Private citizens and businesspeople have shown an increased interest in the private jet industry over the past few years due to certain governmental actions, namely the Tax Cuts and Jobs Act (TCJA) implemented in 2017. This is a federal income tax that can provide several benefits to new private jet owners, but these benefits are time sensitive and set to expire.
If you’re thinking of buying a private jet, now is the time to act. But first, you should understand the 2017 tax act that potentially provides benefits to private jet owners so you can make a confident and informed purchasing decision before it’s too late.
The 2017 Tax Cuts and Jobs Act
The private jet tax known as the Tax Cuts and Job Act was designed to reform current individual income and corporate income taxes that amends the Internal Revenue Code of 1986. The Act was also a way to move the United States to a territorial system of taxation for businesses. Here are some of the intentions behind the implementation of the 2017 TCJA according to the Tax Foundation:
- Increase gross domestic product (GDP) by 1.7% over time, grow wages by 1.5%, and create 339,000 full-time-equivalent jobs by significantly lowering the cost of capital and marginal tax rates
- Increase GDP by an average of 0.29% each year
- Unleash economic growth in the form of an additional $1 trillion in federal revenues
- Increase all taxpayers’ after-tax incomes over time by 1.1%
In short, the TCJA is a deeply revised tax law created for economic stimulation. It simplifies taxes and reduces the tax burden on businesses throughout the United States, and as you’ll see throughout the rest of this article, it can specifically benefit people who buy a new private jet.
But these changes are only temporary, as the specifics put forth in the 2017 TCJA will expire. See the section below entitled “The Expiration Date” to learn more about the time-sensitive benefits of this tax law.
How to Take Advantage of the TCJA
The good news is that you can take advantage of the TCJA if you’re considering buying a private jet. In addition to significantly changing the laws related to individual and corporate income taxes, the TCJA also adjusted how private jet taxes work. It enhanced the amount and timing of aircraft depreciation as related to income taxes, as well as which aircraft are eligible.
Before the passage of the 2017 TCJA, private individuals and corporations were able to deduct 50% of a private aircraft’s purchase price from their income subject to tax in their first year of ownership if the aircraft was used for business purposes. This immediate bonus depreciation deduction was set to decrease to 30% by 2019 and was only applicable to factory-new aircraft.
Now, under the guidelines of the 2017 TCJA, private jet depreciation rates that you can deduct jumped from 50% to 100% during the first year of owning the aircraft, both pre-owned and new. What this means for people looking to buy a private jet for business purposes is that they may be able to immediately write off 100% of their expenses from that purchase.
This benefit is highly appealing to anyone who is set to buy a private aircraft for business purposes, but it also provides an important reason why now is the appropriate time to buy.
The Expiration Date
Unfortunately, the 100% deduction described above will eventually be unavailable, as it is set to decrease to 80% after December 31, 2022. The following year, the tax benefit will drop to 60% and decrease by another 20% in each subsequent year until it is gone.
It’s hard to know what policy the government will propose to take the place of the 2017 TCJA, but you can know for sure that the tax deductions available now are time-sensitive and may benefit you greatly when filing your taxes.
Supply and Demand for Private Aircraft
The time restriction places an element of urgency on your decision to buy a private aircraft. You’ll want to take advantage of the 100% tax deduction for private jets before it decreases and ultimately expires. But know that other people are thinking the same thing as you.
People who have been considering buying private jets are now finalizing their decisions as December 31, 2022 rapidly approaches. And to say the looming 20% decrease in the available deduction is causing an increase in private jet sales would be a vast understatement. In fact, without the assistance of an experienced aircraft acquisition team, it may be hard to find a private jet of your own in the current market.
According to Business Air News, the current demand for pre-owned private jets is so high that the supply is at an all-time low. The reason is that pre-owned aircraft are all that’s available to buy on short notice. Anyone who wants to buy a new private jet must place their order in advance, sometimes several years before they receive it. New private jets are built to order as opposed to being mass-produced. With this low inventory comes higher prices on used inventory. New model years, high-quality aircraft, and low time airframes are all closing at what buyers feel are over-valued prices. Some buyers are unmotivated by the tax incentive, so they are willing to wait for the market to adjust and for prices to normalize. For others who are specifically looking for tax advantages, the full depreciation write-off will certainly help them to maximize their tax planning in 2022.
You’ll need to shop for a pre-owned private jet if you want to buy one before the 100% tax break decreases to 80% at the end of the year.
How to Secure a Deal
The best way to secure a deal on a private jet is to find a respected, professional private jet broker that knows how to navigate the current market with its high demand and low supply. A broker can negotiate a great deal for you, helping you navigate all regulations on the journey toward a completed sale. Know that it can take several weeks to finalize a private jet sale.
With December 31 on the horizon, now is the time to act. Latitude 33 Aviation can help you buy a private jet and offers many other services related to the purchase, ownership, and management of private jets of various sizes and models. From the initial inquiry to the final signature, Latitude 33 Aviation is ready to guide you through the entire township cycle, saving you time and helping you maximize your investment.
Looking to Purchase a Private Aircraft?
If you’re ready to take the next step toward owning a private jet, now is the time to act. The team at Latitude 33 Aviation is here to help you buy and manage your private aircraft in time to experience the tax benefits of the 2017 TCJA.
Our goal is to help you secure a private aircraft for your business needs, even in this current market when demand is at an all-time high. Contact us today to start the process of buying a private jet.