You just bought a business plane for $5 million. Now you're looking at a tax bill that makes your stomach hurt. But here's some good news: you might be able to write off that entire $5 million in just one year. Yes, the whole thing. 

According to recent tax law changes, business aircraft owners can now deduct 100% of their plane's cost immediately. That's a potential tax savings of $1.85 million if you're in the highest tax bracket. 

The trick is knowing how aircraft depreciation works and following the rules exactly right. Miss one small detail and you could lose hundreds of thousands of dollars. Let's break down exactly how to calculate your depreciation and keep every dollar you deserve.

Key Takeaways

When you calculate aircraft depreciation, you spread the cost of your plane over several years on your taxes. Right now, business owners can use 100% bonus depreciation to deduct the entire purchase price in year one if the plane is used more than 50% for business. You can also choose MACRS depreciation over 5-7 years or Section 179 expensing up to $2.5 million. The key is proper documentation and meeting business use requirements every single year.

TopicWhat You Need to Know
Current Rules (2025)100% bonus depreciation is back and permanent for qualifying aircraft
Business Use TestYour plane must be used more than 50% for business every year
Maximum DeductionWrite off 100% of cost in year one, or use Section 179 up to $2.5M
Recovery PeriodPart 91 planes: 5 years, Part 135 planes: 7 years under MACRS
Record KeepingMust track every flight with detailed logs showing business purpose
State TaxesSales and use taxes vary by state, plan carefully to avoid double taxation
Biggest RiskFailing the 50% business use test triggers massive depreciation recapture

What Is Aircraft Depreciation and Why Does It Matter?

Think of aircraft depreciation like this: when you buy a plane for your business, the government knows that plane loses value over time. It experiences wear and tear from flying. So instead of making you eat that huge cost all at once, tax rules let you spread it out. You get to deduct a portion of what you paid each year. This lowers your taxable income, which means you pay less in income tax.

Here's why this matters so much. Let's say you run a consulting business that made $10 million in profit this year. Without any deductions, you'd owe about $3.7 million in federal taxes. But if you bought a $5 million plane and can depreciate it, you suddenly have a $5 million tax deduction. Your taxable income drops to $5 million. Now you only owe $1.85 million in taxes. You just saved $1.85 million.

The basic concept works like this:

The IRS sees your plane as a business asset. Just like a computer or a truck, it helps you make money. The difference is the size of the numbers. A $50,000 truck saves you maybe $18,500 in taxes. A $5 million plane saves you $1.85 million. That's real money that stays in your business.

Now, you might wonder why anyone would spread this out over multiple years instead of taking it all at once. Sometimes it makes sense. If your business had a bad year with low profits, that huge deduction might not help you much. You'd rather save it for a year when you're making more money. The depreciation method you choose depends on your specific situation.

The value of an aircraft drops naturally over time. Engines wear out. Avionics get outdated. The market shifts. But for tax purposes, depreciation is about recovering your cost, not tracking actual market value. Your plane might hold its value really well in the market, but you still get to claim depreciation on your taxes.

The Big Change in 2025: What Business Aircraft Owners Need to Know

July 2025 changed everything for business aircraft buyers. Congress passed something called the One Big Beautiful Bill Act. This law brought back 100% bonus depreciation permanently. Let me explain what that means in plain English.

Before 2025, bonus depreciation was slowly disappearing. In 2023, you could deduct 80% of your plane's cost in year one. In 2024, it dropped to 60%. It was supposed to keep dropping until it hit zero in 2027. Business owners were watching this huge tax benefit vanish. Then boom—Congress reversed course completely.

Here's what the new law does:

This is massive news. If you bought a plane in December 2024, you could only deduct 60% in year one. But if you bought the exact same plane in February 2025, you can deduct 100%. That's a huge difference on a multi-million dollar purchase.

There's one catch about timing. The date that matters is when you signed your purchase contract. If you signed your contract before January 19, 2025, you might still be stuck with the old phasedown rates. But if you signed on or after January 19, 2025, you get the full 100%.

Why did Congress do this? They want to encourage business investment. When companies buy equipment like planes, it stimulates the economy. Manufacturers make more aircraft. Pilots get hired. Maintenance shops stay busy. Everyone wins. Plus, the government still gets tax money eventually. They just let you keep more of it upfront.

The Section 179 increase is also big news. This tax law lets you expense (immediately deduct) up to $2.5 million of qualifying property. For smaller planes, this might cover your entire purchase. For bigger jets, you'd use Section 179 first, then apply bonus depreciation to the rest.

