Monday, April 11, 2011

How to Take a 100% Tax Write-Off for a New Porsche, BMW or Cadillac

Looking for a way to lower your tax liability in 2011? Thanks to a temporary tax law, you can write off the full cost of many luxury SUVs as long as it is used 100% for business, and weighs at least 6,000 lbs. Remember the “Hummer loophole?” Yep, it’s back and it’s even more ridiculous.

According to, vehicles that qualify include: the Porsche Cayenne Turbo, the BMW X6 M, and the Ford Lincoln Navigator.

    If this high octane tax deduction sounds to you like an echo from the past, it is. Early last decade, there was a public furor over the “Hummer loophole” which allowed small business owners and self employed folks (including doctors, real estate agents and others with a purported business use for a vehicle) to deduct most of the cost of purchasing big SUVs.

    Back then, taxpayers were exploiting Section 179 of the U.S. Tax Code – a provision designed to allow small businesses to expense (or immediately write off) small capital investments. As part of the 2003 Bush tax cuts, the maximum Section 179 write-off was increased from $24,000 to $100,000. In October 2004, after the Hummer hullabaloo, Congress limited the write-off for trucks weighing between 6,000 and 14,000 pounds to $25,000, curbing luxury SUVs’ tax appeal. (Write-offs for luxury cars were already more limited.)

    But as my colleague Ashlea Ebeling explains in a story here in Forbes about smart tax moves for the next two years, an immediate SUV write off is allowed again under a different, even more generous provision of the tax code, good through Dec. 31, 2011. She writes:

    Last December’s bipartisan tax deal included a temporary 100% write-off (known as 100% bonus depreciation) for new equipment placed in service by Dec. 31, 2011. This break, which is unlikely to be extended, isn’t just for big companies. “It could be significant savings for the little guy, too,” says Howard Krant, a New York City CPA. He notes that 100% bonus depreciation can be more valuable than another, longer-standing 100% write-off provision (known as Section 179) available to small businesses. That’s because you can’t use Section 179 to claim a loss.

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