The free Hummer myth
October 25, 2006 6:50 AM   Subscribe

Free Hummer/Escalade due to U.S. tax break -- is this for real, and if so, why isn't everyone flocking to get one?
posted by chef_boyardee to Shopping (11 answers total)
It's real.

Why am I not getting one? Because a) Hummers suck and b) I'm not a small business owners who files taxes in this manner.
posted by fixedgear at 6:57 AM on October 25, 2006

Simple, you write that off too!

It's certainly real. A friend bought a Toyota 4runner in 2003 and later regretted not getting a larger, more expensive vehicle instead, since the tax writeoff would just about make up in the difference of price, for him.
posted by kableh at 7:03 AM on October 25, 2006

That article is from 2003. The loophole was changed in 2004, so that it's $25,000 instead of $100,000.

Lack of time travel is why people aren't flocking to do it.
posted by smackfu at 7:03 AM on October 25, 2006

It's not as real as it used to be. That Post article is three years old. Here is more current info. The deal ends this year.
posted by Kirth Gerson at 7:06 AM on October 25, 2006

Free Hummer is a myth. You received a deduction, not a tax credit equal to the purchase price. While a credit for the entire purchase price would equal a free hummer, a deduction only results in saving a fraction of the total price.
posted by buggzzee23 at 7:06 AM on October 25, 2006

Even with the full $100,000 deduction, this isn't a free Hummer, it's just cheaper. The deduction means you can subtract up to that amount when filing an itemized deduction if the purchase is used for business.

So the following caveats apply:

1.) If you use the vehicle for personal use, you must reduce the the deduction by that percent.
2.) The deduction is obviously limited to the purchase price of the vehicle.
2.) That's not free money, it's just reducing the amount of taxes you pay.

Let's say your a lawyer who makes $120,000 and buys a Hummer for $80,000 to visit clients. You also use it as your personal vehicle for 50% of its mileage. That limits the deduction to $40,000, reducing your taxable income to $80,000 (assuming no other deductions). A $40,000 decrease in taxable income equals maybe $15,000 in "free money" depending on your filing status (I'm just guessing the numbers here). So it's a big subsidy, but not a free ride.

(I'm very much opposed to the loop hole for oversized vehicles in general and think it should be $0)
posted by justkevin at 7:13 AM on October 25, 2006

small businesses and the self-employed are eligible to deduct the entire purchase cost of new equipment up to $100,000 $25,000 the year of the purchase

Because they need to purchase/deduct other equipment?

Because if I saw them in their Hummer I'd take my business elsewhere?
(I'm actually serious about this one. Hummers and Escalades are ostentatious displays of wealth. If your customers aren't wealthy themselves, they'll feel more comfortable if you're on their level.)
posted by hydrophonic at 7:14 AM on October 25, 2006

I believe the corporate tax rate is 35%, so that law was a 35% off coupon for the initial purchase of the vehicle.

It was responsible for the sale of a lot of large SUVs, but a lot of people didn't bother because a large SUV simply wasn't a good investment for their business, even with the coupon.

After all, if they need a truck, most businesses are better served by either a van or a pick-up.
posted by Tacos Are Pretty Great at 8:54 AM on October 25, 2006

Smackfu is correct, the "loophole" was changed so that it is less attractive. Note also, that the smallest vehicle that qualified was the Dodge Durango SUV. In fact, since it's relatively inexpensive, it might be worth investigating whether you can still drive the whole vehicle thru the loophole ...
posted by GarageWine at 9:46 AM on October 25, 2006

Previously, you had to depreciate your computer and deduct it over 5 years.

No, you've been able to expense it under Section 179 for quite a while. Section 179 used to be limited to $25,000, but you can buy a hell of a lot of computer for $25,000. But now it's $108,000 and indexed for inflation.
posted by kindall at 10:55 AM on October 25, 2006

"most businesses are better served by either a van or a pick-up"

That's probably one of the reasons why the Ford F-150 series was selling so well.. that tax write-off. I don't remember seeing too many Escalades or Hummers around here, but I've seen a LOT of large SUVs (GMC Denali, etc) with magnetic logos for a housekeeping service on them.
posted by drstein at 1:55 PM on October 25, 2006

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