One more important detail: these rules apply at the federal level. Your state might have completely different rules. Some states follow federal depreciation rules. Others don't. California, New York, and Illinois, for example, make you add back bonus depreciation when calculating state taxes. So you might save big on federal taxes but still owe your state.

The bottom line is this: if you've been thinking about buying a business aircraft, 2025 is an excellent year to do it. The tax benefits are as good as they've ever been.

How Much Money Can You Really Save?

Let's get into actual numbers. This is where accelerated depreciation becomes real money in your bank account instead of just tax talk. I'll walk you through several examples so you can see exactly how the math works.

Example 1: The $5 Million Jet

You buy a used Citation for $5 million. Your business made $8 million in profit this year. You're in the 37% federal tax bracket.

That's not theoretical savings. That's actual cash you keep instead of sending to the IRS. You could reinvest that money, hire more people, or expand your business.

Example 2: The $1.5 Million Turboprop

You buy a King Air for $1.5 million. Your business made $4 million in profit. You're in the 35% tax bracket.

With Section 179, you get the full deduction right away, just like bonus depreciation. The difference is Section 179 has a dollar limit ($2.5 million) and can't create a loss. If your business only made $1 million, you could only deduct $1 million under Section 179. The rest would carry forward.

Example 3: Comparing Methods

Let's say you buy a $3 million plane but decide NOT to use bonus depreciation. Instead, you use the Modified Accelerated Cost Recovery System (MACRS) to spread it over 5 years. Here's what your annual depreciation looks like:

At a 37% tax rate, your tax savings are:

This adds up to $1.11 million in total savings over six years. That's the same total you'd get with bonus depreciation. The difference is timing. With bonus depreciation, you get all $1.11 million in savings right away in year one. With MACRS, you wait six years to get it all.

The Time Value of Money

Getting $1.11 million today is worth more than getting it spread over six years. Why? You can invest that money and earn returns on it. At just 5% annual returns, that $1.11 million becomes about $1.5 million over six years. So bonus depreciation actually gives you an extra $390,000 in value compared to MACRS, even though the tax savings add up to the same total.

State Tax Impact

Don't forget state taxes. If your state doesn't allow bonus depreciation (like California), you'll save on federal taxes but still owe state taxes on the full amount. California's top rate is 13.3%. On a $5 million purchase, that's $665,000 in state taxes you can't avoid. Your net federal benefit of $1.85 million minus $665,000 in state taxes equals $1.185 million in total first-year tax savings. Still huge, but not quite as big as the federal savings alone.

The math is clear. If you need a plane for your business anyway, buying it in 2025 with the current tax benefits is like getting a huge discount on the purchase price.

How to Calculate Your Aircraft Depreciation Step-by-Step

Calculating your depreciation deduction isn't hard once you understand the steps. I'll walk you through each one like we're sitting at a table with a calculator. This process determines how much you can deduct on your tax return each year.

Understanding Your Depreciation Options

You have three main ways to depreciate your plane. Each one works differently and gives you different results.

Option 1: Bonus Depreciation This lets you deduct 100% of the plane's cost immediately in year one. It's the fastest way to get your tax deduction. No calculations needed—just deduct the whole purchase price.

Option 2: MACRS Depreciation This is the Modified Accelerated Cost Recovery System. You spread the cost over 5 years (Part 91 planes) or 7 years (Part 135 commercial planes). The IRS has tables that tell you what percentage to deduct each year. The percentages are front-loaded, so you deduct more in early years.

Option 3: Section 179 Expensing This lets you deduct up to $2.5 million immediately. It's like bonus depreciation but with a dollar cap. Good for smaller planes or when you want to control exactly how much you deduct.

Most people pick bonus depreciation right now because you can write off everything at once. But knowing all three options helps you make the best choice for your situation.

Step 1: Figure Out Your Aircraft's Total Cost

Your depreciation expense gets calculated based on your total cost. This is more than just the purchase price. You need to add up everything you spent to acquire the plane and get it ready to use.

Include these costs:

Example calculation:

That extra $90,000 adds real value to your deductions. At a 37% tax rate, that's an extra $33,300 in tax savings you might have missed.

Step 2: Choose Your Depreciation Method

Now you pick which option works best for you. Here's how to think about it:

Choose 100% bonus depreciation if:

Choose MACRS depreciation if:

Choose Section 179 if:

Most aircraft owners with profitable businesses choose bonus depreciation right now. It's simple and gives you the biggest immediate benefit.

Step 3: Make Sure Your Aircraft Qualifies

Before you can claim any depreciation, your plane must meet several requirements. The IRS is very strict about these rules.

