Bonus Depreciation for 2014 Aircraft Deliveries

Posted on October 23, 2013

Our next available new DA42 -VI won’t be deliverable until April or May, 2014.  But you may still qualify for 50% bonus depreciation on that purchase.  Daniel Cheung from Aviation Tax Consultants shares this:

The general rule to qualify for bonus depreciation includes:

  • Purchase and place in service a new business aircraft in 2013
  • Aircraft held as demonstrator by factory or dealer will qualify as new

 

If the following requirements are met, a 2014 new aircraft delivery can also qualify for 50% bonus depreciation:

  • Signing a binding contract to buy a new aircraft by December 31, 2013
  • Making a non-refundable deposit of the lesser of
    • 10% of the cost, or,
    • $100,000
  • The aircraft should have an estimated production period exceeding 4 months
  • The cost of the aircraft exceeds $200,000
  • Taking delivery and placing the aircraft in service for Part 91 operation by December 31, 2014
  • Depreciation will be taken on 2014 income tax return

By integrating your business aircraft into a trade or business, you can generate tremendous tax savings by deducting your aircraft operating expenses, in addition to 50% of the purchase price of the aircraft.  Ownership structure will impact your ability to utilize bonus depreciation on your business aircraft.  Other income tax planning opportunities include: personal use of a business aircraft, related party leasing rules for listed property, passive activity loss issue, and documentation requirements to support the business use of the aircraft.

Sales and use tax savings can amount to six to nine percent of the aircraft purchase price.  Sales and use tax planning opportunities vary depending on the state that serves as the home base of the aircraft.  The inter-relation and operatin of the Internal Revenue Code,  state sales and use tax laws, and the Federal Aviation Regulations create unique planning challenges and opportunities for business aircraft owners.

You may contact Daniel by email or 812-342-9589

Disclosure Under IRS Circular 230: To ensure compliance with requirements recently imposed by the IRS, we inform youthat any tax advice contained in this communication, including any attachments, was not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax related penalties or promoting, marketing or recommending to another party any tax related matters addressed herein.

 

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