WANADA members are no doubt well aware of the tax bill that Congress passed just before adjourning for year. But what’s in it for dealers? Quite a lot, thanks to hard work by NADA and its dealers. Many provisions go into effect Jan. 1, 2018. Here are some provisions that will help dealers:
- Full deductibility of floorplan interest. The original House and Senate tax bills generally disallowed interest deductibility, including floor plan financing, for interest expenses in excess of 30 percent of adjusted taxable income. Thanks to a NADA-backed amendment in each chamber, floor plan interest remains 100 percent deductible, permanently. The final bill provides that entities that receive full deductibility of floorplan interest cannot claim the new temporary immediate expensing provisions. But Section 179 expensing, with permanent increased limits, remains available.
- Lowers the tax rate and ensures tax relief for pass-through dealerships. The final bill allows a 20 percent deduction on pass-through income (including from trusts and estates), which results in an effective tax rate below 30 percent for business income.
- Maintains the LIFO (last in, first out) inventory accounting method. NADA successfully fought to preserve LIFO, which many dealerships have used for decades.
- Significantly reforms estate tax. NADA has long fought to reform the “death tax” because of its extremely adverse effect on family-owned dealerships. The tax bill doubles the estate, gift and generation-skipping transfer tax (GST) exemptions from $5.6 million to $11.2 million per individual and $22.4 million per couple, indexed for inflation with portability. That is effective Jan. 1, 2018, until Dec. 21, 2025.
- Defeats the border adjustment tax (BAT). The BAT would have raised prices on every vehicle. NADA opposed this new tax, and it was not included in either tax bill.
- Retains advertising deductibility. Limiting the deductibility of advertising expenses would have been an administrative nightmare for most dealers, and could have raised dealers’ taxes. NADA opposed this provision, which was not in either bill.
NADA will provide a more detailed analysis of the tax bill before the upcoming tax season. Dealers with questions on tax reform may contact NADA Legislative Affairs at firstname.lastname@example.org.Download Bulletin PDF