Take Flight with the New Tax Bill
January 31, 2018|By Alan C. Smith, Executive Vice President & Chief Lending Officer
Great news for businesses that own aircraft and businesses looking to invest in one: you can now accelerate the depreciation of new and used aircraft. According to the Tax Cuts and Jobs Act, businesses can “ claim a deduction for the full value of a new asset the same year the acquisition occurs.” With a marginal tax rate of 39.6 percent, a taxpayer purchasing a $4 million aircraft would realize a tax savings of almost $1.6 million. Previously, businesses had to use the straight-line method, spreading the cost of the tax break over several years.
The Bill’s Downside
However, some parts of this legislation are not favorable to businesses, such as the repeal of like-kind exchanges (or Section 1031). This was an important tax provision that allowed businesses to delay paying taxes on the sale of an asset if it was exchanged for a qualifying “like-kind” asset. With this tax provision repealed, businesses can no longer trade up to a different aircraft and defer paying taxes.
High-Flying Tax Break
Despite the repeal of Section 1031, this new tax bill should spur sales and growth for the aviation industry, which supports over one million jobs. Expensing 100 percent of the cost for new or used aircraft affects purchases made after September 27, 2017.
A Pilot and A Banker
I’m experienced in a wide variety of aircraft financing- so if you are interested in financing options from turboprops, to light medium and heavy corporate jets, give me a call. My first aircraft financing was in 1993 and I’m a pilot so I’ve put together several solutions for my clients. I’m a through and through aviation enthusiast.
Navigating through the new tax bill is easier if you have someone knowledgeable to guide you. At The Bank of San Antonio, it’s my job and pleasure to help clients understand the changes that may affect your business. If you have questions about private aircraft financing, reach out to me directly by email, [email protected] or phone, (210) 807-5505.