Tax Breaks Given on Gas-Guzzling SUVs

LOS ANGELES - New tax breaks are available to anyone who wants to help the environment by purchasing fuel-efficient hybrid vehicles. But if owners of small businesses really want to save money, they can get even bigger federal tax breaks by buying the largest gas-guzzling SUVs.

The disparity is drawing criticism from environmentalists and the Republican chairman of the Senate's tax-writing committee, who is working on a change. Dealers and owners who have benefited from the SUV tax incentive say it helps spur a key part of the economy — auto-making — and allows small business owners to purchase vehicles that improve their bottom line.

Federal tax rules that took effect last month allow a credit of up to $3,150 for anyone buying a hybrid car. The credit is the same regardless of tax bracket.

However, owners of small businesses who buy a Hummer, Ford Excursion or other SUV weighing more than 3 tons get a deduction of up to $25,000 if they use the vehicle exclusively for work. How much money they get back for the deduction depends on their tax bracket.

The benefits don't stop there. Once they subtract the $25,000 from the cost of their 3-ton SUV, small business owners can deduct the depreciation on the remaining amount. Someone who bought a $60,000 SUV, for example, can claim the remaining $35,000 over six years.

No such luck for small business owners who buy cars weighing less than 3 tons. No matter how much the vehicles cost, they can claim just $15,535 in depreciation over six years and $1,675 each additional year. Deductions for depreciation on trucks and vans weighing less than 3 tons are slightly more generous.

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