The “Small Business Jobs Act of 2010” was passed recently and includes good news for aircraft buyers since Bonus Depreciation benefits were extended with the bill. Unfortunately, a significant portion of the new benefits expire at the end of the year. If you’re going to take advantage of this opportunity, you should do so quickly!

Let’s look at a few concepts, first. What does “Bonus Depreciation” mean? Can you “depreciate” more as a bonus?

Bonus Depreciation will allow the owner of an eligible asset to see depreciation benefits more quickly. They will not be able to receive “more depreciation.” Bonus Depreciation is also available for a large number of capital assets, not just aircraft.

Bonus Depreciation allows 50% of the cost of eligible assets to be deducted in the year the property is acquired. The remaining 50% remains eligible for depreciation according to normal depreciation rules. To be eligible, the property must be used more than 50% of the time for business purposes predominantly inside the United States. Additionally, the asset must be “new.” Unfortunately, pre-owned aircraft do not qualify. However, bonus depreciation could apply to new parts, components, and avionics.

Bonus Depreciation can provide significant tax benefits in the year that an asset is acquired but results in lower levels of depreciation benefits in the following years and the total depreciation benefit over the life of the aircraft remains the same.

What is “qualifying property” for Bonus Depreciation? Only aircraft whose original use commences in 2010 are eligible and must be “placed in service” prior to the end of 2010. There are a few exceptions and extensions. Essentially, a written contract must be arranged prior to January 1, 2011to qualify. There are qualifying aircraft out there!

Aircraft purchased earlier in the year may be eligible for Bonus Depreciation, as well. Aircraft types, termed “transportation property” & “certain aircraft” may qualify for an extension on the placed in service date through 2011. Transportation property is usually considered to be an aircraft that is used predominantly for charter operations. Certain aircraft are not “transportation property,” but cost more than $200,000 and have an estimated production period in excess of four months. Most jets and turboprops meet this definition. The purchaser must make a non-refundable deposit of at least 10% of the cost or $100,000.

The “Small Business Jobs Act of 2010” provides significant benefits for purchasers of new business aircraft that can take advantage of the accelerated depreciation schedule. You should take a serious look at these concepts if you had a good year and a need for significant business travel. Don’t wait!
This information is being provided for general information and should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are urged to consult your attorney or other advisor concerning your own situation and for any specific legal and/or tax questions.