Will Joe The Plumber Lose His SUV Deduction Under McCain Or Obama?

We had an interesting and heated discussion on Sunday about whether the luxury tax would be re-instituted under an Obama Presidency.

Obviously, the luxury tax will only effect a small percentage of people whose lifestyle would not be altered in major way if it did return.

So tonight I thought we would discuss a deduction that WOULD have a major effect on many businesses...especially ones like Joe the Plumber's.

It is the IRS Section 179 deduction which allows businesses to get a major deduction when they buy a vehicle with a GVWR of over 6000lbs.

About Section 179 from Section179.org:

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the US Government to encourage businesses to buy equipment and invest in themselves. It is sometimes referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses have used this tax code to purchase qualifying vehicles (like SUV's and Hummers.)

Essentially, Section 179 works like this:

When your business buys certain pieces of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a vehicle, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example.)

Section 179 Calculator

I would hope the next President would not only keep it but maybe amend it back to the higher amount allowed from a few years ago AND open it up so the business can choose ANY car or truck that meets the needs of the business. Plus make it higher if some chooses alternative vehicles like hybrids, NGV's, Clean Diesels, Bio-Diesels, etc. And finally make it even larger if they buy American or something that is over 50% American content.

Eliminating this deduction would have a major effect on many USA businesses in my opinion, including mine

This deduction is near and dear to my heart because I have been able to take advantage of it while building the AutoSpies.com business.

What would you advise the next President regarding Section 179?

2008 SEMA Auto Show Photo Gallery

Kyle - 10/27/2008 11:57:58 PM

-1 Boost

Businesses with vehicles over 6000# GVWR should be forced by the Government to "redistribute" their vehicles to those who can only afford a vehicle with a 3000# GVWR.

It's only fair.

TTRaceRR - 10/28/2008 12:51:17 AM

+1 Boost

I find it disgusting when a roofing company owner drives around in a fully loaded Hummer that he has been able to completely right off as a business expense. I've seen these around town with a variety of businesses displayed via a removable magnetic sign on the door. While I think business should be able to write off a vehicle that is truly a necessary piece of equipment to run their businesses, luxury high-ticket items such as a Hummer should not be included. Either cap the amount to be deducted or require the owner to make a case for their vehicle's purpose on the job. I can't imagine a Hummer or any luxury SUV that is a necessity for any small business. Logical vehicles are pick-ups, cargo vans and flat-bed trucks.

Agent001 - 10/28/2008 12:52:46 AM

+3 Boost

Not a Hummer fan myself but that owner could argue that a Hummer is hard to miss and gets his businesses name out...

001

randy33 - 10/28/2008 2:53:50 AM

-2 Boost

You socialists don't get it!

It is NOT YOUR RIGHT to decide which of our possessions are "truly necessary", and which are just simply "a luxury".

Have you EVER read the Declaration of Independence? No? Well has anybody even bothered to ever EXPLAIN TO YOU the circumstances which lead to this country being founded?

Are you even an American citizen?

Live your own life! Stop WHINING about your neighbor's possessions!

You "find it disgusting when a roofing company owner drives around in a hummer"? How absurd! Do you understand how ridiculous the statement you just made is? What the hell is wrong with you? Who freaking cares if the truck's got a plastic HUMMER logo glued to it? A HUMMER is just a TAHOE, you fool! It makes no freaking difference what the sheetmetal looks like. 6,000 lbs is 6,000 lbs, the government doesn't give a damn what the sheetmental looks like. A HUMMER is a wagon. A TAHOE is a wagon. THEY ARE THE SAME.

LAY OFF! Go find somebody else to tread on.

randy33 - 10/28/2008 3:35:09 AM

+1 Boost

Yes Agent001, of course you are exactly right! But for god sakes everybody, please don't miss the point here:

We are not beholden to this person's inquiry! Just ignore the whiny little fruitbags.

Do NOT be fooled; TTRacerRR and others like him are not interested in actually arguing the merits of your business expenses per se; rather, these people are only interested in cultivating a basis for their right to CONTROL and influence your business decisions!