The plane must be:

That last one is critical. Business use means flights directly related to your trade or business. Flying to meet clients counts. Flying to your vacation home doesn't count. You'll need to track this carefully every single year you own the plane.

Step 4: Calculate Your First Year Deduction

Let's work through the math with our $4,090,000 example from Step 1.

If you choose 100% bonus depreciation:

If you choose MACRS (5-year property):

If you choose Section 179:

The calculation is straightforward. The hard part is making sure you qualify and maintaining good records.

Step 5: Plan for Future Years

What happens after year one depends on which method you chose.

If you took 100% bonus depreciation: You already deducted everything. There's no more depreciation to claim. Your basis in the plane is zero for tax purposes. If you sell it later, your entire sale price becomes taxable gain.

If you're using MACRS: You continue deducting each year based on the IRS tables. The depreciation rate changes each year. For a 5-year property, the schedule is: 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%. Note that it actually takes 6 years to fully depreciate 5-year property due to the half-year convention.

Important ongoing requirement: You must continue meeting the 50% business use test every single year. Fail even once, and you trigger something called depreciation recapture. The IRS makes you recalculate all your prior depreciation using a slower method, then you have to pay back the difference. This can create a massive tax bill.

The Two Tests You Must Pass Every Single Year

Understanding these two tests is absolutely critical. They determine whether you can claim accelerated depreciation or not. Fail them and you could owe hundreds of thousands of dollars in taxes. These aren't one-time tests either. You must pass them every single year you own the plane.

The 25% Test: What Counts as Business Use

The first test is called the Qualified Business Use test. At least 25% of your plane's use must be for qualified business purposes. But here's where it gets tricky: not all business flights count toward this 25%.

Flights that DON'T count for the 25% test:

Flights that DO count:

Let's say your plane flew 400 hours total this year. Here's how the 25% test might look:

For the 25% test, you can only count the 120 hours of third-party charter. That's 30% of total hours (120 ÷ 400). You pass the 25% test. The 80 hours of your own business trips don't count because you're probably a 5% owner. The partner's flights definitely don't count.

The 50% Test: Staying Above the Line

Once you pass the 25% test, you move to the 50% test. This one is simpler but just as important. More than half of all your plane's use must be for business of any kind.

Now you CAN count those related-party business flights. Using the same example from above:

Business use = 120 + 80 + 100 = 300 hours Total use = 400 hours Business percentage = 75%

You pass the 50% test with room to spare. But notice how close you are to the edge if things change. If those personal vacation flights increased to 150 hours, you'd drop to 68.4% business use. Still safe. But if vacations increased to 200 hours, you'd drop to 60%. Still safe, but getting nervous. At 250 vacation hours, you'd be at exactly 50%—failing the test.

How to measure use: You have four options, and you must pick one and stick with it for the entire year:

Most people use flight hours because it's simplest. But occupied seat hours can work better if you often fly with multiple passengers on business trips.

What Happens If You Fail These Tests

This is where things get expensive. If you fail either test in any year, you trigger depreciation recapture. Let me show you what that means with real numbers.

Example scenario:

What happens: The IRS makes you recalculate your 2025 and 2026 depreciation using the Alternative Depreciation System (ADS). This is a much slower, straight-line method over 6 years instead of the accelerated method you used.

Under ADS, you should have deducted:

But you actually deducted $10 million. The difference is $7.5 million. That entire $7.5 million gets added to your 2027 income as ordinary income. At 37%, you suddenly owe $2.775 million in additional taxes in 2027. Plus interest and potentially penalties.

You went from a $3.7 million benefit in 2025 to owing $2.775 million in 2027. That's a $6.475 million swing in cash flow. This is why monitoring your use percentages throughout the year is so critical.

How to Track Your Aircraft Use the Right Way

Good record keeping isn't optional. It's the foundation of everything else. The IRS specifically requires detailed documentation for aircraft. Generic records won't cut it. You need specific information for every single flight.

What Records You Need to Keep

Think of your flight records as your audit defense. If the IRS comes knocking, these records will either save you or sink you. Here's exactly what you need:

Flight log requirements:

Supporting documentation:

Expense documentation:

Depreciation records:

The IRS wants to see this documentation created at the time of each flight, not reconstructed later. A flight log you create during an audit will be challenged. A flight log you maintained all along carries much more weight.

How to Document Each Flight

Let me show you the difference between good documentation and bad documentation. This is what trips up most people.

Bad documentation:

Good documentation:

See the difference? The bad version gives almost no useful information. The good version tells a complete story. It shows clear business purpose, specific details, and verifiable facts. If the IRS audits you three years later, you can reconstruct what happened from these records.

