The past couple of years have been exciting — and often confusing — regarding taxation in the United States. The GOP’s latest tax overhaul is a prime example of the major changes we continue to see for many aspects of the tax code. These changes affect individuals, families, small businesses, and large corporations in different ways. And while the updated law can be a challenge for some to get used to, it also offers a host of benefits.
For business owners and executives looking to purchase a private jet, the new tax code offers a major incentive to buy now. A tax loophole, which allows those who buy private jets to deduct the purchase from their taxes, has driven a rising demand for private aircraft.
What’s the loophole?
The 2017 Tax Cuts and Job Act passed by the GOP last year included a policy change regarding bonus depreciation for transportation items. Bonus depreciation is a tax incentive that allows businesses to deduct a large portion of the price of business assets.
Previously, eligible business purchases, including private jets, qualified for 100% bonus depreciation — but this bonus depreciation was not immediate. The new tax cut makes business jets eligible for immediate 100% bonus depreciation.
For many businesses, this tax loophole effectively means they can purchase a business jet at no net cost to them depending on the specifics of their taxes.
What does it mean for jet buyers?
The government will not foot the bill for your private jet, but this loophole makes it possible for you to immediately offset 100% of your purchase cost through a bonus depreciation.
Under the new law, the price of any aircraft purchased and put into service between September 27, 2017, and January 1, 2027, can be deducted from taxes as an immediate bonus depreciation. If the cost of your jet exceeds what you owe in taxes, the bonus depreciation you write off could leave you owing nothing in taxes.
This tax loophole for jet purchase has spurred a buying frenzy. For many businesses, the loophole makes it possible for them to purchase a jet that might have been out of their price range were it not for the new bonus depreciation policy. The market has seen significant increases in demand since the announcement of the new tax bill, with more and more buyers interested in purchasing business aircraft.
The ripple effects of increased industry action
Even businesses without the funds to purchase a private jet still benefit from the incentives. New companies that offer jet time-sharing and partial ownership are growing as a result of the new tax bill, and more and more businesses are taking advantage of these affordable business aviation options.
The business aviation market has seen an uptick in demand at every level since the announcement of the new tax loophole. This renewed demand is welcome news for an industry that experienced declines in recent years. For many businesses, this change opens the door to entirely new transportation opportunities to take their travel to new heights.