Accelerated Depreciation of Business Aircraft

The United States tax code was recently amended to provide dramatic incentives to owners of aircraft used for business purposes. The ultimate affect of these changes reduces the net out of pocket costs associated with owning an airplane. The tax incentives are not particularly well-known, despite being within the public domain, although they are beginning to help boost general aviation aircraft sales.

The tax incentives essentially allow for accelerated depreciation of the aircraft cost, according to the following schedule: Year 1 - 20.00%; Year 2 - 32.00%; Year 3 - 19.20%; Year 4 - 11.52%; Year 5 - 11.52%; and Year 6 - 5.76%

The aforementioned schedule may vary, depending upon the acquisition date (including calendar month) of the aircraft. The accelerated write off is limited to airplanes that are used for business purposes at least 50 percent of the time that are non-commercial in nature.

When paired with the fact that most general aviation aircraft have a fairly high value retention rate, the accelerated depreciation schedule reduces the negative cash flow inherent with plane ownership. Additionally, the interest paid on any related acquisition loan is likely to be tax deductible.

DISCLAIMER: Aviation tax law is highly specialized and complicated. When coupled with tax codes, it is a minefield not easily navigated. We strongly advise aircraft owners to obtain tax advice from a professional that specializes in this field – an aviation tax adviser. Sound, credible aviation tax advice is well worth the cost.