To maximize profits, you need to maximize your tax benefits. Owning a private aircraft may appear an unnecessary expense to some, but depreciation rules can make its luxury far more affordable for savvy fliers.
If you’re considering a corporate jet for your business, you should understand the aircraft’s tax value. Not only can you travel privately for business by air but you can also claim substantial depreciation refunds on your asset when you file business tax returns. You just need to meet IRS criteria.
To be considered a justifiable expense, a private jet must be deemed necessary for business. Getting people from one location to another is considered necessary; being overly lavish is not.
Government tax laws help business leaders afford aircraft through accelerated depreciation. Under IRS rules, a private jet has a useful life of five years. Those rules further state that businesses can write off 70% of aircraft costs within the first three years. This is a tremendous benefit you can take advantage of for your business.
Business aircraft depreciate under the Modified Accelerated Cost Recovery System (MACRS). This calculus accelerates the depreciation rate in the first years of ownership. With MACRS, depreciation is taken over a period of five years.
If you don’t qualify for MACRS, you can use another technique called the alternative depreciation system (ADS), which is straight-line depreciation with the same amount taken each year for six years.
Bonus depreciation enables business leaders to deduct an additional 50% of their purchase costs during the first year. The rate will go down 10% each year beginning in 2018. Specific rules apply and rates can be higher, so be sure to go over the particulars with your accountant.
Today’s business decision-makers have many reasons to purchase private aircraft. Convenience is more important than ever, and with tax benefits like these available, a jet could be a very smart purchase for you and your business.