For Such Large SUVs, American Entrepreneurs Are Granted Enormous Tax Breaks

It is common knowledge that Americans enjoy driving gigantic SUVs. This has to do with personal preferences, large parking spaces, and low fuel prices, but that is not the whole story.

The U.S. Internal Revenue Service makes owning vehicles with a maximum permissible weight of 6,000 pounds – 2,721 kg – particularly attractive for entrepreneurs. Undoubtedly based on the idea that owning such a large vehicle may be necessary for the business, self-employed individuals can deduct up to 100 percent of the purchase price of such a vehicle in the first year.

Due to the so-called Section 179 rules (Google ‘Section 179’ and you will find yourself in a veritable hornet’s nest), you are officially allowed to deduct up to $31,300 in a single year for such heavy vehicles, significantly more than the maximum of $12,200 that applies to regular passenger cars. If the heavy vehicle in question is primarily intended for the transport of goods—think of pickup trucks—that maximum does not even exist, and the maximum depreciation in the first year can even be the full purchase value, i.e., 100 percent. This is also possible for SUVs, by the way, but by using other schemes in addition to the Section 179 deduction. However, there are some conditions: for instance, the car must actually be used for business purposes for at least 50 percent of the time.

For American entrepreneurs, therefore, it is in many cases more advantageous to opt for a larger and more expensive SUV rather than a more compact model, because the higher purchase price is amply compensated by the very relaxed depreciation. This advantage partly explains the popularity of giants like the Cadillac Escalade, Chevrolet Tahoe and Suburban, and Ford Expedition, but European models such as the BMW X5 and X7 and Mercedes-Benz GLE and GLS also qualify. Note, however, that the 2,721 refers to the maximum permissible weight and not the curb weight. In practice, the curb weight is closer to 2,000 kg, which is quickly reached for large SUVs.

• See Also: American Customs Noose For Vehicles Made In Germany