WASHINGTON — In the past, generous tax breaks for gas-consuming heavy SUVs often raised the ire of Congress. However, last December’s Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 actually made tax breaks for these assets even more generous. Although probably unintended, the limited-time 100% “bonus” depreciation allowance includes a new, heavy SUV purchased and used for business.
That’s right, the entire purchase price can be written off in the placed-in-service year. A dry cleaning business that buys and places in service a new heavy SUV—those built on a truck chassis and rated at more than 6,000 pounds gross (loaded) vehicle weight—after Sept. 8, 2010, and before Jan. 1, 2012, and uses it 100% for business, may write off its entire cost in the placed-in-service year. There is no specific rule barring this result.
Under the 2010 Tax Relief Act, the bonus first-year depreciation percentage is 100% (instead of 50%) for bonus-depreciation-eligible qualified property placed in service during the time period. Qualified property includes property to which MACRS (Modified Accelerated Cost Recovery System) depreciation applies with a recovery period of 20 years or less. Autos and light trucks are 5-year MACRS property and thus qualify for bonus depreciation (assuming business use is in excess of 50% of total use).