Call it a tax break for the wealthy or a justifiable business expense, but whatever you call it, the SUV tax loophole is almost certain to be closed.
Small business owners have been allowed to write off the full cost of heavy-duty vehicles, weighing at least 6,001 pounds when loaded, as a business expense. Although the provision was designed to benefit farmers, construction workers and others who need big vehicles, white-collar professionals have been using the loophole to buy the priciest SUVs, Reuters reported.
Last year, the incentive grew even stronger when lawmakers expanded the write-off from $25,000 to $100,000 and dropped depreciation schedules to allow taxpayers to deduct the full cost all at once.
The provision has come under fire from consumer groups and environmentalists, who call it the Hummer tax loophole. The $100,000 write-off is enough to cover not just the $50,000 Hummer H2 but even a $90,000 Porsche Cayenne Turbo.
Sen. Don Nickles, R-Okla., pushed the reduction after his car-dealer son convinced him it was "a rip-off."
Some Republicans objected to limiting or eliminating the tax break, saying that the move would have the same effect as a tax increase. The Bush administration supported shrinking the benefit.
Congressional negotiators on Wednesday reduced the deduction to $25,000 for most vehicle purchases as part of a bill that would raise money to offset other tax breaks. The legislation, which contains tax changes of all kinds, must be approved by the full House and Senate.
According to Scripps Howard News Service, Keith Ashdown, head of Taxpayers for Common Sense, called the change "a small pearl in this pile of pork."