How Long Can You Use the 100 Percent Private Jet Tax Break?

You Have Until 2023 to Use the 100 Percent Private Jet Tax Break

Aircraft purchased after September 27, 2017, and before 2023 enjoy 100 percent expensing. We share all the essential details here.

In the U.S., the private charter flight market is heating up. Younger clients are more attracted to the sharing economy. They’re willing to pay for memberships, subscriptions, and fractional ownership to off-set some of the costs of owning a jet.

Nonetheless, 62% of private jet departures in 2018 involved owned jets. Private jet ownership is still a common goal for high-wealth individuals. Now maybe one of the best times to acquire a personal aircraft.

Even if you intend to use your aircraft for personal reasons in the future, you can benefit from the private jet tax break. You may be able to write off 100% of your acquisition.

However, you must carefully structure your purchase under the Internal Revenue Code (IRC). You must also be purchasing a new aircraft, and you must do so by 2023.

Here’s everything you need to know about the private jet tax deduction.

What is the Private Jet Tax Break?

Before the Tax Reform and Jobs Act of 2017, owners of private aircraft could take a private jet deduction of 50%. This deduction could only be applied to new aircraft. It was set to drop to 30% in 2019.

Since the Act was spearheaded by the Trump Administration, individuals who purchase a private business jet after 2017 can now deduct 100% of the expense on their taxes.

Since private aviation is a $23 billion a year industry, this stands to be a substantial tax deduction.

What is the Difference Between a Business and Personal Aircraft?

There are a few stipulations to the private jet tax deduction. If you intend to acquire a private aircraft, you’ll need to plan if you want to benefit from the new tax law.

The way you structure the ownership of your aircraft under tax law will affect your eligibility for deductions. For example, if you purchase a personal aircraft for personal use, you may not deduct the expense.

Your aircraft must be owned and operated by a business for you to write it off as a business expense. Nonetheless, there is some leeway to this rule. If you purchase your aircraft as an extension of your home office, for example, you may be able to write it off as a business expense.

Of course, this means that you cannot use your aircraft for personal reasons for a year. You can only use it as a commuting vessel for business trips. This way, it is still classified as an ordinary and necessary expense incurred while doing business.

It’s also important to note that the Act has eliminated entertainment write-offs. Even if you are entertaining clients as part of regular business, you cannot write-off the costs of using your private jet in doing so.

Stay Appraised of Tax Current Events

As with the private jet tax break, there could be other changes to tax laws that affect you in the future. The levers of government tend to change hands every couple of years. It pays to stay on top of changes to tax law and aviation trends so you can derive the most benefit from your acquisition.