Year-end 2011 tax planning
Options with purchase, renting, and flight training
Any business use of an owned or rented aircraft has always been tax deductible, but that’s not the only factor to keep in mind this tax season.
In September 2010, and again in December 2010, Congress passed and the president signed into law small business jobs and tax bills that included provisions that may be additionally advantageous for aircraft purchasers whose aircraft will be used at least 50 percent for business. Of course, it’s common knowledge that interest rates are near 40-year lows and prices remain in a buyer’s market.
For equipment buyers, including aircraft, the two main provisions of the bills include extension with modification of the bonus depreciation program and the IRS Section 179 expensing option. Faster or “bonus” depreciation for brand-new aircraft, and/or added new equipment in existing aircraft, can now be 50 percent in 2010, 100 percent in 2011 (including after Sept. 8, 2010), and 50 percent in 2012. Also, some larger aircraft may be able to carry the benefit into a 2013 placement.
The second component, IRS Section 179 expensing, can be used for either new or used business aircraft and aircraft equipment: 100 percent of cost up to $500,000 of the first $2 million in taxpayer acquisition can be expensed in 2010 and 2011, and 100 percent of the first $125,000 cost under $500,000 acquisition in 2012.
Flight training continues to be deductible if and when it is required by one’s current job or employer, or when it enhances current employment short of qualifying you for a new job.
AOPA’s “Pilot’s Guide to Aircraft Taxes” has been updated with these basics.
The one sure benefit for both personal- and business-use aircraft purchase is the current low interest rates on financing your new or used aircraft. Visit AOPA Online for information on financing an aircraft.
Aircraft owners and potential aircraft owners wanting to consider renting their aircraft to two or three named pilots to help substantially trim ownership costs should contact the AOPA Insurance Agency at 800/622-2672 for details. Not all insurance companies offer this type of insurance, but the AOPA Insurance Agency can.
Caveat: As you would expect, even small tax code details are significant. AOPA legally cannot and does not provide individualized tax advice—you’ll need to contact a tax professional for that, but the association can help you find one. Give AOPA a call at 800/USA-AOPA.
November 30, 2011