Create a system: Many aircraft owners use flight tracking software that captures most of this information automatically. The software logs takeoff and landing times, calculates distances, and creates a basic record. You just need to add the business purpose and passenger details after each flight.

Some people use a simple spreadsheet. Others use specialized aviation tax software. The tool doesn't matter as much as the discipline of recording every flight promptly.

Monthly reviews: Once a month, sit down and review your records. Calculate your running business use percentage. If you're at 65% in March, you know you have cushion. If you're at 52%, you know you need to be careful about personal trips for the rest of the year.

Why the IRS Is Watching Aircraft Owners Closely

In February 2024, the IRS Commissioner announced a major audit campaign targeting business aircraft. They're specifically looking at high-net-worth individuals and large corporations. They released training materials showing their auditors exactly what to look for.

What triggers audits:

The IRS knows that many aircraft owners are tempted to classify personal flights as business flights. A weekend trip to Aspen could be called a "business networking event." A vacation to the Bahamas becomes "scouting for new office locations." These classifications need to be legitimate and well-documented.

The audit rate for aircraft deductions is much higher than average. The IRS views aircraft as a high-risk area for abuse. They're allocating significant resources to these audits. That's why your documentation needs to be bulletproof.

What happens in an audit: The IRS will request all your flight logs, passenger manifests, and supporting documentation for typically 3-6 years. They'll compare your logs to FAA flight tracking data. They'll look at your calendar and cross-reference business meetings. They'll interview passengers to verify the business purpose.

If your records are solid, the audit might be brief. If your records are weak or missing, you're in trouble. The IRS will reclassify flights as personal, fail your 50% test, and hit you with recapture. Plus interest and potentially a 20% accuracy penalty.

Good records turn a scary audit into a manageable inconvenience.

Special Rules for Personal and Entertainment Flights

This section confuses almost everyone. The rules seem contradictory at first. But once you understand the logic, they make sense. Personal and entertainment flights create special tax complications you need to plan for.

When Personal Flights Are Allowed

You can absolutely use your plane for personal trips. Nobody says you can't take your family on vacation in your plane. But personal flights affect your taxes in two ways:

First, personal flights count against your 50% business use test. Remember, you need more than 50% business use. If 40% of your flights are personal, that's fine—you're still at 60% business use. But if 60% of your flights are personal, you fail the test and trigger recapture.

Second, you cannot deduct any costs related to personal flights. The fuel, hangar fees, maintenance, and depreciation expense attributable to personal use gets disallowed. You need to allocate your total operating costs between business and personal use.

Example allocation:

You can only deduct the $350,000 on your tax return. The $150,000 related to personal use provides no tax deduction.

Personal use by employees: If an employee (who isn't an owner) uses the plane for personal trips, this works differently. You can still deduct the costs as a business expense, but you must report the value of the flight as compensation to the employee. They'll pay income tax on that value. This is typically calculated using something called the Standard Industry Fare Level (SIFL) method, which usually produces much lower values than actual operating costs.

Entertainment Flights: The Confusing Part

Here's where the tax law gets weird. Entertainment flights count toward your 50% business use test, but you can't deduct the related expenses. Let me explain why this makes sense.

What counts as entertainment:

These activities might be related to your business. Taking a client to a football game can absolutely help your business relationship. Flying to meet a client at a golf resort might lead to signing a big contract. The IRS accepts that these activities have business value.

Why entertainment flights count for the 50% test: Because you're using the plane in your business activities, even if the activity itself is entertainment. You're building client relationships. You're networking. You're conducting business. So these flights count as business use.

Why you can't deduct entertainment expenses: Congress changed this in 2017. They decided entertainment expenses were being abused. So they eliminated the deduction entirely. It doesn't matter if the entertainment is business-related or not. No deduction.

How this affects your plane: You need to identify which flights are entertainment flights. Then you calculate what portion of your total costs relates to those flights. That portion gets disallowed on your tax return.

Example:

You lose $90,000 in deductions due to entertainment use. At a 37% tax rate, that costs you $33,300 in additional taxes. But these flights still counted toward your business use percentage, so you didn't fail the 50% test.

This is one of the most misunderstood areas of aircraft taxation. Many people think entertainment flights make them fail the business use test. They don't. They just reduce your deductible expenses.

How to Report Personal Use Properly

When someone uses your plane for personal trips, you have reporting obligations. The IRS requires you to calculate the value of that personal use and report it as income to the passenger.

