If you’ve been following the news about the Tax Cuts and Jobs Act of 2017, you’ve probably heard that business aviation will be affected by the new plan. Conversations abound about what this means for corporate and private jet owners and whether the tax breaks re-energize interest and investments in private aircraft.
We summarize below three major ways the new tax break for private jets may benefit owners – whether that means more cash on hand, a private jet deduction, or a new reason to hold onto the aircraft you already own. This is not intended to be tax advice, please contact a tax professional to determine what, if any, tax benefits you may be eligible to receive.
1. A permanent decrease in tax rate
With a permanent decrease in the corporate tax rate from 35 percent to 21 percent1, businesses will have more cash to invest—and reinvest—in assets like corporate jets. According to Steve Varsano, CEO of The Jet Business, this directly affects the business aviation industry as a whole, since expected corporate growth could lead to a 10-15 percent increase in new and pre-owned jets sold this year2.
2. Changing depreciation schedules
Prior to tax reform, private jet depreciation was taxed at 50 percent the first year, but it will now be taxed at 100 percent3. How is that a good thing? This allows jet owners to write off—or fully expense—the cost of acquiring and servicing new and pre-owned private aircraft in the first year of use (if purchased after September 27, 2017, and before January 1, 2023).
3. New tax exemptions
Aircraft management fees are now exempt from federal excise taxes (FET)4. This is a provision that was passed from the Senate bill, which says passengers traveling on a private jet shouldn’t incur the same taxes that commercial airline passengers do. In short, private owners get the tax break on aircraft maintenance, which in turn allows private plane passengers to get the tax break on travel.
But the new tax plan also includes some more nuanced changes for owners. One example is that the previous like-kind exchange has been repealed3. This means that any taxable gain made from selling an aircraft can no longer be deferred into the purchase of a new aircraft to be used for the same business purpose, and is now subject to taxation, which might be a compelling reason to hold onto the aircraft you already have and work to upgrade it instead of looking to replace it.
So, what does this mean for you?
Consider reinvesting your tax break
With the money saved from lower corporate tax rates and jet write-offs, it’s likely you could see a sizeable benefit. While there is a multitude of ways you can spend it, as a jet enthusiast and business person, reinvesting in your jet is one of your best options.
This could mean investing in an aircraft cabin refurbishment by overhauling upholstery and flooring, updating the wiring, and reconfiguring the cabin to make it more modern and functional. Or, you could take a closer look at your jet’s connectivity and entertainment options. Is your current system up to par?
With the latest advances in inflight connectivity technology, now is the right time to invest in onboard internet. Our Gogo AVANCE™ inflight connectivity and entertainment platform offers solutions that seamlessly integrate all that you may need to meet the growing demands on inflight Wi-Fi, yet still are flexible and affordable depending on your service requirements. And, each AVANCE system provides direct access to Gogo Vision, our inflight entertainment and information service. Gogo Vision serves up current magazines, movies, and TV shows along with news, weather, and flight information—all which are sure to keep passengers engaged and informed.
More importantly, however you choose to reinvest bolsters the value of your jet investment—especially if you lease or provide charter services—by specifically earmarking and cycling business aviation tax breaks back into your aircraft.
Over your years of ownership, you’ll recognize obvious needs for upgrading and maintaining your aircraft. With a little help from the favorable tax overhaul, now may be the perfect opportunity to get a jump start on those upgrades without having to break the bank.
If you’re ready to learn more about our inflight connectivity and entertainment solutions, connect with a Gogo inflight connectivity consultant. We’re ready to answer your questions and help you make the right investment specific to your inflight Wi-Fi needs.
1. Harpaz, Joe. 2017. "Corporate Tax Pros Already Prepping for Tax Reform." Forbes, December 15, 2017.
2. 2018. "Private Jets Big Winner from Tax Reform." CNBC, February 1, 2018.
3. Hoover, John B, and Ruther Wimer. 2017. "Tax Reform Highlights for Business Aviation." NBAA, December 19, 2017.
4. Mayer, David G. 2018. "AINsight Blog: Tax Reform a Deal Changer for Bizav." Aviation International News, January 11, 2018.