For businesses, an aircraft is more than a mode of transport—it's a significant capital asset. One of the most powerful financial benefits of owning a business aircraft is depreciation, a tax deduction that allows a company to recover the cost of the asset over time.
What is Depreciation?
Depreciation is an annual income tax deduction that accounts for the wear and tear and decline in value of an asset. By taking a depreciation deduction, a business can lower its taxable income, thereby reducing its tax liability. To be eligible, the aircraft must be used for business purposes.
Bonus Depreciation for Aircraft
Tax laws often allow for "bonus" depreciation, which enables a business to deduct a large percentage (sometimes up to 100%) of the aircraft's cost in the first year of service. This can provide a massive, immediate tax benefit. The rules for bonus depreciation change frequently, so consulting with a tax professional is essential.
MACRS Depreciation
If bonus depreciation is not taken, businesses typically depreciate an aircraft using the Modified Accelerated Cost Recovery System (MACRS). For aircraft used in business, the cost is generally recovered over a 5-year period, with larger deductions in the earlier years.
Structure Your Purchase for Tax Efficiency
While we are not tax advisors, we understand how to structure financing to work in concert with your tax strategy. We can work with your tax professional to ensure a seamless acquisition.
Consult with Our TeamThe Importance of a Tax Advisor
Disclaimer: This article is for informational purposes only and does not constitute tax advice. The rules governing aircraft depreciation are incredibly complex and subject to change. It is absolutely critical to work with a qualified aviation tax advisor to ensure you are in full compliance with IRS regulations and are maximizing the potential tax benefits of aircraft ownership.