Tax code 179, SUV's that qualify for a tax break (page 1)

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Everything you need to know about tax code 179

DISCLAIMER: Everything contained in these pages is information gathered by me through various news sources and IRS publications. Be sure to consult your CPA or Tax Attorney before purchasing a vehicle to make sure you qualify.

Written by Jerry Reynolds, Owner of Prestige Ford of Garland, TX

Background: In the mid 1940's, Congress passed a law that would allow for tax deductions to farmers after World War II that would allow them to write off the cost of new equipment to encourage more people to work the land. Although many people took advantage of the law, it sat on the books for years without any changes to speak of. However, in 1996 the amount of money allowable to be written off started to grow for the sole purpose of encouraging business. Besides farm equipment, other things were added to the list such as vehicles.

To keep to the original spirit of the law, vehicles that have a gross vehicle weight of over 6000 pounds qualify for accelerated tax write-offs in the year they are bought up to a certain dollar amount. Until recently, that amount was $25000. In simple terms, if you qualify, you could write off up to $25000 of the amount of the vehicle in the same year you purchased it, plus the remainder of the price over the following four years.

GREAT NEWS: In May of this year, thanks to the 2003 Tax Act, the amount was raised to $100,000. That means that you can buy one or more eligible vehicles and write-off the entire amount up to $100,000 on your 2003 tax return! This is all documented in Section 179 of the tax code. Prior to this, you could take advantage of writing off depreciation, but it had to be done over five years.

EXAMPLE: So say you spend $40,000 to buy a new truck or SUV that's used 100% in your self-employed business activity (meaning you conduct your operation as a sole proprietor, LLC member, or partner). Provided you make the vehicle purchase before year-end and start using it for business before then, you can probably deduct the entire $40,000 cost on this year's business tax forms.

SO WHAT'S THE CATCH? Only that your newly acquired vehicle will need to be used more than 50% of the time for business purposes. Here's a little more background so you'll understand how the Section 179 break works. I'll walk you through steps to complete this process and hopefully reduce your tax liability for THIS YEAR.

STEP ONE is to find a vehicle that qualifies for the deduction. Again, it has to have a gross vehicle weight rating of over 6000 pounds. At the end of this article, I will give you a list of new vehicles that is current AND that for sure qualify based on the weight. You can also usually look on the driver's door of any car, and there will be a sticker with pertinent information on it. GVWR is what you are looking for.

Next, be SURE to PURCHASE the vehicle. Leases do not qualify. However if you DO lease there are certain deductions you can take, but generally you can only take them as you make payments. Interest rates are a non-issue, but rebates will affect the amount you can write off because factory rebates lower the sales transaction price.

MILEAGE LIMITATIONS: As with most vehicle related deductions, you are going to have to document your mileage to protect yourself in the case of an audit. Remember, your vehicle must be used a minimum of 50% of the time for business purposes to even qualify for the deduction, but the AMOUNT of business use will also dictate what amount you can write off this year. For instance, let's say you buy a $50,000 Lincoln Navigator and you use it 100% for your business, then you can write off $50,000 this year. But let's take that same Navigator, and say you only use it for business 60% of the time.... then your write off for this year is $30,000 ($50,000 times 60%=$30,000).

SO DO USED VEHICLES QUALIFY? Yes, you can purchase a used vehicle as well as a new one, but clearly to achieve the maximum write off, the more money you spend the more money you save this year, making pre-owned vehicles less attractive.

DO NOT PROCRASTINATE: This bill is coming under attack from all sides as promoting the use of non-fuel efficient, polluting vehicles and by groups alleging that this tax loophole is just for the "rich". The Senate Finance committee recently passed an additional 3% tax reduction to manufacturers. However, attached to that Bill is legislation that would close the $100,000 vehicle write off cap and lower it to just $25000, which is less than most of the vehicles cost by a wide margin.

ACCORDING TO KIPLINGER'S TAX LETTER, OCTOBER 2003: "Congress is moving closer to closing the expense loophole for SUV's. Senate tax writers have voted to slash the maximum expensing to $25,000 for SUV's. Firms thinking about buying an SUV should not wait too long".

