Costing over $160,000, the G-Wagons aren’t what most people would consider a bargain, but for the wealthy, these luxury SUVs offer tax loopholes.
The so-called “Hummer Deduction,” Section 179, allows a car that weighs at least 6,000 pounds to count as a tax benefit under certain circumstances. Take it through your company, use it for business at least half the time, and this Mercedes G-Class – or Cadillac Escalade (from $76,000) or Infinity QX80 (from $70,000) – could earn a $25,000 deduction in the first year of ownership.
The IRS treats these rides as impaired assets, which allows for compensation, although the benefit was not originally intended to help high rollers, according to Swapalease.com’s Scot Hall. It was actually intended for agricultural equipment like tractors; as our cars got heavier, the tax code didn’t follow.
“It’s a provision to incentivize companies to buy new equipment,” Hall told The Post., “The heavier the vehicle, the more likely it is to be a heavy-duty pickup. These days, however, there are more vehicles than people think that are squeezing in to qualify.
The “Hummer Deduction” isn’t the only 100% legal workaround that wealthy Americans use to offset their high-end lifestyles against Uncle Sam’s bottom line, according to Asher Rubinstein, a partner at Gallet Dreyer & Berkey, based in New York, and a seasoned asset professional. protective tax practice.
Take “Augusta Rule,” its name a nod to the town in Georgia, where landlords have long rented out their mansions during the PGA Spring Masters Tournament.
In the 1970s, residents lobbied federal authorities to allow them to do so for a brief period each year without operating as rental businesses — or paying taxes on what they charged. Now anyone with multiple properties can rent out their primary residence at market rates for up to 14 days a year and collect the profits tax-free.
There is another loophole – the equivalent of one percent extreme couponing, which can be stacked on top, per Rubinstein.
“To rent [your home] to your company for a company retreat or a monthly board meeting, and now the rent payment is tax deductible for the company and income tax free for you,” he said. “It’s like a bonus on both sides.”
Another temporary bonus that Rubinstein encourages everyone to recognize this tax season: business meals, which have traditionally been 50% deductible, can now be fully deducted – a move by the government to try and recover hindered restaurant checks. by the pandemic.
“It was a lifeline that Congress threw at the restaurant industry,” he said of the measure, which expires at the end of the year. This means that even Premier Cru Bordeaux and a four-course prix fixe at Daniel’s are eligible, as long as the meeting and catering was business-related.
Got a closet full of Birkins or a few prized Picassos? There is also a tax solution for this. You can establish your own 501(c)(3) family and then donate the luxury goods to this new foundation. The donation gives the right to a tax deduction and the foundation does not pay tax when it sells the goods.
Rubinstein has client systems like this in place for everything from sculptures to actions; crypto rich guys are now asking if this applies there too.
Here’s how these systems work: Suppose you bought Apple stock at $50 and it went down to $150. Selling these shares on a regular basis will trigger a capital gains tax on the profit of $100. But if you donate those shares to a charitable remainder trust — your own personal 501(c)(3) — the tax situation is much better after you sell them.
“You can get distributions on an annual basis, as long as you can demonstrate that 10% of the amount will go to a qualifying charity at the end of the trust,” says Rubinstein.
It works the same way for any prized possession, like a painting or a bag that increases in value every year: a family-controlled 501(c)(3) turns a luxury good into a gesture of benevolence.
Want to offset the cost of a high-end pet? There’s a chance of it if the dog is a security animal, according to Rubinstein. And when you’re spending six figures on a dog, that’s a welcome discount.
Greene owns and runs Svalinn, a Montana-based dog breeding and training business that sounds like a canine Quantico. Well-trained graduates cost $125,000 each and double as adorable pets and protection officers, ready to spot danger before it happens.
“A lot of people buy dogs as a business expense because it’s a justifiable security asset,” Greene told the Post. Like the Florida jeweler who keeps a Svalinn dog by his side in the store and walks to his car late at night. Doctors are also common customers, she says, eager to be protected from a surprise visit from a disgruntled former patient.
“Unlike a simple companion dog, your personal protection dog accompanies you wherever you go. It’s your guardian angel,” Greene said.
It’s a reminder that there really are different rules – or even a different game to play – when you’re rich.
“Some people might argue that you’re depriving the government of revenue, so there’s an ethical obligation,” attorney Rubinstein said, “But wealthy people take advantage of legal loopholes. If you have a business meeting with clients , why should the deduction be capped at one bottle of mediocre Sonoma wine? Why can’t we open the premier vintages and deduct them instead?”