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Hummer tax break gets hammered

Cars and light trucks, by contrast, are considered listed property. The maximum 2004 depreciation you can take on a new vehicle, no matter how much you paid for it, is $10,610. Because depreciation limits drop considerably over subsequent years, a $30,000 car will take a decade to fully depreciate.

SUV buyers might legitimately hail: "The tax break is dead; long live the tax break!"

"I guess if you have a $90,000 Hummer, it probably hurts you a little bit," Windham allows. "But if you have a $90,000 Hummer, you're probably not worried about it."

A limited victory
Keith Ashdown, vice president of policy for Taxpayers for Common Sense, called the move a good first step toward correcting an ongoing tax inequity.

"We thought it was a huge victory for taxpayers. It will save hundreds of millions of dollars and end the inequity that biased small business owners to buy sport utility vehicles over anything else," he says.

But Ashdown admits that the battle to correct inequities in the tax treatment of business vehicles is far from over.

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"One of our issues is, we have to stop taxing vehicles based on their gross vehicle weight, and instead base it on what they are used for," he says. "If you're a passenger vehicle, you should not get a break for hauling hogs. However, if you are a passenger vehicle and you're doing something specific for your business, it should be considered a legitimate business expense for tax purposes."

Then there's the issue of that lengthy depreciation schedule for passenger vehicles and light trucks to consider.

"The 10-year depreciation cycle of automobiles is too long. Seven years is still too long. Because nobody keeps their vehicles that long anymore. Depreciation has to be based on the real life of the car. We need to shorten that," he says.

But for now, Ashdown and his watchdogs are content with having delivered a blow to the fat cats.

"We feel all vehicles should be treated the same. We're still not doing that because SUVs still can get $25,000 under the small truck provisions for farmers and other small businesses, but it's a good step toward leveling the playing field."

Jay MacDonald is a contributing editor based in Mississippi.

-- Updated: Jan. 20, 2005
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Tax breaks for gas-saving vehicles
Tax Adviser explains business SUV tax-break rules
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