Answers for Pilots: Tax time for pilots and aircraft owners

Bonus depreciation for brand-new aircraft or new equipment

February 1, 2012

Tax time

There’s no getting around it—tax time is on the horizon! As you are gathering your paperwork and meeting with your tax advisor, remember that, if you used an aircraft for business (one that you either owned or rented), you may be eligible for possible deductions for the 2011 tax year. And if you purchased an aircraft, provisions from the 2010 small business jobs and tax bills extend through 2011 and may be advantageous to you if you used the new aircraft at least 50 percent for business. You also may be in luck if you upgraded the aircraft equipment in 2011, as the two main provisions of the bills include modified extensions of the bonus depreciation program and the IRS Section 179 expensing option.

Bonus depreciation for brand-new aircraft or new equipment in existing aircraft purchased in 2011 (actually, the purchase date can go as far back as Sept. 8, 2010) is 100% of its cost. Bonus depreciation continues into 2012, but drops to 50%.

The second component, IRS Section 179 expensing, can apply to either new or used business aircraft and aircraft equipment, and allows expensing of 100% of cost up to $500,000 of the first $2 million in taxpayer acquisition in 2010 and 2011, and, 100% of the first $125,000 of cost under $500,000 in taxpayer acquisition in 2012.

Flight training continues to be deductible if and when it is required by a current job or employer, or when it enhances current employment short of qualifying you for a new job. Read more in “The Pilot’s Guide to Taxes”.

Keep in mind, too, that the current low interest rates provide continuing incentive for financing a new or used aircraft. The AOPA Aircraft Financing Program provides information on financing and loans.

It’s important to get professional tax advice when you are exploring possible tax advantages, as even small tax code details can be significant. AOPA legally cannot and does not provide individualized tax advice—you’ll need to contact a tax advisor for that—but the association can help you find one. Give us a call Monday through Friday, 8:30 a.m. to 6 p.m. Eastern time, 800-USA-AOPA (872-2672).

Kathy Dondzila

Kathy Dondzila | Manager, Technical Communications, Pilot Information Center

Technical Communications Manager, Kathy Dondzila, joined AOPA in 1990 and is an instrument-rated private pilot.