If you've purchased an automobile this year, or are contemplating such a purchase, the federal government just may help you with the cost.

You may be eligible for a federal tax credit if you buy a hybrid this year, although credits are reduced or eliminated for certain popular models. If you buy a car, truck, minivan, SUV, or heavy SUV for business use there are also expanded expensing provisions and first-year depreciation deductions.

Hybrid Tax Credit 
The hybrid credit is available if you are the original purchaser of a new, qualifying hybrid vehicle. You must also plan to use your hybrid in the United States.

The hybrids for model year 2008 that qualify for the credit, and their associated tax credit amounts, are as follows:

Make	Model	Purchase Date (if applicable)	Credit Amount
Chevrolet	Malibu Hybrid		$1,300
Chevrolet	Tahoe Hybrid 2WD / 4WD		$2,200
Ford	Escape Hybrid 2WD		$3,000
Ford	Escape Hybrid 4WD		$2,200
GMC	Yukon Hybrid		$2,200
Honda	Civic CVT	Prior to 1/1/08	$2,100
		1/1/08 - 6/30/08	$1,050
		7/1/08 - 12/31/08	$525
		1/1/09 and later	$0
Lexus	RX 400h 2WD / 4WD	4/1/07 - 9/30/07	$550
		10/1/2007 and later	$0
Lexus	LS 600h L Hybrid	4/1/07 - 9/30/07	$450
		10/1/2007 and later	$0
Mazda	Tribute 2WD		$3,000
Mazda	Tribute 4WD		$2,200
Mercury	Mariner Hybrid 2WD		$3,000
Mercury	Mariner Hybrid 4WD		$2,200
Nissan	Altima Hybrid		$2,350
Saturn	Aura hybrid		$1,300
Saturn	Vue Green Line		$1,550
Toyota	Camry Hybrid	4/1/07 - 9/30/07	$650
		10/1/2007 and later	$0
Toyota	Prius	4/1/07 - 9/30/07	$787.50
		10/1/2007 and later	$0
Toyota	Highlander  Hybrid 4WD	4/1/07 - 9/30/07	$650
		10/1/2007 and later	$0

Section 179 Expensing Limits
The Section 179 deduction, which allows you to deduct all or a portion of the cost of certain depreciable property used in your trade or business, was increased for 2008. This year, you can deduct up to $250,000 in purchases, as long as your business does not operate at a loss and the total purchases do not exceed $800,000.

To qualify, a car or truck must be used at least 50 percent for business purposes.

There are combined dollar limitations, or caps, on Section 179 deductions plus the normal first-year depreciation deduction. These combined limits are $2,960 for passenger automobiles and $3,160 for light trucks, vans, and SUVs. Heavy SUVs ( with GVWs greater than 6,000 pounds) are exempt from these caps. You can deduct up to $25,000, as long as the SUV is used 100 percent for business, and depreciate the remainder over a five-year period. (Note: Congress is considering legislation to end tax breaks for heavy SUVs.)

Fifty Percent Special First-Year Depreciation
For 2008, you can take a special depreciation deduction equal to 50 percent of the cost (less any Section 179 deduction) of vehicles you use for business and place in service in 2008.

This is in addition to normal first-year depreciation, which is calculated on the vehicle's cost less any Section 179 deduction and special fifty-percent first-year depreciation.

If your new vehicle qualifies for fifty-percent depreciation, the limits on depreciation deductions are increased by $8,000, to $10,960 for passenger automobiles and $11,160 for light trucks, vans, and SUVs.

David Stiefel is a Bader Martin shareholder and director of the firm's family and closely held business practice. He has also earned the AICPA's Personal Financial Specialist (PFS) credential, awarded to CPAs with proven expertise and experience in financial planning.  David's work integrates accounting, tax, and business consulting services for private and family-owned companies and their owners. His clients operate in a range of industries, with an emphasis in hospitality, distribution, professional services, retail, and real estate. David also has significant professional experience in the areas of forensic accounting, litigation support, and expert testimony.

 

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