IN SUMMARY: For now, Tax Code Section 179 offers many people the opportunity to buy and write off some of the most popular vehicles on the road. It is clear however, that this is about to change.If as a small business owner or professional that qualifies, odds are this opportunity is going to go away VERY soon. This temporary loophole, along with record factory incentives and low interest rates, make this a great time to buy one or more vehicles.A LIST OF ELIGIBLE VEHICLES IS BELOW

But first, read the legend below carefully... The list will give you every variation of the eligible vehicle by model, engine and transmission. For instance, the first eligible SUV is in a box that looks like this:

2003 Cadillac Escalade 2WD 4dr SUV (5.3L 8cyl 4A) 6800

That means this is a 2003 Cadillac Escalade two wheel drive (2WD) 4 door SUV with a 5.3 liter 8 cylinder engine and a 4 speed automatic transmission (4A). 5 Speed Automatics will be 5A. 4M or 5M in the truck section refers to four or five speed MANUAL transmissions. The number on the right is the actual GROSS VEHICLE WEIGHT RATING that determines its eligibility.

This list is accurate as of October 30, 2003.

ELIGIBLE SUV'S: (In alphabetical order by brand, 2003's first, then 2004's)

2003 Cadillac Escalade 2WD 4dr SUV (5.3L 8cyl 4A) 6800
2003 Cadillac Escalade AWD 4dr SUV (6.0L 8cyl 4A) 7000
2003 Cadillac Escalade ESV AWD 4dr SUV (6.0L 8cyl 4A) 7200
2003 Chevrolet Suburban 1500 LS 2WD 4dr SUV (5.3L 8cyl 4A) 7000
2003 Chevrolet Suburban 1500 LS 4WD 4dr SUV (5.3 L 8cyl 4A) 7200
2003 Chevrolet Suburban 1500 LT 2WD 4dr SUV (5.3L 8cyl 4A) 7000
2003 Chevrolet Suburban 1500 LT 4WD 4dr SUV (5.3L 8cyl 4A) 7200
2003 Chevrolet Suburban 1500 Z71 4WD 4dr SUV (5.3L 8cyl 4A) 7200
2003 Chevrolet Suburban 2500 LS 2WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 Chevrolet Suburban 2500 LS 4WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 Chevrolet Suburban 2500 LT 2WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 Chevrolet Suburban 2500 LT 4WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 Chevrolet Tahoe LS 2WD 4dr SUV (4.8L 8cyl 4A) 6500
2003 Chevrolet Tahoe LS 4WD 4dr SUV (4.8L 8cyl 4A) 6800
2003 Chevrolet Tahoe LT 2WD 4dr SUV (5.3L 8cyl 4A) 6500
2003 Chevrolet Tahoe LT 4WD 4dr SUV (5.3L 8cyl 4A) 6800
2003 Chevrolet Tahoe Z71 4WD 4dr SUV (5.3L 8cyl 4A) 6800
2003/04 Chevrolet TrailBlazer EXT LS 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2003/04 Chevrolet TrailBlazer EXT LS 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2003/04 Chevrolet TrailBlazer EXT LT 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2003/04 Chevrolet TrailBlazer EXT LT 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2003 Dodge Durango R/T 4WD 4dr SUV (5.9L 8cyl 4A) 6050
2003 Dodge Durango SLT 2WD 4dr SUV (4.7L 8cyl 5A) 6050
2003 Dodge Durango SLT 4WD 4dr SUV (4.7L 8cyl 5A) 6400
2003 Dodge Durango SLT Plus 2WD 4dr SUV (4.7L 8cyl 5A) 6050
2003 Dodge Durango SLT Plus 4WD 4dr SUV (4.7L 8cyl 5A) 6400
2003 Dodge Durango SXT 2WD 4dr SUV (4.7L 8cyl 5A) 6050
