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The schedule that you use to depreciate your aircraft is going to be determined by the use profile of the aircraft subject to the depreciation. Most part 91 business aircraft are depreciated on a 5 1/2-year makers schedule, accelerated schedule or a 6-year straight line schedule provided that there’s at least 50% business use and at least 25% qualified business use in the tax year at hand if you’re using the accelerated schedule.

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The occupied seat rule generates out of Section 274-10, which defines personal use of business aircraft. What occupied seat rule says is the IRS is going to treat aircraft very differently than they would treat the use of other transportation equipment such as a car. That is, when an aircraft flies to a particular destination the IRS is going to look at the purpose of every passenger on that flight,

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The passive activity tax rules divide income and loss into three buckets: active, passive, and portfolio. Most income tends to be active, for example, salary income and most income from businesses people run. Passive income results from either businesses that person owns part of but doesn’t materially participate in or rental businesses. Losses from passive activities cannot offset active income for tax purposes. This means that if you have active income but passive losses then your taxable income will exceed your actual income meaning that you pay a larger amount of tax than you would on your true net income.

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SIFL stands for the Standard Industry Fare level, and it’s a multiplier that’s purchased by the IRS in order to help you value personal use of business aircraft. Personal use of business aircraft for non-entertainment purposes, or for entertainment purposes, is relatively common and has a tax consequence, the first of which, for most businesses, is making sure that additional income is imputed for the use of the aircraft onto the individual taxpayer that gets the benefit,

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Qualified business use is a term of art when considering business aircraft and it is most commonly used in reference section 280F of the IRS code. Qualified business use is the type of business use that is going to apply towards at least 25% of the use if you intend on taking makers accelerated depreciation or bonus depreciation on your aircraft. Business use that doesn’t fall into the definition of qualified business use is business use through a related party lease.

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