100% Bonus Depreciation Returns in July 2025 Tax Legislation
On July 2, 2025, President Trump signed the *One Big Beautiful Bill* (H.R. 1), reviving 100% bonus depreciation for business assets—and making it permanent in the Senate version—effective for property placed in service on or after January 20, 2025.
What Is Bonus Depreciation?
Bonus depreciation allows a business to deduct the entire cost of qualifying property (like aircraft) in the year it is placed in service. Under current law:
2023: 80%
2024: 60%
2025: 40%
2026: 20%
2027+: 0%
However, the July 2025 law reverses this phase-out. Under the House version, new and used property placed in service after January 19, 2025 enjoys 100% expensing, extended through 2029; the Senate version makes it permanent.
Why This Matters for Pre-Owned Aircraft Buyers
1. First-use requirement: Both new and used aircraft qualify—as long as it’s the buyer’s first use of that airframe.
2. Business-use threshold: Aircraft must be used more than 50% for business to qualify. Usage documentation (flight logs, purposes, percentages) is essential.
3. Passive-use risks: Personal or commuting flights reduce business use percentage. Falling under 50% may trigger recapture of deductions, plus IRS scrutiny.
Real-World Example
A business buys a pre-owned aircraft for $5 million and places it in service in August 2025. Meeting all requirements, they could deduct the full $5 million in tax year 2025—versus deducting only 40% under previous law.
Cash flow & ROI boost: This accelerated expensing dramatically reduces taxable income upfront, freeing funds for reinvestment in maintenance, upgrades, or operations.
Risks & Compliance Considerations
• IRS audits: The IRS is ramping up audits on business aircraft regarding proper use and documentation.
• Flight logs: Record every flight leg, its business purpose, and who flew.
• Fringe-benefit compliance: Personal flights must reflect income inclusion (e.g., Standard Industry Fare Level rates).
• MACRS vs. ADS elections: In some cases—if business-use drops below threshold later—it may make sense to choose straight-line (ADS) depreciation to avoid recapture.
Strategic Timing & Market Impact
• Inventory tightness: Reports indicate an uptick in demand, with pre-owned inventory already tightening earlier this year.
• Surge in activity: Industry groups (NBAA, AOPA, GAMA) strongly back the incentive, highlighting its impact on sales, production, jobs, and competitiveness.
What Buyers Should Do Now
1. Analyze aircraft use: Confirm >50% business use, including charter, repositioning, or client travel.
2. Engage advisors: Work with aviation tax CPAs and legal counsel.
3. Plan timing: Aim to have aircraft placed in service after Jan 20, 2025, ideally before inventory tightens further.
4. Maintain documentation: Flight logs, purposes, passenger roles, and fringe-benefit records are critical.
5. Evaluate depreciation methods: Consider ADS if business-use may dip below requirement.
Bottom Line
The July 2025 tax law restores and potentially makes permanent 100% bonus depreciation for both new and used aircraft—provided first use and business-use criteria are met. For buyers of pre-owned aircraft, this translates into immediate and substantial tax savings in the year of acquisition—a powerful tool for improving ROI.
However, compliance—with rigorous documentation and use thresholds—is non-negotiable. The IRS is watching.
Need help navigating aircraft acquisition, depreciation strategy, and compliance? Consult your aviation tax specialist today to maximize this opportunity before inventory tightens and tax filings begin.
*Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Consult with qualified professionals before acting.*
