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Tax change to aircraft purchase stimulates pre-owned demand
Prospective buyers wanting to take advantage of 100 per cent depreciation before the end of the year, when the tax break reduces, have put additional pressure on an already overheated market for preowned aircraft.

Covid concerns may be easing, interest rates rising and the stock market falling, but prospective US business buyers of private jets are highly motivated to make their purchases this year because the 'free ride' of 100 per cent depreciation in the first year of use, afforded by the 2017 Tax Act, will end on 31 December, 2022, according to Palm Beach, Florida-based private jet broker broker The Private Jet Company (TPJC) CEO Daniel Jennings.

Instead of 100 per cent depreciation, which will have been available until the end of this year, the maximum allowed declines to 80 per cent in 2023, 60 per cent in 2024 and in increments of 20 per cent for each year following that. An additional incentive to purchase business aircraft is provided by the 2020 CARES Act, which includes a five year net operating loss carryback that permits tax payments going back to 2015 to be refunded due to a loss in the current year.

“Prospective buyers wanting to take advantage of that 100 per cent depreciation before the end of the year have put additional pressure on an already overheated market for preowned aircraft,” says Jennings.

TPJC provides sales, acquisition and a wide range of private aviation consulting services to private jet buyers and sellers.

“Prospective buyers need to be aware that, like any tax regulation, the rules on depreciation for a business aircraft are complex,” warns Jennings. “Whether you can take depreciation, and how much you can take in the first year of operation after purchase in 2022, depends on your income and how the plane is utilised, whether for your own business or for charter, and the percentage that each of those uses.”

The additional pressure on demand for private aircraft comes at a time when the number of available pre-owned aircraft is at an all time low. Why not order a new aircraft? The answer is that most manufacturers are sold out for the next three years; new ones are built to order, not mass produced.

“The best advice I can give is to find an experienced professional private jet broker with experts who know how to find pre-owned jets in this market and know how to negotiate the best deal for you, as well as all the ins and outs of regulations. Normally it takes 30 days to complete the sale of a pre-owned jet, so you need to start the process soon if you want to complete the transaction before the 100 per cent depreciation runs out,” he concludes.

Brokers can help private jet buyers, sellers and owners in several ways: by advising on financing and tax regulations of buying and owning an aircraft; by finding private jets for sale that are off-market or that will come to market after refurbishment, upgrades or major maintenance; by negotiating a private jet sale with sellers using experienced brokers; by finding private jets for sale that could generate charter revenues to lower the acquisition costs; by finding a private jet for sale and knowing operators who will charter it out quickly.

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