Tax Cut Bill Increases Deduction Limits For Small Businesses

by Mike Godfrey, Tax-News.com, Washington

21 May 2003

Small businesses are expected to benefit from a measure contained within President Bush's $350 billion tax cut plan recently passed by the Senate, which will allow them to deduct the full cost of certain vehicles up to $100,000 in value.

The proposal will allow owners of small businesses the option of deducting the cost of anything the IRS considers to be a 'truck' - that is a vehicle above 6,000 pounds in weight. It is estimated by the Joint Committee on Taxation that the measure will cost between $23 and $39 billion.

At present, the maximum allowable deduction is set at $25,000, and it was back in January that President Bush suggested this should be raised to $75,000. However, after much haggling between the Senate and the House, the ceiling was eventually raised to $100,000.

A similar proposal aimed at larger corporations is also contained in the House version of the tax cut bill. This would allow firms to deduct 50% of the cost of capital equipment purchases.

Recommended