Business Purchase SUV Tax Credit

The President's Advisory Panel on Federal Tax Reform

SUV Tax Credit - Under current tax policy, the U.S. government grants a $25,000 tax break for the business purchase of sports utility vehicles over 6,000 pounds. The original intent of the provision was to increase capital investments by farmers and other small business owners who rely on light-trucks or vans (i.e. construction companies). When this provision was added to the tax code, luxury passenger SUVs were not the market force they have become, and it appeared a good way to help small business owners by accelerating depreciation and avoiding a luxury-tax surcharge.

The problem has arisen largely because the tax code classifies vehicles by weight instead of function. First, a truck or van is defined as a vehicle that weighs more than 6,000 pounds. Before the advent of the SUV, this was a sufficient way to separate passenger automobiles from other classes of vehicles. But, the growth of the market for large, luxury SUVs has dramatically expanded the number of passenger vehicles weighing over 6,000 pounds.

The SUV break has been reduced from 100,000 to $25,000, but it should still be eliminated. Buying a $100,000 SUV still brings a $58,000 tax deduction. This tax break isn’t helping reduce our dependence on foreign oil. In fact, it does the exact opposite.  Expensing all business vehicles equally would save the federal treasury $700 million overfive years.