2003 Dodge Durango SXT 4WD 4dr SUV (4.7L 8cyl 5A) 6400
2003 Dodge Durango Sport 2WD 4dr SUV (4.7L 8cyl 5A) 6050
2003 Dodge Durango Sport 4WD 4dr SUV (4.7L 8cyl 5A) 6400
2004 Ford Excursion Eddie Bauer 2WD 4dr SUV (5.4L 8cyl 4A) 8600
2004 Ford Excursion Eddie Bauer 2WD 4dr SUV (6.8L 10cyl 4A) 8599
2004 Ford Excursion Eddie Bauer 4WD 4dr SUV (6.8L 10cyl 4A) 8900
2004 Ford Excursion Eddie Bauer 2WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9419
2004 Ford Excursion Eddie Bauer 4WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9525
2004 Ford Excursion Limited 2WD 4dr SUV (5.4L 8cyl 4A) 8600
2004 Ford Excursion Limited 2WD 4dr SUV (6.8L 10cyl 4A) 8599
2004 Ford Excursion Limited 4WD 4dr SUV (6.8L 10cyl 4A) 8900
2004 Ford Excursion Limited 2WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9419
2004 Ford Excursion Limited 4WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9525
2004 Ford Excursion XLS 2WD 4dr SUV (5.4L 8cyl 4A) 8600
2004 Ford Excursion XLS 2WD 4dr SUV (6.8L 10cyl 4A) 8599
2004 Ford Excursion XLS 4WD 4dr SUV (6.8L 10cyl 4A) 8900
2004 Ford Excursion XLS 4WD 4dr SUV (5.4L 8cyl 4A) 8897
2004 Ford Excursion XLS 2WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9419
2004 Ford Excursion XLS 4WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9525
2004 Ford Excursion XLT 2WD 4dr SUV (5.4L 8cyl 4A) 8600
2004 Ford Excursion XLT 2WD 4dr SUV (6.8L 10cyl 4A) 8599
2004 Ford Excursion XLT 4WD 4d SUV (5.4L 8cyl 4A) 8897
2004 Ford Excursion XLT 4WD 4d SUV (6.8L 10cyl 4A) 8900
2004 Ford Excursion XLT 2WD 4dr SUV (6.0L 8cyl Turbodiesel 5A) 9419
2004 Ford Excursion XLT 4WD 4d SUV (6.0L 8cyl Turbodiesel 5A) 9525
2004 Ford Expedition Eddie Bauer 2WD 4dr SUV (4.6L 8cyl 4A) 6750
2004 Ford Expedition Eddie Bauer 2WD 4dr SUV (5.4L 8cyl 4A) 6900
2004 Ford Expedition Eddie Bauer 4WD 4dr SUV (5.4L 8cyl 4A) 7300
2004 Ford Expedition XLS 2WD 4dr SUV (4.6L 8cyl 4A) 6750
2004 Ford Expedition XLS 4WD 4dr SUV (4.6L 8cyl 4A) 7050
2004 Ford Expedition XLT 2WD 4dr SUV (4.6L 8cyl 4A) 6750
2004 Ford Expedition XLT 2WD 4dr SUV (5.4L 8cyl 4A) 6900
2004 Ford Expedition XLT Popular 4WD 4dr SUV (4.6L 8cyl 4A) 7050
2004 Ford Expedition XLT Popular 4WD 4dr SUV (5.4L 8cyl 4A) 7300
2004 Ford Expedition XLT FX4 4WD 4dr SUV (5.4L 8cyl 4A) 7300
2004 Ford Expedition XLT Sport 2WD 4dr SUV (4.6L 8cyl 4A) 6750
2004 Ford Expedition XLT Sport 2WD 4dr SUV (5.4L 8cyl 4A) 6900
2004 Ford Expedition XLT Premium 4WD 4dr SUV (4.6L 8cyl 4A) 7050
2004 Ford Expedition XLT Premium 4WD 4dr SUV (5.4L 8cyl 4A) 7300
2004 GMC Envoy XL SLE 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2004 GMC Envoy XL SLE 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2004 GMC Envoy XL SLT 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2004 GMC Envoy XL SLT 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2004 GMC Envoy XUV SLE 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2004 GMC Envoy XUV SLE 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2004 GMC Envoy XUV SLT 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2004 GMC Envoy XUV SLT 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2003 GMC Yukon Denali AWD 4dr SUV (6.0L 8cyl 4A) 7000
