Treasury Secretary Scott Bessent recently announced that the return of 100 percent bonus depreciation is likely to be enacted in an upcoming tax bill, potentially creating significant opportunities for businesses considering aircraft purchases.
On Monday, House Republicans unveiled President Donald Trump’s so-called “One, Big, Beautiful Bill,” a sweeping tax and spending package. It included the return of 100 percent bonus depreciation.
This tax policy shift could reshape the aviation industry by making aircraft acquisition more financially attractive for all types, including pistons and jets.
What Is Bonus Depreciation?
Bonus depreciation allows businesses to immediately deduct a large percentage of the purchase price of eligible assets, rather than writing them off over their useful life. Under 100 percent bonus depreciation, a company purchasing a $10 million business jet could potentially deduct the entire $10 million from its taxes in the year of purchase, instead of spreading the deduction across multiple years.
- READ MORE: Bonus Depreciation 101
The potential reinstatement of 100 percent bonus depreciation could significantly benefit the aviation sector, where aircraft purchases often represent substantial capital investments. For business aircraft owners and potential buyers, this policy would allow for immediate deduction of the full cost of new or pre-owned aircraft in the year of purchase.
The immediate tax benefits could include:
- Significant reduction in tax liability in the purchase year
- Increased cash flow that can be reinvested in business operations
- Enhanced ability to upgrade fleet equipment more efficiently
- Competitive advantage through improved business travel capabilities
Policy Details and Legislative Process
While Bessent expressed optimism about including 100 percent bonus depreciation in the upcoming tax bill, the policy still requires congressional approval. Both the House and Senate would need to pass legislation before the president could sign it into law.
Notably, Bessent mentioned the potential for retroactive application: “We are going to make that, as President Trump said in his speech to Congress, retroactive to January 20.” This retroactive feature could provide a windfall for businesses that have already made qualifying purchases this year.
Historical Context
The Tax Cuts and Jobs Act of 2017 originally established 100 percent bonus depreciation for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. However, this benefit has been gradually phasing out, with the rate dropping to 80 percent for property placed in service in 2023, and further reductions scheduled for subsequent years.
The new tax bill aims to restore the full 100 percent rate, reversing this planned phase-out.
Support from Industry Associations
The National Business Aviation Association (NBAA) has consistently advocated for bonus depreciation, citing its positive impact on the general aviation industry. According to the NBAA, the GA industry provides high-skill, high-paying jobs for more than 1.1 million Americans and generates $219 billion in economic activity annually in the United States.
Bonus depreciation delivers long-term stimulus to industries like general aviation, giving American companies access to advanced equipment and preserving jobs in aviation-related manufacturing—one of the few industries that contributes positively to U.S. trade balance.
Considerations for Business Owners
For businesses considering aircraft purchases, this potential tax change presents a significant opportunity. However, experts emphasize that aircraft acquisitions should align with overall business strategy and financial goals.
Industry professionals caution potential buyers against waiting too long to make a decision. If 100 percent bonus depreciation is reinstated, there could be a surge in demand for aircraft, potentially leading to reduced inventory and higher prices.
Looking Ahead
As the tax bill moves through Congress, business aircraft owners and potential buyers should stay informed about developments and prepare to act quickly if the legislation passes. Consulting with tax professionals and aviation experts is essential to navigate the complexities of aircraft depreciation and maximize the benefits of this potential tax change.
For those whose financial strategy includes financing, professional guidance through the intricacies of aircraft finance will be crucial to leverage these potential tax advantages fully.
FAQ
How does bonus depreciation apply to aircraft?
Aircraft, including piston aircraft, turboprops, jets, and helicopters, are all eligible for bonus depreciation if they are used for business purposes. This allows owners to significantly reduce their tax liability in the year of acquisition.
What types of aircraft can benefit from bonus depreciation?
All types of aircraft, including piston aircraft, are eligible for bonus depreciation as long as they are primarily used for business purposes.
How much of the aircraft’s use needs to be business-related to qualify for bonus depreciation?
To qualify for bonus depreciation, the aircraft must be used for business purposes at least 50 percent of the time. Personal or recreational use does not count toward this requirement.
Does financing affect the eligibility for bonus depreciation?
No, how the aircraft is financed, whether through cash purchase, loan, or lease, does not impact its eligibility for bonus depreciation as long as it is used primarily for business purposes.
For those looking to learn more, FLYING Finance offers a variety of solutions for buying your next aircraft.
