New tax package bonanza:
- Among the provisions of the tax package just approved by Congress is an increase in the deduction allowed for small-business equipment purchases, which rises from $25,000 to $100,000. That means real estate agents, lawyers, doctors — anybody who files a Schedule C or corporate tax return — can write off the entire cost of virtually any big sport-utility vehicle. The potential tax savings in the top bracket is $35,000.
The dramatically higher limit greatly simplifies the math. The deduction for SUV purchases was already pretty hefty, but it came in three parts: A $25,000 equipment deduction, plus 30% of the remaining price (courtesy of the 2002 economic stimulus bill), plus the standard five-year depreciation schedule on the remainder. On a $72,000 Range Rover, the deduction came to about $45,000 the first year, for a tax savings of more than $16,000.
It’s so much easier — and cheaper — to write the whole thing off. Simply multiply the purchase price by your tax rate. The tax savings on that same Range Rover? More than $25,000 in the top brackets. In contrast, those who buy ultra-efficient gas-electric hybrids for personal use get a tax deduction of $2,000, worth at most $700. [MSN] In other words, the bigger the better, as if we need an incentive from government to guzzle on.