The 2017 Tax Cuts and Jobs Act provides a wonderful opportunity for business aircraft purchasers of both new and pre-owned aircraft to take 100% bonus deprecation on the aircraft purchase price in the year of acquisition pursuant to Section 168(k), provided that the aircraft is placed in service for business use in that year. This purchase incentive, designed to spur economic activity in equipment sales, can serve as a valuable tool to free up capital and encourage business investment and activity.
After years of debate, tax reform has arrived. The late-year 2017 passage and signing of the Tax Cuts and Jobs Act (TCJA) has reshaped the business and individual tax landscape. The TCJA provides excellent tax opportunities for businesses of all sizes to invest in general aviation aircraft, but requires careful planning and review to ensure that deductions are preserved. Below you will find a few highlights of the new law, along with discussion points to consider with a trusted advisor.
Potential Cuts to Business Taxes May Make Deductions More Valuable This Year
One of the central promises of the new administration has been long-awaited tax reform. President Trump has promised imminent executive action outlining the tax reform priorities that he will pursue, and with a Republican Congress in place, some version of tax reform is likely either in 2017 or in early 2018. While it is difficult to “read tea leaves” there are some commonalities between the Congressional tax reform agenda and the campaign promises of the President that signal significant relevant changes to corporate and small business taxation.
Second in a series of articles on “How to Survive an IRS Audit of your Aircraft”
There are many valid business reasons to separate aircraft ownership from the operating companies it serves. These often include liability protection, ownership differences, and managerial issues to name a few. Although it is often beneficial to segregate ownership for non-tax reasons, it is important to avoid inadvertently causing the aircraft entity to be treated on a “stand-alone” basis for passive activity income tax purposes.
A Great Time to Invest in Business Aircraft and aircraft upgrades
- Potential drop in flow-through tax rates for small businesses from 39% to 15% or 25% may make the value of deductions substantially exceed the expected recapture at sale
- 179 Expensing Election of $500,000; phase out starts when equipment purchases exceed $2,000,000.
- 50% Bonus depreciation for factory new equipment
Potential Cuts to Business Taxes Make 2016 Deductions More Valuable This Year
With the inauguration of President Elect Donald Trump just around the corner,