If you’ve recently purchased an aircraft, and you use it for business purposes, there are several tax law changes that should be on your radar. Among others, the new tax law approves 100-percent depreciation on business-use aircraft both new and used—a huge boost compared to that previously allowed. Also, the tax deferral procedure known as a “1031 exchange” is no longer available for aircraft owners starting in tax year 2018. If you are currently in a 1031 agreement on your aircraft, it’s time to talk with your tax attorneys and accountants about how best to handle your situation.
Back to the good news. While 100-percent depreciation is now allowed on business-use aircraft, the aircraft must be placed in service to qualify. As always, you should consult with your tax advisor before making an aircraft purchase. The laws are complex and careful structuring of the transaction is imperative to secure available tax deductions.
Did we do better or worse in the new tax bill? That’s debatable. Most people would agree it’s going to be better at least for folks who are using aircraft with a business purpose, because they may now be eligible for 100-percent depreciation in the first year AND it doesn’t matter whether the aircraft is used or new. The new law more than doubles the amount of depreciation previously allowed. This change definitely creates real stimulus for those business owners who have income to offset and have been considering the benefits of using an aircraft in their business.
We are frequently asked if there’s a tax write-off for those strictly using the aircraft personally. Unfortunately, there is no write-off for aircraft flown for personal use.
If you’ve been contemplating a purchase for some time, keep in mind the new tax law makes now a great time to purchase new or used aircraft with any business use. If you have been contemplating using an aircraft in your business in some way, there is now a lot more incentive to do so.
Traditionally the fourth quarter has been a very busy period for business aircraft sales. By then most business owners have a pretty good idea of how they are going to do financially for the year and are typically trying to manage the bottom line. This year’s fourth-quarter sales will be worth watching to see if the expected incentive of the new tax bill results in increased sales. Here’s hoping it does.