Last updated: • Not tax advice
Big Picture
U.S. tax law offers accelerated depreciation methods for qualifying business aircraft, including Section 179 expensing and bonus depreciation. Eligibility and limits change over time and depend on business use percentage, type of operation, and aircraft classification. Coordinate with a CPA early to align structure and timing with your financing plan.
Section 179 vs Bonus Depreciation
- Section 179: Expensing up to annual limits, with phase‑outs based on total property placed in service. See IRS Pub 946.
- Bonus depreciation: Additional first‑year deduction for qualified property; phase‑down schedules apply under recent legislation.
- Business use threshold: Deduction depends on qualified business use; mixed‑use aircraft require careful recordkeeping.
Recordkeeping and Substantiation
- Flight logs documenting business purpose and passenger names/titles.
- Policies around entertainment use and disallowance rules.
- Entity structures (LLC/Trust) and accountable plans.
Coordination with Financing
Lenders focus on cash‑flow viability; depreciation doesn’t create cash but can reduce taxes. Model after‑tax cash flow and reserves in the calculator. Align payment cadence with tax cash cycles; see payment frequency.
Common Pitfalls
- Assuming 100% business use without documentation.
- Underestimating entertainment use disallowance.
- Ignoring recapture if business use drops below thresholds.
Example Scenarios
A professional services firm with consistent business use may prioritize accelerated deductions to offset high income years. A mixed‑use owner‑pilot may limit deductions based on substantiation rules. Each path has different compliance and recordkeeping burdens—model after‑tax cash flow with your CPA.
Legislative Phase‑Downs
Bonus depreciation percentages phase down under current law unless extended. Section 179 thresholds adjust periodically. Monitor updates via IRS and industry associations like NBAA to avoid surprises.
FAQs
Can I take both Section 179 and bonus depreciation?
Often yes, subject to ordering rules and limits. Your CPA can optimize the mix for your facts and goals.
Do Part 135 operations change deductions?
Commercial use has different constraints and opportunities. Consult an aviation‑savvy CPA; see NBAA tax resources.
What if I sell early?
Depreciation recapture may apply. Model outcomes with your advisor before selling or refinancing.
Related Articles
External references: IRS Pub 946 · IRS Pub 535 · NBAA Tax Issues