For employees who aren't owners: Calculate the value using the SIFL method. This uses government-published rates based on the distance flown. The rates are usually much lower than your actual costs. Add this amount to the employee's W-2 income. The company gets to deduct this amount as compensation.

For owners and 5% shareholders: This is trickier. You still need to calculate the value using SIFL or another acceptable method. But whether the company can deduct this depends on compensation rules and whether it's considered reasonable compensation.

SIFL calculation basics: The SIFL rate has two parts: a cents-per-mile rate and a terminal charge. The cents-per-mile rate depends on the distance of the flight. Shorter flights have higher per-mile rates. The terminal charge is flat per flight.

For example, a 500-mile personal flight might value at:

That same flight might have actually cost you $3,000 in operating expenses. But for reporting purposes, you use the $193.44 SIFL value. This is much better than having to report the actual $3,000 cost.

Documentation requirements: Keep records showing how you calculated the personal use value. Document who used the plane, when, where they went, and how you computed the value. This all needs to be contemporaneous documentation.

Many aircraft owners forget about this reporting requirement entirely. That's a mistake that shows up in audits. The IRS knows that personal use happens. They want to see that you properly reported it.

State Sales Tax: The Hidden Cost Most People Miss

Federal income tax benefits get all the attention. But state sales and use taxes can cost you hundreds of thousands of dollars if you're not careful. Some states charge 8% or more on aircraft purchases. On a $5 million plane, that's $400,000. This section can save you serious money.

How to Avoid Paying Sales Tax Twice

Here's what trips people up. You buy a plane in one state. That state wants sales tax. Then you fly the plane home to your state. Your home state wants use tax. If you're not careful, you could pay both taxes on the same purchase.

Sales tax gets charged in the state where you take delivery. If you close the deal and take possession in Kansas, Kansas charges sales tax. Even if you live in California.

Use tax gets charged by the state where you base and use the plane. If you hangar it in California and fly it mostly in California, California charges use tax. Even if you bought it in Kansas.

Most states give you a credit for sales tax paid to another state. So if you paid 6.5% Kansas sales tax and California charges 7.5% use tax, California only makes you pay the 1% difference. That's still real money on a big purchase, but at least you're not paying the full 7.5% twice.

The key planning point: If possible, take delivery in a state with no sales tax or a fly-away exemption. Then you only pay use tax in your home state (if your home state charges it). You avoid the double taxation entirely.

States with no sales tax:

Taking delivery in Delaware is a popular strategy. You close the deal there, immediately fly home, and only deal with your home state's use tax.

The Fly-Away Exemption Explained

Many states offer something called a fly-away exemption. This is a sales tax exemption if you buy the plane in that state but immediately leave and don't come back for a specified period.

How it works: You buy a plane in Kansas. Kansas has a fly-away exemption. As long as you leave Kansas within a certain number of days (varies by state) and don't return for a certain period, Kansas won't charge sales tax. Even though you took delivery in Kansas.

Common fly-away states:

Each state has different rules about how long you can stay and when you can return. Kansas, for example, typically requires you to leave within a certain timeframe and not return within the first six months.

Example scenario: You buy a Cessna Citation in Wichita, Kansas for $3 million. Kansas sales tax is 6.5%, which would be $195,000. But you properly claim the fly-away exemption. You leave Kansas within the allowed time and base the plane in your home state of Texas. Kansas charges you nothing. Texas has its own fly-away/interstate commerce rules that might also give you an exemption. Done right, you pay zero sales tax anywhere.

The catches: You need to actually leave the state quickly (usually within 10-30 days depending on the state). You can't use the plane extensively in that state during the fly-away period. You typically need to file specific exemption forms with the state. And if you mess up the requirements, the state can come back years later demanding the tax plus interest and penalties.

States are getting aggressive about enforcing these rules. They use FAA flight tracking data to verify that planes actually left the state and didn't come back too soon. If you claim a fly-away exemption but flight data shows you spent two weeks flying around the state before leaving, the exemption fails.

Setting Up a Leasing Structure

This is the most sophisticated state tax planning technique. It's also the most complex and has some risks if done wrong. But it can save enormous amounts of money.

The basic concept: Instead of buying the plane directly, you create a separate company (typically an LLC) to own the plane. That company buys the plane using a sales-for-resale exemption, paying no sales tax upfront. The company then leases the plane to your operating business. Sales tax gets collected on the lease payments instead of the purchase price.

Why this saves money: Instead of paying $400,000 in sales tax upfront on a $5 million purchase, you pay sales tax on maybe $50,000 in annual lease payments. That's $3,250 per year instead of $400,000 upfront. Over 10 years, you'll pay $32,500 instead of $400,000. The savings are massive.

