Aviation tax planning in 2025 holds new promise for aircraft buyers, as shifting political landscapes and potential tax reforms from the incoming Trump Administration create a dynamic environment. After a year of heightened scrutiny from the IRS under the Biden Administration, buyers are hopeful that the new government will ease tax regulations and provide more favorable depreciation opportunities. With the possibility of 100% bonus depreciation returning, aircraft owners have reason to be optimistic about their tax planning in the near future. As the year unfolds, aviation tax planning will be crucial for making informed decisions in an uncertain regulatory landscape.
Aircraft buyers based in the US who plan to use their new and used planes primarily for business purposes have entered 2025 with reasons for hope that the year might prove favorable in terms of the tax treatment the US Federal Government affords their newly acquired aviation assets.
That hope is new, and it follows a year in which the tax picture at both US federal and state level for aircraft buyers began to show early signs of darkening.
In 2024, under what proved to be the outgoing Biden Administration, the US Internal Revenue Service (IRS) pronounced that it would direct greater scrutiny toward finding out to what extent owners were using their aircraft for business purposes – as legislation conferring tax benefits on purchases of aviation assets meant them to do.
The IRS further indicated it would put that scrutiny into practical effect by conducting increased numbers of tax audits on owners of new and used business and private aircraft.
That planned intensification of IRS focus would mean those owners who couldn’t document clearly that at least 50% of the flying they conducted with their aircraft during the year would be ineligible for the bonus depreciation schedule available, under the 2017 Tax Cuts and Jobs Act.
As matters stand today, the act’s provisions for bonus depreciation on aircraft and various other purchased assets are scheduled to end in 2027.
But the dawning of 2025 – and with it the assumption of power by the Trump Administration – has brought what is widely expected to be a dramatic sea change in the US Government’s regulatory ethos as it affects many areas of business. That sea change is expected to include a relaxation of tax legislation, and perhaps a contraction in the size and oversight power of the IRS.
As of this early-February writing, it remains to be seen to what extent the Trump Administration will honor the political promises the incoming Administration made during last year’s Presidential campaigning process.
But public pronouncements and hastily drawn-up Presidential Executive Orders, transmitted soon after Donald Trump resumed office on January 20, indicated that on a wide variety of fronts Trump and his team intended to back their previous rhetoric with prompt action.
However, purely as far as aircraft purchasing and its associated tax planning in 2025 are concerned, it appears clear from the start that if they are all acted upon, the Trump Administration’s promises will create a complex and possibly confusing background for buyers’ decision- making this year.
But that complex background could include some clear bright spots for those contemplating purchasing business and private aircraft in 2025.
According to the three experts interviewed for this article, one ray of hope for US buyers of aircraft this year is that under the new and possibly more taxation-lenient Trump Administration, a potentially weakened, smaller and less enforcement-focused IRS will not put into effect the increased audit program it promised aircraft buyers in 2024.
The experts reckon another important hope is that, in concert with a compliant Congress, the new administration will make permanent the business-friendly bonus depreciation provisions enacted in 2017’s Tax Cuts and Jobs Act – doing away with what otherwise would be their 2027 sunset.
Will 100% Bonus Depreciation Return?
Scott Burgess, Partner at Aviation Legal Group, says some Business Aviation industry insiders are expecting that when the Trump Administration enacts new tax legislation – which will likely be in the latter half of this year – the new rules will renew the 100% bonus depreciation last available in 2022 for purchases of new and used aircraft.
Were this to happen, its provisions might act in either of two ways, one potentially more tax-beneficial than the other to buyers of Part 91 aircraft.
At present, for FAR Part 91-certified aircraft flown at least 50% of the time on documented business missions, the bonus depreciation schedule enacted in 2017 allows for an annually steady declining percentage of depreciation over a five-year schedule from 2022, from 100% in Year 1 (2022) to 20% in Year 5 (2026).
According to Leah Alexander, Aircraft Sales & Acquisitions for Duncan Aviation, in practice that means the level of bonus depreciation allowed in 2025 is 40% for business use, and applies to most new and used aircraft placed into service this year, even if they were bought before 2025.
So, if an owner bought an aircraft in 2024 – when the bonus depreciation rate was 60% – but only puts it into service this year, then the owner is only allowed to depreciate 40% of the cost of the aircraft in their 2025 tax return.
But if an owner puts a new 2025-purchased aircraft into service in 2026 and the purchase meets the requirements for “Certain Aircraft and Transportation Property” as specified in Section 168(K)(2)(B) of the Internal Revenue Code (IRC), they would be allowed to depreciate 40% of its cost in 2026, instead of the 20% bonus depreciation otherwise specified for 2026 by the Tax Cuts and Jobs Act of 2017.
So, it will be important for anyone planning to buy an aircraft in 2025 and put it into service in 2026 to consult with their tax advisor to assess if the transaction will meet the ‘Certain Aircraft and Transportation Property’ IRC criteria and, if so, whether the purchase is likely to benefit their expected 2026 depreciation planning and tax position.
Yet, this situation could change markedly for the better as far as aircraft buyers in 2025 are concerned, if new tax legislation expected from the Trump Administration this year does come into effect.
The BizAv industry is hoping that the Trump Administration’s new tax legislation will allow 100% bonus depreciation every year. For every year in which that tax legislation remained in effect, it would mean buyers of Part 91 aircraft flying their aircraft at least 50% of the time for business purposes would be able to depreciate the entire cost of their aircraft in the year they bought it.
The alternative, a somewhat less attractive scenario, which new Trump Administration tax legislation might offer aircraft owners is that it could renew the five-year declining-balance bonus depreciation the existing rules allow before the 2027 ‘sunset’.
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Original article published on avbuyer.com