2003 GMC Yukon SLE 2WD 4dr SUV (4.8L 8cyl 4A) 6500
2003 GMC Yukon SLE 4WD 4dr SUV (4.8L 8cyl 4A) 6800
2003 GMC Yukon SLT 2WD 4dr SUV (4.8L 8cyl 4A) 6500
2003 GMC Yukon SLT 4WD 4dr SUV (4.8L 8cyl 4A) 6800
2003 GMC Yukon XL 1500 SLE 2WD 4dr SUV (5.3L 8cyl 4A) 7000
2003 GMC Yukon XL 1500 SLE 4WD 4dr SUV (5.3L 8cyl 4A) 7200
2003 GMC Yukon XL 1500 SLT 2WD 4dr SUV (5.3L 8cyl 4A) 7000
2003 GMC Yukon XL 1500 SLT 4WD 4dr SUV (5.3L 8cyl 4A) 7200
2003 GMC Yukon XL 2500 SLE 2WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 GMC Yukon XL 2500 SLE 4WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 GMC Yukon XL 2500 SLT 2WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 GMC Yukon XL 2500 SLT 4WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 GMC Yukon XL Denali AWD 4dr SUV (6.0L 8cyl 4A) 7200
2003 Hummer H1 Open Top 4WD 4dr SUV (6.5L 8cyl Turbodiesel 4A) 10300
2003 Hummer H1 Wagon 4WD 4dr SUV (6.5L 8cyl Turbodiesel 4A) 10300
2003 Hummer H2 Adventure Series 4WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 Hummer H2 4WD 4dr SUV (6.0L 8cyl 4A) 8600
2003 Hummer H2 Lux Series 4WD 4dr (6.0L 8cyl 4A) 8600
2003 Isuzu Ascender S 2WD 4dr SUV (4.2L 6cyl 4A) 6200
2003 Isuzu Ascender S 4WD 4dr SUV (4.2L 6cyl 4A) 6400
2003 Land Rover Discovery HSE 4WD 4dr SUV (4.6L 8cyl 4A) 6228
2003 Land Rover Discovery S 4WD 4dr Suv (4.6L 8cyl 4A) 6063
2003 Land Rover Discovery SE 4WD 4dr SUV (4.6L 8cyl 4A) 6064
2003 Land Rover Range Rover HSE 4WD 4dr SUV (4.4L 8cyl 5A) 6724
2003 Lexus LX470 4WD 4dr SUV (4.7L 8cyl 5A) 6860
2004 Lincoln Aviator Luxury RWD 4dr SUV (4.6L 8cyl 5A) 6110
2004 Lincoln Aviator Luxury AWD 4dr SUV (4.6L 8cyl 5A) 6210
2004 Lincoln Aviator Ultimate RWD 4dr SUV (4.6L 8cyl 5A) 6110
2004 Lincoln Aviator Ultimate AWD 4dr SUV (4.6L 8cyl 5A) 6210
2004 Lincoln Navigator Luxury RWD 4dr SUV (5.4L 8cyl 4A) 7300
2004 Lincoln Navigator Luxury AWD 4dr SUV (5.4L 8cyl 4A) 7450
2004 Lincoln Navigator Ultimate RWD 4dr SUV (5.4L 8cyl 4A) 7300
2004 Lincoln Navigator Ultimate AWD 4dr SUV (5.4L 8cyl 4A) 7450
2003 Mercedes-Benz M-Class ML320 AWD 4dr SUV (3.2L 6cyl 5A) 6283
2003 Mercedes-Benz M-Class ML500 AWD 4dr SUV (5.0L 8cyl 5A) 6283
2003 Mercedes-Benz M-Class ML55 AWG AWD 4dr SUV (5.5L 8cyl 5A) 6283
2003 Mitsubishi Montero Limited 4WD 4dr SUV (3.8L 6cyl 5A) 6085
2003 Mitsubishi Montero XLS 4WD 4dr SUV (3.8L 6cyl 4A) 6085
2003 Porsche Cayenne S Tiptronic 4WD 4dr SUV (4.5L 8cyl 6A) 6746
2003 Porsche Cayenne Turbo Tiptronic 4WD 4dr SUV (4.5L 8cyl 6A) 6790
2003 Toyota Land Cruiser 4WD 4dr SUV (4.7L 8cyl 5A) 6860
2003 Toyota Sequoia Limited 2WD 4dr SUV (4.7L 8cyl 4A) 6500
2003 Toyota Sequoia Limited 4WD 4dr SUV (4.7L 8cyl 4A) 6600
2003 Toyota Sequoia SR5 2WD 4dr SUV (4.7L 8CYL 4A) 6500
2003 Toyota Sequoia SR5 4WD 4dr SUV (4.7L 8CYL 4A) 6600
2004 Volkswagen Touareg AWD 4dr SUV (3.2L 6cyl 6A) 6486
2004 Volkswagen Touareg AWD 4dr SUV (4.2L 8cyl 6A)