Tax Incentives and Bonus Depreciation for 2011 Make It More Costs Effective to Buy and Airplane

With the rise in fuel costs, a depressed economy and the expiration of tax depreciation deductions, the general aviation industry fell on hard times after 2009. New tax laws featuring strong tax incentives for the purchase of new airplanes and other aircraft however look to be just what the aircraft sales industry needs.

According to an article in the May 2011 edition of the Aircraft Owners and Pilots Association (AOPA) magazine, the new tax breaks will allow individuals who use their aircraft for business purposes to claim up to 100 percent depreciation during the first year of ownership. The bonus depreciation on aircraft is allowed on the first $2 million of the cost of a new aircraft. After that standard tax depreciation allowances apply.

That said, the bonus tax depreciation laws allows for business owners to dramatically reduce the amount of their tax bill at the end of the year. In round numbers, an individual could reduce their tax obligation by as much as $400,000 during the first year of ownership on a $1 million aircraft, assuming a 40% tax burden.

Individuals whishing to take advantage of the tax savings however, need to act soon. The tax incentives are set to drop to only 50 percent next year in 2012, and will expire completely in 2013. More information on this and other tax incentives, including the Section 179 tax deductions can be found on the IRS web site at www.irs.gov.