The requirements:

The trap to avoid: This is called the Flight Department Company Trap. If your leasing company looks too much like it's providing charter services, the FAA might consider it illegal charter. You could face fines up to $11,000 per flight. You need very careful structuring to avoid this, typically with a proper management company arrangement.

When this makes sense: This strategy works best for very expensive aircraft in high-tax states. If you're buying a $10 million jet and basing it in California (7.25% base rate, can be higher with local taxes), the potential savings are $725,000 or more. That's worth the complexity and professional fees to set it up correctly.

When this doesn't make sense: If you're buying a $1 million plane in a low-tax state, the savings might only be $50,000. By the time you pay lawyers and accountants to set up the structure properly, you might not come out ahead. The ongoing complexity and compliance costs might exceed the tax savings.

State tax planning requires working with advisors who specialize in aviation taxation. General tax lawyers often miss these opportunities or set up structures that don't work correctly.

Common Mistakes That Cost Business Owners Money

I've seen these mistakes happen over and over. Some cost a few thousand dollars. Others cost hundreds of thousands. Learning from others' mistakes is much cheaper than making them yourself.

Mistake #1: Not Getting the Plane "In Service" Before December 31

The rule: To claim depreciation in 2025, the plane must be "placed in service" by December 31, 2025. Placed in service means it's ready and available for its intended use.

What people do wrong: They think buying the plane is enough. They close on December 28th and figure they can claim 2025 depreciation. But if they don't actually fly a business mission until January 4th, the plane wasn't placed in service in 2025.

The cost: Missing this deadline by a few days means you lose an entire year of depreciation. On a $5 million plane with 100% bonus depreciation and a 37% tax rate, that's $1.85 million in tax savings pushed to next year. The time value of that money at 5% interest is $92,500. That's what a few days of delay costs.

How to avoid it: If you're buying near year-end, plan ahead. Schedule a business trip for late December. Make absolutely sure you have at least one documented business flight before December 31. The safest approach is to close by early December at the latest, giving you time for any delays.

Mistake #2: Poor Record Keeping

The rule: You need detailed contemporaneous records of every flight showing business purpose, passengers, dates, and distances.

What people do wrong: They keep minimal records. Maybe just a basic flight log with takeoff and landing times. Or they reconstruct records months later when preparing their tax return. Or they describe every flight as just "business meeting" with no details.

The cost: In an audit, the IRS will disallow deductions you can't substantiate. If you claimed 75% business use but can't prove it, they might reclassify half your flights as personal. Suddenly you fail the 50% test, trigger recapture, and owe hundreds of thousands in additional taxes plus penalties.

How to avoid it: Set up a system for recording flight details immediately after each flight. Use software if possible. Make it a routine part of every trip. Spend 5 minutes after each flight documenting the business purpose in detail. Those 5 minutes could save you $100,000 or more in an audit.

Mistake #3: Mixing Personal and Business Use Without Tracking

The rule: You must track your business use percentage carefully and make sure you stay above 50% every single year.

What people do wrong: They assume they're fine because they use the plane "mostly" for business. They don't calculate the actual percentage. They don't realize that their summer vacation trips and winter ski trips added up to 45% of their total hours. Now they're at 55% business use, which passes the test but doesn't leave any margin for error.

The cost: One audit where the IRS challenges just a few flights and reclassifies them as personal, and you drop below 50%. Recapture gets triggered. On a $10 million plane where you claimed $10 million in bonus depreciation, the recapture could easily be $3 million in additional taxes.

How to avoid it: Calculate your business use percentage quarterly. If you're trending toward the danger zone, adjust your flying patterns. Postpone personal trips or add more business trips to keep your percentage high. Aim for at least 65% business use to give yourself a safety buffer.

Mistake #4: Not Watching Your Percentages Each Year

The rule: The 50% business use test applies every single year you own the plane, not just the first year.

What people do wrong: They focus on passing the test in year one (when they claim depreciation) but forget about it in later years. Maybe in year three, they fly the plane to their vacation home 40 weekends. That's 80 trips out of maybe 150 total flights—suddenly they're at only 47% business use.

The cost: Recapture. Even though you're done claiming depreciation, failing the test in year three triggers recapture of all the prior years' excess depreciation. This is one of the most painful tax surprises people encounter.

How to avoid it: Treat the 50% test as an ongoing requirement for as long as you own the plane. Track it every year, not just the first year. Set calendar reminders to review your use percentage quarterly. Make it part of your annual tax planning conversation with your accountant.