Simply put, TTRacerR is a CONTROL FREAK. He suffers from a psychotic condition called SOCIALISM which spurs him to yearn for your attention.

TTRacerR wants us to listen to what he has to say about our business expenses. But TTRracerR knows *NOTHING* about our businesses, and knows NOTHING about us.

So then what do we have here? A control freak.

M53R - 10/28/2008 12:40:20 PM

-1 Boost

Randy33

This kind off mentality is the reason why the US economy is going down the drain.

Brembo - 10/28/2008 3:39:16 PM

-1 Boost

Hey randy33 stop WHining about others' opinions!

tkindred - 10/28/2008 9:45:23 AM

+3 Boost

It was obiously a typo. Since we all got the meaning.

tkindred - 10/28/2008 9:51:37 AM

0 Boost

If some fool wants to buy a gas guzzling hummer that is terrible for the environment ( I know, I am a tree hugger because I mentioned the environment), let em. Let's not consider it does little to stimulate the economy with a purchase like this.

It's a way to "feel cool" (look stupid to many others), and have uncle same (us) pay for part of their expense in owning the ugly box on wheels.

tkindred - 10/28/2008 10:04:49 AM

+3 Boost

Oh, I know. I am also a socialist commy.

tkindred - 10/28/2008 10:29:29 AM

-1 Boost

Oh, and Joe the Plumber seems like the kind that has no understanding of taxes or business and once starting a business, it would fail. Consequently he would file bankruptcy where WE and the financial institutions would have to bail him out direclty and indirectly through the right offs.

Also, there may be a correlation between those who bring on high overhead with purchases such as expensive vehicles that do not grow the business in anyway and those who bile bankruptcy.

Just perhaps. Who knows.

gkearns56 - 10/28/2008 11:15:28 AM

0 Boost

The real Joe the Plumber isn't even a licensed plumber; makes less than $42,000 based on his tax return and his own comments.

BimmerFan - 10/28/2008 1:37:41 PM

-1 Boost

...AND he should be in JAIL for not paying his back taxes of somewhere in the 10K range. He should actually be in a Federal Prison for tax evasion. A Hummer wont do him any good there. The only Hummer he will be getting is from his cell mates.

lexusrox123 - 10/30/2008 9:00:49 AM

+1 Boost

why are all the socialists blasting joe the plumber? just because he made obammy the messiah stutter?

Bored - 10/28/2008 12:12:45 PM

+1 Boost

I've never had an issue with the law but with all laws, there are loopholes begging to be exploited. Yeah, it would be nice to fix this, but we have bigger issues to deal with in this country than worry about some guy buying a $50K Hummer when a less expensive vehicle would do.

I will admit that it is insulting when some has legally purchased a "company" vehicle, but allows their spouse to drive it as their personal vehicle (soccer mom?) the majority of the time.

BobW - 10/28/2008 12:42:21 PM

+1 Boost

Actually this write-off doesn't work for all business people or self-employed. It was originally an incentive for farmers to buy equipment and was implemented back in the 1920's or 30's--but that's another long story. In any case, as currently constituted is an accelerated depreciation program that allows for a first year depreciation of $25k plus the 10% of the difference between the purchase price and $25k. Over the next four years the depreciation varies slightly until after five years there has been a 100% depreciation allowed for the vehicle. The rules also state that the vehicle has to be used at least 50% for business use (and that has to be verifiable business use--a log must be kept by the owner), if not, the entire amount depreciated to that point must be recaptured. Miles commuting to an office do not count towards business miles, so a person has to be using the vehicle driving around to clients or jobs or they won't be able to accrue enough business use miles and can't justify the depreciation.
It is a fair write-off for people who purchase a vehicle that they are using for business--after all, the business use is using up the car and causing a part of its depreciation, etc.
There are larger limits and first year depreciation amounts for vehicles with higher gross vehicle weight.
BW

chewy - 10/28/2008 4:14:29 PM

+2 Boost

Such loopholes have to be closed.