IRS Drives Off Tax Incentives

by Talk Business & Politics ([email protected]) 133 views 

Anyone considering buying an SUV for business use or a hybrid car for personal use might want to get on the ball.

New legislation before Congress might lower the amount business owners can deduct from their taxes on SUVs used for business purposes from a maximum of $30,000 in the first year to a maximum of $3,260.

On June 19, Rep. Charles Rangel, D-N.Y., introduced a bill that would eliminate a $25,000 expensing deduction for SUVs.

The bill would also reduce the amount deductible for first-year depreciation on SUVs from $5,000 to $3,260.

The House voted 221-189 in favor of the act Aug. 4.

If the bill becomes law, H.R. 2776, the Renewable Energy and Energy Conservation Tax Act of 2007, would take effect at the start of next year.

The Senate is considering different legislation regarding energy issues that doesn’t include changes to tax deductions.

The new House legislation would reverse the portion of the American Jobs Creation Act of 2004 that allowed for the deduction.

To qualify, business owners must purchase a truck or van weighing at least three tons and keep logs recording the use of the vehicle.

To deduct the entire amount, the vehicle must be used for business purposes only. To receive any expensing deduction, the vehicle must be used for business at least half of the time.

Tax credits that were offered with purchases of hybrid vehicles are expiring because of the volume of sales. The IRS credits ranged from $250 to $3,500.

Limits were placed on the number of credits issued for vehicles made by each manufacturer. Toyota reached its first limit in the second quarter of 2006. After that, the credits were cut in half.

Those credits were reduced by half again in April of this year, and after Oct. 1, no tax credits will be issued for Toyota hybrids.

Many of the credits will most likely be going by the wayside this year, said Jack Bottoms, a CPA with Wilson & Wilson EA in Fayetteville.

After 2010, there will be no tax credits for hybrids of any brand.