Mistake #5: Trying to Do This Without Professional Help

The rule: Aircraft taxation is extremely complex with multiple overlapping rules and serious penalties for mistakes.

What people do wrong: They figure their regular accountant can handle it. Or they try to do it themselves using tax software. Their accountant, who usually prepares tax returns for small businesses and individuals, doesn't know the specialized rules for aircraft depreciation, Section 280F tests, Section 274 allocations, and state tax planning.

The cost: Missed opportunities, failed compliance, and audit exposure. You might miss out on $100,000 in state tax savings because you didn't know about fly-away exemptions. You might set up a leasing structure incorrectly and trigger FAA violations. You might claim depreciation incorrectly and face recapture.

How to avoid it: Work with professionals who specialize in aviation taxation. Yes, they cost more than your regular CPA. But on a multi-million dollar aircraft purchase, spending $10,000-$25,000 on proper tax planning can easily save you $100,000-$500,000 or more. The expertise pays for itself many times over.

Look for attorneys or CPAs who are members of aviation tax organizations, speak at aviation tax conferences, or publish articles about aircraft taxation. Ask how many aircraft transactions they work on per year. You want someone who does this regularly, not someone who handles one plane every few years.

Your Action Plan: What to Do Right Now

Let's turn all this information into specific steps you can take. Your action plan depends on where you are in the aircraft ownership journey.

If You're Buying an Aircraft Soon

You're in the best position because you can plan everything from the start. Here's your step-by-step checklist:

60-90 days before closing:

  1. Hire an aviation tax attorney and aviation CPA
  2. Decide on your ownership structure (direct ownership, LLC, corporation, leasing structure)
  3. Determine optimal depreciation method based on your income forecast
  4. Research state tax planning opportunities (fly-away exemptions, interstate commerce exemptions)
  5. Choose your delivery location to minimize state taxes
  6. Set up your record-keeping system (software or spreadsheet)

30 days before closing:

  1. Create your flight documentation templates
  2. If using a leasing structure, form the entity and obtain sales tax license
  3. Review and finalize purchase agreement with tax provisions
  4. Arrange for FAA registration
  5. Plan your first business trip to ensure placed-in-service before December 31

At closing:

  1. Document all costs that add to your depreciable basis
  2. File required state tax exemption certificates
  3. Get wire transfer confirmations and closing statements
  4. Make sure bill of sale is filed with FAA with proper timestamp
  5. Execute any required lease or management agreements

First month after purchase:

  1. Take that first business trip to place the plane in service
  2. Start your flight log immediately
  3. Set up quarterly review calendar reminders
  4. Meet with your tax advisor to confirm depreciation strategy
  5. Ensure all acquisition costs are properly documented

Year-end (for first year):

  1. Calculate your business use percentage
  2. Verify you meet both the 25% and 50% tests
  3. Prepare your depreciation schedules
  4. File Form 4562 with your tax return
  5. Set up records storage system for long-term retention

If You Already Own an Aircraft

You might have already made some mistakes. That's okay. Here's how to fix things and get on the right track:

This week:

  1. Gather all your flight records for the current year
  2. Calculate your year-to-date business use percentage
  3. If you're below 60%, start planning to increase business use or reduce personal use
  4. Check if you have detailed records for every flight
  5. Make a list of any missing documentation

This month:

  1. Set up a proper record-keeping system going forward
  2. Review your prior year tax returns for aircraft depreciation
  3. Verify you correctly calculated and claimed all allowed depreciation
  4. Meet with an aviation tax specialist to review your situation
  5. Calculate whether you're on track to meet the tests this year

This quarter:

  1. Implement quarterly business use percentage reviews
  2. Create documentation templates for future flights
  3. Review your state tax situation and identify any refund opportunities
  4. Verify all required W-2/1099 reporting for personal use was done correctly
  5. Do a mock audit review of your records—could you defend every deduction?

Before next tax year:

  1. Calculate final business use percentage for this year
  2. Ensure you pass both required tests
  3. Prepare complete depreciation schedules
  4. Review any improvement or repair costs to ensure proper treatment
  5. Plan next year's flying to maintain compliance

If you discover problems: Don't panic. Many issues can be fixed:

The worst thing you can do is ignore problems and hope they go away. The IRS won't forget. Address issues proactively before they turn into audit problems.

How to Find the Right Professional Help

Not all tax professionals are equal when it comes to aircraft. You need specialists. Here's how to find them:

Look for these qualifications:

Questions to ask potential advisors:

Expected costs:

These might seem like high fees. But on a $5 million aircraft purchase where proper planning saves you $200,000 in state taxes and ensures you keep $1.85 million in federal tax benefits, paying $20,000 in professional fees is incredibly worth it. It's about 1% of the money you're saving.

