If you can afford the accessory-laden electric vehicle, you may be able to drive it through the "Hummer Loophole."
A $25,000 tax loophole big enough to drive a Tesla through awaits the right buyer of the electric carmaker’s hefty 2016 SUV.
First, you have to be able to afford the $100,000-plus sticker price car analysts predict for the well-accessorized, seven-seat, all-wheel drive Tesla Model X. Tesla hasn’t set an official base-model price, but if you have to ask…
The first ones shown off recently were premium models starting at $132,000, Reuters reported. Tesla CEO Elon Musk tweeted that base models would start about $5,000 above the Model S sedans, which start at $69,900.
Next, you must claim the Falcon-wing wonder will be used for your small business.
If you meet those requirements, the IRS says you may get a $25,000 federal tax deduction on top of an already existing tax credit of up to $7,500 for buyers of electric vehicles with batteries greater than 5 kilowatt-hours. Tesla says the Model X comes with a 90 kWh battery providing 250 miles of range.
Live in California? Not only will the state give you another $2,500 tax rebate for buying an electric vehicle, says Tesla, it will let you drive it solo in carpool lanes, allowing the rich to get where they’re going faster. Other states offer incentives, too.
“This is a high priced vehicle that only wealthy people can buy,” Karl Brauer of Kelley Blue Book told the Los Angeles Times. “There are a lot of people who believe we have already done enough to help Tesla.”
The $25,000 deduction comes from what was formerly known as the “Hummer Loophole,” or IRS Section 179, a business deduction established under President George W. Bush for a sport utility vehicle weighing more than 6,000 pounds and used in business.
“The curb weight of Model X is 5,441 pounds. So we expect the GVWR [gross vehicle weight] to exceed 6,000 pounds,” Tesla’s Alexis Georgeson told AutoBlog. “This means a Section 179 deduction could be taken for up to $25,000 of the purchase price.”
A deduction isn’t the same as $25,000 cash in hand, nor does it yield the same tax savings for everybody, the Los Angeles Times reminded readers:
If a California Realtor or sales rep, for example, buys a Model X for $100,000, the motorist would immediately qualify for the $7,500 federal income tax credit and the $2,500 California rebate, to reduce the vehicle cost to $90,000. The owner could then deduct $25,000 from taxable income on a federal tax return. If the owner is paying a 33 percent tax rate to the feds, the deduction would reduce the tax bill by $8,250.
Analysts urge buyers to check with a tax accountant before filing for any of these breaks.
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