Late last night the House passed the tax compromise bill without making any changes. The 2010 Tax Relief Act now goes to the President’s desk. Since the President spearheaded the compromise that outlined the terms in the bill, there is no reason to think he will not sign the bill into law.
Many of the provisions in the bill are becoming clearer as Congress and analysts release detailed breakdowns of the Act’s contents. The 2010 Tax Relief Act will allow businesses to expense 100% of their investments in machinery and equipment in 2011. They will be able to expense 50% of the value in 2012. It was not clear earlier if this provision would include cars. Now we know.
Cars are not included in the new rules. Motor vehicles followed a schedule with a cap placed on the amount that may be applied as a deduction per year. Currently that is $3060 for passenger cars and $3160 for trucks and vans. These values are based on the consumer price index. In addition, passenger cars are eligible for an $8000 deduction during the year they are purchased. This deduction was set to sunset at the end of this year, but the 2010 Tax Act extends it for another two years.
It should be noted that these are deductions for business use. For the case of vehicles used for both business and personally, a taxpayer must reduce the deduction accordingly. The maximum deduction in the first year for a passenger car is $11,060. If that vehicle was used evenly for both business and personally (50% each), then only up to $5530 could be deducted.
For more information on the 2010 Tax Relief Act or for other tax issues, contact the Chicago tax lawyers at Horowitz & Weinstein.
Horowitz Law Offices
311 West Superior, Suite 314
Chicago, Illinois 60654