Not everyone was aware that the Section 179 deduction was going to be reduced for SUVs, as per this email I received.

Kerry

I was reading your tax law on section 179 that was updated on Oct 27.  I was surprised to see that there is a limit of 25,000 on the claim for SUV's I thought this would have been valid through the end of the year.  I am to purchase a 6008 lb vehicle tomorrow and my friend told me that this deduction has gone away but from your article it was reduced from the full
amount to a max of 25K.

If this correct and how did this get passed so quietly... I have not heard of this change at all till reading your document and my tax advise was not aware of it.

Please feel free to call or reply.

My reply:

The issue of limiting the amount deductible for buying SUVs wasn't actually a new thing.  Ever since the Section 179 deduction was increased from $24,000 to $100,000, and people discovered its ability to be used for business vehicles weighing more than 6,000 pounds (a rule actually passed in 1984), environmental wackos started screaming bloody murder that this was encouraging people to buy evil gas guzzling SUVs.

Several months ago, there was a bill passed by a Senate committee with this new $25,000 limit for SUVs, but it never became part of an actual law.  The law that was just signed by President Bush last week was mainly a stimulus bill, with several tax reductions.  In order to achieve the normal goal of being "fiscally responsible," our rulers in Congress had to take away some tax breaks in order to offset the new ones they were establishing.  This limit on deducting SUV purchases was just the thing to fit that need.

I guess the issue of adequate advance notice regarding this change is somewhat subjective.  I know that for well over two full weeks prior to its enactment, there were all kinds of discussions about this very topic on several tax and vehicle websites.  There was so much discussion of just this one item, that most people were ignoring the several other parts of that tax law, many of which are very good for those of us who believe in lower taxes.

Having been in this profession for as long as I have, I have yet to figure out any consistent rationale for the effective dates that our rulers in DC use for new tax laws.  Sometimes, it is at the beginning of the following year, while on other occasions, it's as of the date the law is signed by the President.  We actually have to consider ourselves somewhat lucky that we were given until Bush signed the law, because I have seen several laws over the past decades where similar kinds of restrictions were established effective as of some date several months prior to the signing, based on when a congressional committee inserted that provision into the law.

I hope this clears up any confusion you had over where this new restriction on deducting the cost of SUVs came from.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 10/28/2004 05:15:00 PM Send this post: