How Will the New U.S Tax Laws Affect Business Aviation?

In this video blog, Guardian Jet’s VP of Sales Doc Dwyer explains how the new U.S. tax laws will impact business aviation in 2018.

You can watch the 2:46 video or read the transcript below.

Hi, I’m Doc Dwyer.

Today I’m going to talk about the new U.S. tax law, and how it’ll affect business aviation.

Overall, we see a very positive impact on the industry . . . in no small part due to the first major change: 100 percent bonus depreciation.

Bonus depreciation will now be available on both new and used aircraft. This replaces the five-year MACRS depreciation schedule that were used to.

We’ve seen bonus depreciation for new aircraft, but we’ve never seen it for used aircraft. This is a very important distinction because the second major change is the elimination of 1031 like-kind exchanges for aircraft.

We can no longer tie two transactions–mdash;a buy and sell–mdash;together with a like-kind exchange.

Income tax will now be due on the sale of the difference between the tax basis and the sales price.

This, however, will be mitigated by the bonus depreciation, and the fact you can get a full deduction in year one.

So, in essence, you’ll have the same net effect as a 1031 like-kind exchange as long as both transactions are done in the same year.

You’ll even get the benefit of a 100 percent bonus depreciation.

So, we expect the focus to shift from doing both transactions in a 180-day window to doing both transactions in the same year.

A couple other benefits we see in the tax bill:

• Most individuals and LLC’s will see a drop in tax rates by approximately 2.5 percent.
• Tax rates for large corporations will drop to 21 percent, plus the state tax rate.
• There’s no effect on sales tax trading credits. (Trading credits will still be available in states that allow it.)
• A couple caveats to the 100 percent bonus depreciation:
  • Part 135 usage - Use the 7-year MACRS for that portion.
  • Part 91 usage - If the business usage is less than 50 percent, it’s not eligible for that bonus depreciation and you’ll use the 7-year MACRS schedule instead.

Overall, like we said, this is very positive news for the aviation industry. If you have any questions or would like to talk about it in more detail, please don’t hesitate to call us at +1-203-453-0800 or email us here. Thank you very much.

Note: The Modified Accelerated Cost Recovery System (MACRS) is the current tax depreciation system in the United States. Under this system, the capitalized cost (basis) of tangible property is recovered over a specified life by annual deductions for depreciation.