Congress not only extended accelerated “bonus” depreciation rules for business-related aircraft purchases, but also upped the limits on what businesses can spend.
There had been some concern that temporary tax rules designed to buttress the industry would fall victim to the last minute deal cut to avoid the so-called fiscal cliff. Instead, businesses can now deduct up to 60 percent of the cost of a new aircraft in the first year, if it is purchased in 2013 – up from 50 percent for 2012, but still short of the 100 percent “bonus” depreciation allowed in 2010 as part of a plan to stimulate the economy.
Prior to 2010, buyers could deduct only 20 percent depreciation the first year on capital expenses, including aircraft purchases.
The tax benefit also applies to new avionics purchases and major overhauls, including engines. The incentives are credited with keeping aircraft factories open and workers on payrolls during the Great Recession. Another tax benefit is aimed at buyers who choose to deduct expenses rather than opt for the accelerated depreciation strategy. Details on that new rule can be found in Section 179 of the Federal Tax Code. As always, consult your accountant before making decisions based on the new rules.