Aircraft ownership carries tax benefits

How to keep the tax man at bay

September 23, 2013

With so many terrific reasons to buy an airplane—from making your own schedule to seeing the world from a unique perspective—there are sound financial reasons for aircraft ownership as well. Beyond the money saved on overnight trips, delays caused by airlines, and other miscellaneous expenses, owning an airplane has definite tax advantages.

Of course, the best tax advice and counsel comes from your own tax professional, but some of the tax advantages of aircraft ownership are featured here so that you will know what questions to ask and be able to guide the discussion when it’s tax time.

If your business is the owner of an aircraft, you are entitled to Modified Accelerated Cost Recovery System (MACRS) depreciation. This is the current tax depreciation system in the United States for tangible property, including airplanes. Modified Accelerated Cost Recovery System benefits an aircraft owner because accelerated—that is, faster—deprecation allows aircraft owners to deduct greater amounts during the first few years of your aircraft ownership. This is the IRS code so there are lots of exceptions and fine print, but as an aircraft owner, it’s likely that the accelerated system impacts you in a positive way.

It’s not just your aircraft itself that can ease your tax burden—some of the expenses associated with aircraft ownership and usage are deductible. That means fuel, maintenance, charts, etc. Those items are all part of a business’ deductions. If you own your aircraft as an individual, you can still benefit from these deductions when your aircraft is used in pursuit of business. Again, your tax professional is your best friend here to make sure you can maximize the deductions your aircraft creates.

Owning an airplane is a job in itself, and one that requires specific knowledge of your responsibilities. In addition to the tax advantages listed here, you’d do well to understand other legal and financial issues that can affect you. For example, forming a limited liability corporation (LLC) as the legal owner of your personal airplane can protect you in a liability situation, even though there are no particular tax advantages to doing so. In addition to the safe operation of your aircraft as a pilot, you are tasked with understanding all the repercussions of operating your airplane.

When it comes time to buy an airplane, you want to deal with people who know their way around a cockpit. The staff of AOPA Aviation Finance Co. wants to make your purchase experience as smooth as possible, and that starts with being able to speak aviation. AOPA Finance specialists at 800/62-PLANE or 800/627-5263 are standing by ready to serve you. In a rush? Email info@aopafinance.com to begin the application process today.

The information is presented in this article should not be relied upon as legal or financial advice. For the precise tax advantages for you, consult an aviation-savvy lawyer and tax professional who will be able to provide you with advice tailored for your state, regulatory requirements, and your unique circumstances.