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.
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.
- 179 Expensing Election of $500,000; phase out starts when equipment purchases exceed $2,000,000.
- 50% Bonus depreciation for factory new equipment
In a welcome display of good governance, Congress this year has largely broken its recent routine of allowing important tax incentives to expire with the start of each new year, only to retroactively reinstate those provisions as year-end approaches—leaving taxpayers during the interim on tenterhooks, guessing what tax laws they will be subject to.
Tax Depreciation of General Aviation Aircraft
Businesses throughout the country routinely make use of general aviation aircraft to provide travel and communication efficiencies that provide them with an important competitive advantage. As part of a general Congressional approach to encourage business investments, the Tax Code allows a rapid depreciation schedule for aircraft that allows owners to fully write-off purchase/acquisition costs over a period of time (usually five year) that is far less than the economic life of an aircraft.
In September 2013, the Department of Treasury released long-expected final regulations governing what expenditures can be deducted as repairs in the year incurred, versus what must be depreciated over multiple years. These new regulations, which are effective starting in 2014, and will govern this area of law for the foreseeable future, span several hundred pages in length. As a result, this article provides only a basic introduction, and leaves out numerous special rules and exceptions.