Kirsch Kohn Bridge CPAs + Advisors
  • About
    • Firm Overview
    • Our Team
    • International Affiliation
  • Services
    • Assurance and Accounting
    • Tax
    • Advisory Services
  • Industries
    • Construction
    • Manufacturing and Distribution
    • Not-For-Profits
    • Professional Services
    • Real Estate
    • Retail
    • Technology
  • Insights
  • Careers
  • Contact
  • Client Resources
  • Pay Online
  • Menu Menu
  • LinkedIn

Insights

The Tax Implications of Owning a Corporate Aircraft

December 6th, 2021/Tax

If your business is successful and you do a lot of business travel, you may have considered buying a corporate aircraft. Of course, there are tax and non-tax implications for aircraft ownership. Let’s look at the basic tax rules.

Business travel only

In most cases, if your company buys a plane used only for business, the company can deduct its entire cost in the year that it’s placed into service. The cases in which the aircraft is ineligible for this immediate write-off are:

  • The few instances in which neither the 100% bonus depreciation rules nor the Section 179 small business expensing rules apply or
  • When the taxpayer has elected out of 100% bonus depreciation and hasn’t made the election to apply Sec. 179 expensing.

In those cases, the depreciation schedule is 20% of the cost for year 1, 32% for year 2, 19.2% for year 3, 11.52% for year 4, 11.52% for year 5 and 5.76% for year 6. Note that the bonus depreciation rate is scheduled to be phased down for property placed in service after 2022.

Interestingly, these “cost recovery” rules are more favorable than the rules for business autos. The business auto rules place annual caps on depreciation and, in the year an auto is placed in service, both depreciation and Sec. 179 expensing.

In the case of a business-travel-only aircraft, post-acquisition expenses aren’t treated differently than post-acquisition expenditures for other machinery and equipment. For example, routine maintenance and repair expenses are immediately deductible while amounts that improve or restore the aircraft must be capitalized and depreciated.

The only “catch” that distinguishes the tax treatment of an aircraft used 100% for business travel from the treatment of most other machinery and equipment is that company aircraft are one of the categories of business property that require more rigorous recordkeeping to prove the connection of uses and expenses to business purposes.

Business and personal travel

Personal travel won’t affect the depreciation results discussed above if the value of the travel is compensation income (and is reported and withheld upon as such) to a person that isn’t at least a 5% owner or a person “related” to the corporation. This means, for example, that personal travel by a non-share-holding employee won’t affect depreciation if the value of the travel is compensation to him or her and is reported and withheld upon. The depreciation results can be affected if the person for whom the value of the travel is compensation income is at least a 5% shareholder or a related person. But even in that case, the depreciation results won’t be affected if you comply with a generous “fail-safe” rule.

With one limitation, personal travel won’t affect the treatment of otherwise-deductible post-acquisition expenditures if the value of the travel is compensation income (and is reported and withheld upon). The limitation is that if the person for whom the value of the travel is to be treated as compensation income is at least a 10% owner, director, officer or a person related to the corporation, the amount of the deduction for otherwise-deductible costs allocable to the personal travel can’t exceed the travel value.

Moving forward

Other rules and limitations may apply. As you can see, even in the case of an aircraft used for business and personal travel, these rules aren’t onerous. But they do require careful recordkeeping and, when an aircraft is used for personal travel, compliance with reporting and withholding requirements. Contact us to learn more in your situation.

TAGS: Tax

Share This
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail

Sign Up For Insights

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Categories

  • Accounting
  • Advisory
  • Assurance
  • Tax

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021

Insights

Changes in Sec. 174 make it a good time to review the R&E strategy of your business

March 15, 2023/0 Comments/in Tax/by KKB CPAs

A tax law that passed in 2017 makes a major change to Section 174 research and experimental (R&E) expenses. Here’s what it might mean for your 2022 business tax return being filed this year. Continue Reading Changes in Sec. 174 make it a good time to review the R&E strategy of your business

Read more
https://kkbcpa.com/wp-content/uploads/2023/03/3.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-03-15 12:19:332023-03-15 12:19:36Changes in Sec. 174 make it a good time to review the R&E strategy of your business

Additional Tax Relief Provided for Californians Impacted by Winter Storms

March 9, 2023/0 Comments/in Tax/by KKB CPAs

The California Franchise Tax Board is conforming to the IRS’s postponement of filing and payment deadlines to October 16, 2023, for taxpayers located in most California counties due to the recent winter storms. Continue Reading Additional Tax Relief Provided for Californians Impacted by Winter Storms

Read more
https://kkbcpa.com/wp-content/uploads/2023/03/2.jpg 334 500 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-03-09 12:19:552023-03-09 12:25:57Additional Tax Relief Provided for Californians Impacted by Winter Storms

Answers to your questions about 2023 limits on individual taxes

March 8, 2023/0 Comments/in Tax/by KKB CPAs

How much is the standard deduction in 2023? How much do you have to earn this year before you can stop paying Social Security on your salary? Here are some Q&As about these and other tax-related amounts for 2023. Continue Reading Answers to your questions about 2023 limits on individual taxes

Read more
https://kkbcpa.com/wp-content/uploads/2023/03/1.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-03-08 11:01:362023-03-08 11:01:44Answers to your questions about 2023 limits on individual taxes

Additional Tax Relief Provided for Californians Impacted by Winter Storms

March 9, 2023/0 Comments/in Tax/by KKB CPAs
Read more
https://kkbcpa.com/wp-content/uploads/2023/03/2.jpg 334 500 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-03-09 12:19:552023-03-09 12:25:57Additional Tax Relief Provided for Californians Impacted by Winter Storms

Answers to your questions about 2023 limits on individual taxes

March 8, 2023/0 Comments/in Tax/by KKB CPAs
Read more
https://kkbcpa.com/wp-content/uploads/2023/03/1.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-03-08 11:01:362023-03-08 11:01:44Answers to your questions about 2023 limits on individual taxes

How the new SECURE 2.0 law may affect your business

February 28, 2023/0 Comments/in Tax/by KKB CPAs
Read more
https://kkbcpa.com/wp-content/uploads/2023/02/1.jpg 292 560 KKB CPAs https://kkbcpa.com/wp-content/uploads/2021/12/KKB-Logo-w-text.png KKB CPAs2023-02-28 12:27:112023-02-28 12:27:14How the new SECURE 2.0 law may affect your business
View All

Sign up for insights

"*" indicates required fields

This field is for validation purposes and should be left unchanged.
KKB alternate logo

Kirsch Kohn & Bridge LLP

Phone: 818-907-6500
Fax: 818-783-0725
21800 Oxnard St., Suite 900
Woodland Hills, CA 91367
info@kkbcpa.com

Firm Overview
Our Team
International Affiliation
Contact
Careers

Sign up for our newsletter
Client Resources
Pay Online

© 2023 Kirsch Kohn & Bridge LLP. All rights reserved. Privacy Policy

Coming Soon: New Accounting Rule on Government Assistance DisclosurestaxesHow are Court Awards and Out-of-Court Settlements Taxed?
Scroll to top