2024 Aircraft Bonus Depreciation: Maximize Tax Benefits Before Further Phasedowns
Bonus depreciation has been a game-changer for private jet ownership since the Tax Cuts and Jobs Act (TCJA) was enacted in 2017. For years, aircraft owners enjoyed the ability to deduct 100% of an aircraft’s purchase price in the year it was placed in service. In 2024, eligible private jets qualify for up to 60% bonus depreciation, and this figure will decrease by 20% annually until it reaches 0% in 2027.
Whether you’re considering your first aircraft purchase or are a seasoned owner, understanding the evolving rules is critical to maximizing tax benefits and avoiding unexpected liabilities.
What Is Bonus Depreciation and Why Does It Matter?
Before 2017, only brand-new aircraft qualified for bonus depreciation, but TCJA allows the same benefit for preowned aircraft (certain conditions do apply, and aircraft must be used in a trade or business or held for the production of income). This change created huge opportunity for business aviation users of all shapes and sizes. Deducting $50,000 per year may not impact a given year’s taxable income but deducting $500,000 within a single year can significantly reduce a taxpayer’s highest marginal tax rate. Â
Bonus depreciation allows businesses to write off a large percentage of an asset’s cost in the year of acquisition, rather than gradually over its useful lifetime through standard depreciation. This accelerated depreciation can significantly impact a taxpayer’s highest marginal tax rate within a single year. For private jet owners, this means significant tax savings upfront.
Under current phasedown rules:
- 2024: 60% bonus depreciation
- 2025: 40% bonus depreciation
- 2026: 20% bonus depreciation
- 2027: 0% bonus depreciation
For a jet purchased in 2024 at $10 million, you could deduct $6 million in the first year under bonus depreciation rules. At a 37% tax rate, this deduction could equate to over $2 million in tax savings.
Keep in mind that complex IRS regulations may curtail eligibility for bonus depreciation, which is why a proper ownership structure needs to consider FAA rules, state sales and use tax. The Jet Linx team always consults professional aircraft tax consultants when working with clients to determine the most feasible solution.
2024 Tax Considerations
As we move into 2025, several factors must be considered to ensure compliance and to maximize your bonus depreciation benefits.
Qualified Business Use
To qualify for bonus depreciation, an aircraft must primarily be used for Qualified Business Use (QBU). This is more restrictive than standard business use and has additional requirements.
For example, transporting employees to client meetings, conferences, or other business-related destinations, flying clients to business meetings or events, or carrying company products or materials would all generally qualify as QBU. However, flights for personal vacations, using the aircraft to commute from home to work, and leasing the aircraft to parties for their personal use would not qualify for QBU.
Aircraft owners must document and monitor flight usage annually to maintain QBU status. Failing to meet QBU requirements could trigger recapture, requiring you to pay back part of the bonus depreciation in future years.
End-of-Year Deadlines
To qualify for bonus depreciation in 2024, the aircraft must be purchased and placed in service by December 31, 2024. This means:
- Completing the transaction.
- Ensuring the aircraft is ready and available for business use.
Maximizing Tax Benefits with Section 179
In addition to bonus depreciation, another powerful tool to consider is the Section 179 deduction. This tax provision allows businesses to expense the cost of qualifying assets, including aircraft, in the year of purchase, rather than depreciating them over several years. Section 179, when used in conjunction with bonus depreciation, can provide significant tax savings for aircraft owners by accelerating deductions and reducing taxable income. Due to the complexity of tax laws and the potential impact on individual circumstances, it’s crucial to consult with a tax professional to determine the optimal strategy for maximizing tax benefits.
Potential Changes on the Horizon
Tax laws are always subject to change, particularly in an election year. A long-standing proposal to reinstate 100% bonus depreciation remains in discussion within Congress, as well as many different tax reforms. While there is no guarantee of legislative changes, it’s important to stay informed and consult tax professionals to adapt to any updates.
The Role of Aircraft Tax Planning
Navigating bonus depreciation rules is complex and requires collaboration with aviation tax consultants. Key steps include:
- Structuring ownership. Properly organizing ownership can help maximize tax benefits while ensuring compliance with FAA and IRS regulations.
- Maintaining records. Flight logs, itineraries, and passenger details must be documented to substantiate business use claims.
- Addressing state tax obligations. Different states have varying rules regarding the deductibility of state taxes, and understanding these nuances is crucial.
Jet Linx: Your Partner in Aircraft Ownership
Jet Linx has helped hundreds of aircraft owners optimize the tax and operational benefits of private jet ownership. Our Aircraft Management professionals work closely with trusted aviation tax consultants to design ownership structures tailored to your specific needs.
Once you’ve acquired your jet, Jet Linx provides further benefits through our Aircraft Management Program, including:
- Volume discounts on fuel, maintenance, and insurance – up to 30%.
- Detailed recordkeeping to comply with IRS regulations.
- Industry-leading revenue generation through Jet Card Membership programs and wholesale charter, allowing owners to offset operating costs.
Whether you’re purchasing a new jet or managing an existing one, Jet Linx ensures that your aircraft ownership is optimized for both performance and cost efficiency.
Looking Ahead
While the current 60% bonus depreciation rate still offers substantial benefits, it’s crucial to act strategically and work with qualified professionals to maximize these advantages. The possibility of legislative changes and the continuing phase-down schedule make it essential to stay informed and plan accordingly.
For prospective aircraft owners, the key is to balance the potential tax benefits with your business needs while ensuring compliance with all requirements. Working with experienced aviation tax consultants and aircraft management teams can help navigate these complexities and optimize your aircraft investment.
Please contact us for further information.
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Note: This information is provided for general educational purposes only. Please consult with qualified tax professionals for specific advice regarding your situation.
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