The IRS is pretty strict when it comes to 100 Percent Bonus Depreciation under the 2017 Tax Act, especially on the fundamentals.
- Was your aircraft acquired and placed into service after September 27, 2017 and before January 1, 2027 – this one is fairly straightforward
- Is your aircraft ‘qualified property’
- Is your depreciable property of a specific type, including tangible property with a recovery period of 20 years or less, such as commercial and non-commercial aircraft – this one is probably affirmative
- Was your original use of the aircraft the taxpayer’s use or the aircraft was not used by the taxpayer at any time prior to purchase – this one can be a bit tricky
- Is your aircraft predominantly used for a qualified business use – this is going to be tough in the time of COVID and if you don’t meet 51% ore more qualified business use then you will need to explore an alternative depreciation system (ex., Five Year MACRS)
- Is your aircraft used predominantly in the United States – this one can be a bit tricky
There are, of course other nuances like “under contract” and “alternative deprecation models” and if you use your aircraft significantly for nondeductible entertainment travel (ex., vacation) you may be able to take your depreciation and use disallowance percentages to deprecation on a straight-line basis.
The Bottom Line: With face-to-face interaction at an all time low, many owners are in danger of loosing their bonus depreciation benefits. Check in with your financial and legal teams ASAP, before it is too late to address potential pitfalls! Remember, this article is intended to inform you about issues that you should discuss with your financial and/or legal team and is not intended as legal advice or opinion, you should not act on any information contained in this (or any other) article without directly consulting legal counsel.