Red flags to watch for:

Remember, you're hiring these professionals to protect you from very expensive mistakes. Their expertise should save you far more than they cost.

Conclusion

Owning a business aircraft offers incredible tax benefits, especially with 100% bonus depreciation back in 2025. You can potentially save millions of dollars if you understand how aircraft depreciation works and follow the rules carefully. The math is simple on the surface—deduct your plane's cost, save on taxes. But the details matter enormously.

The 50% business use test is your biggest ongoing obligation. Pass it every year, and you keep all your benefits. Fail it once, and you could face devastating depreciation recapture. Track your flights carefully. Document everything. Stay well above that 50% line.

State taxes deserve just as much attention as federal taxes. A smart delivery location and proper exemption planning can save you hundreds of thousands of dollars. Don't overlook this piece.

Record keeping isn't exciting, but it's absolutely critical. Your detailed flight logs and business purpose documentation are your audit defense. Spend the time to do it right from day one. Future you will be grateful when the IRS comes calling.

If you're serious about buying or already own an aircraft, you need specialized professional help. This is not an area for do-it-yourself tax preparation or general accounting. The stakes are too high, and the rules are too complex.

Ready to make smart decisions about aircraft ownership? Flying411 connects you with aviation experts who understand both the flying and financial sides of aircraft ownership. Whether you're buying your first plane or optimizing your current tax strategy, getting the right guidance makes all the difference. Visit Flying411 to find the resources and professionals who can help you navigate these complex rules and maximize your tax benefits legally and safely.

Frequently Asked Questions

Can I claim aircraft depreciation if I use the plane for both business and personal trips?

Yes, you can claim depreciation on a mixed-use aircraft, but only on the business portion. You must track each flight carefully and calculate what percentage of total use is for business. That percentage determines how much of your costs you can deduct. The key requirement is keeping your business use above 50% every single year. If you fly 60% business and 40% personal, you can depreciate 60% of the plane's cost. The personal 40% provides no tax benefit. You'll also need to report the value of personal flights as compensation income if owners or employees use the plane.

What happens to my depreciation if I sell the aircraft before the end of its useful life?

When you sell an aircraft, you'll face depreciation recapture on any gain. If you claimed $3 million in depreciation and sell the plane for $2 million, your tax basis is now zero (assuming you paid $3 million originally). The entire $2 million sale price becomes taxable gain. The recaptured depreciation gets taxed as ordinary income at your regular tax rate, not the lower capital gains rate. This can create a surprise tax bill. However, you might be able to defer this tax by doing a like-kind exchange (buying another plane) if you meet the specific requirements. Proper planning before selling can minimize the tax impact.

Do I need to use the same depreciation method for financial statements and tax returns?

No, you can use different depreciation methods for your financial statements versus your tax returns. For financial reporting under Generally Accepted Accounting Principles, many companies use straight-line depreciation over the aircraft's actual useful life (often 15-25 years). This provides more consistent annual expenses. For tax purposes, you'd typically use bonus depreciation or MACRS to maximize your tax deductions. This creates a temporary timing difference—you recognize more depreciation expense on your tax return early on, but the total over the aircraft's life is the same. Your accounting software should track both methods separately.

Can I claim bonus depreciation on a used aircraft I bought from a related party?

Unfortunately no. The IRS specifically disallows bonus depreciation on property acquired from a related party. Related parties include family members, business partners owning 5% or more, corporations you control, and various other defined relationships. This rule exists to prevent abuse where people would "sell" aircraft between related entities just to claim bonus depreciation again. If you buy a used plane from an unrelated third party, you can claim bonus depreciation as long as you've never owned, leased, or chartered that specific aircraft before. The key test is whether the aircraft is "new to you" and comes from an unrelated seller.

How do state conformity issues affect my aircraft depreciation planning?

Many states don't follow federal bonus depreciation rules, creating a major planning complication. California, New York, Illinois, and several others require you to "add back" federal bonus depreciation when calculating state taxable income. This means you get the federal tax benefit but might owe significant state taxes. On a $5 million aircraft in California with 100% federal bonus depreciation, you'd save $1.85 million federal but owe $665,000 California tax. Some states do conform to Section 179 expensing even if they don't conform to bonus depreciation, making Section 179 more attractive in those states. You need to analyze both federal and state tax impact together before choosing your depreciation method. This is where specialized advisors earn their fees.