TAX PLANNING
Sales Tax
State Sales Tax can be an important consideration in an aircraft purchase. Although in most cases, it is Federal tax deductible, it still can be a substantial amount. Each state’s rate is different, and the rules vary by state as to liability. A few states have no sales tax on aircraft, and some allow an aircraft to be flown out of state for delivery with no sales tax. The time to plan is BEFORE your purchase, as many states have become quite aggressive in collection. State Tax Rates.
Federal Tax
Most business aircraft purchases are eligible for depreciation and most all expense for operation and finance interest is tax deductible. Should you lease, usually the full lease payment is deductible. New IRS rules for company aircraft used on personal trips may affect deductibility and/or cause additional income to be imputed to aircraft users. (Be sure to check with your accountant or tax advisor).
Depreciation
Aircraft can usually be totally depreciated in a minimum of five years. You can use straight-line or the ACRS method, depending on your best interest (again, check with your tax advisor).
1031 Exchange
Since aircraft historically have held a large percentage of their value in relation to the original purchase price (both new & used), when it becomes time to sell or trade-in, the depreciated book value of the aircraft can be very important. Rather than post a capital gain, the IRS has rule #1031 that allows you to replace the aircraft with a “like-kind exchange” usually resulting in very little or no capital gain. The rules for this exchange are very specific and must be followed carefully to insure it is allowed.
Use our 1031 due date calculator to determine your exchange period. »
Aircraft Tax Advisors
