Incentives for 2012 Business Aircraft Equipment

Greensboro NC, July 16, 2012:  New business aircraft purchases and new equipment purchases for used aircraft are subject to a special 50% bonus depreciation allowance through 2013, if contract is in place by 2012.

Such contracts must be in writing, must be binding under state law against the purchaser, and must not include any liquidated damages clause that limits damages to an amount less than 5% of the aircraft/component price. 

Depending on the details of the contract through which the 2012 aircraft is acquired, the bonus depreciation may be enhanced to 100% of the aircraft or component cost.  The additional first year depreciation deduction is allowable both for regular income tax purposes and alternative minimum tax purposes.  

All property qualifying for bonus depreciation must be new and used primarily for business purposes, and meet other tests necessary to qualify for MACRS (Modified Accelerated Cost Recovery System).  The new bonus depreciation excludes property acquired underwritten binding contract in effect prior to January 1, 2008.

In calculation of cost eligible for bonus depreciation, a taxpayer may include the cost of installation, inspection, certification, and the like.  If refurbished equipment includes both new and used components, the entire cost is subject to bonus depreciation if less than 20% of the value is attributable to the value of the used asset.

In addition to the bonus depreciation allowance, an expensing election is also available to small businesses which engage in capital investments of less than $699,000 within the year.  The expensing election applies to both new and used business property acquired through purchase and placed in service during 2012. 

The expensing election allows taxpayer to write-off up to $139,000 of equipment, but in no case more than the taxpayer’s yearly income.  Further, the available write-off decreases dollar-for-dollar to the extent that the taxpayer’s total capital investment for the year exceeds $560,000.  The major advantage of the expensing election over bonus depreciation is it’s available for used property.

Under the new tax laws passed in December 2010, the Section 179 deduction limit for 2012 is $125,000 and the overall property value limit for 2012 is $500,000. Without this provision, the dollar and investment limits would have reverted to $25,000 and $200,000 respectively, for tax years beginning after 2011.

For more information contact Aircraft Management Services - 1-800-257-0582.