On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act (OBBBA), became law, which increased and permanently extended “bonus depreciation.” Specifically, for private aircraft used in a “trade or business” and meeting certain other requirements, taxpayers can now deduct 100% of the cost basis of a business aircraft for the tax year that it is placed in service. Previously, 100% bonus depreciation was available for business aircraft placed in service between late 2017 the end of 2022 (and in certain cases, the end of 2023), and that’s been phasing down in recent years in 20-point increments. Now, for all tax years, until Congress changes the law, aircraft acquired and placed in service on or after January 20, 2025, will be eligible for 100% bonus depreciation.
Normal requirements for depreciation of aircraft continue to apply to 100% bonus depreciation. The aircraft must be used in a “trade or business,” which does not include investment or so-called “production of income” activities. Bonus depreciation is not available for taxpayers that are automobile or equipment dealers who pay and deduct interest under floor-plan financing arrangements, nor for taxpayers producing electricity or other utilities, nor for farmers and real estate companies that make an election out of section 163(j) interest-deduction limitations. Also, a taxpayer cannot qualify for bonus depreciation if the aircraft is acquired from persons related to the taxpayer
Aircraft acquired after January 20, 2025, that are used for personal use originally but later converted to trade or business use can take advantage of 100% bonus depreciation. Capital improvements to aircraft that would be eligible for 100% bonus depreciation are also eligible for 100% bonus depreciation.
The OBBBA permanently disallows so-called “miscellaneous itemized deductions,” among which are the deduction for “unreimbursed employee business expenses.” If you are considering buying a private aircraft and depreciating it on the basis that you use it in your trade or business as an employee traveling for your employer’s business—you’re barking up the wrong tree.
Also, bonus depreciation for private aircraft that are not predominantly used in a trade or business in future tax years during the regular 5- or 7-year MACRS depreciation schedule is subject to recapture. Using the aircraft in a trade or business for just the first tax year isn’t enough to keep the benefit.
As under prior law, other tax code provisions can limit the benefit of 100% bonus depreciation, such as passive-activity loss limitations (e.g. Part 135 charter use), excess business loss limitations for individuals and individuals getting bonus depreciation through pass-through (K-1) entities such as S-corporations, LLCs or partnerships, and hobby loss limitations (for activities not entered into for profit).
The information in this article is intended to highlight potential issues with aircraft ownership and operations and is therefore general in nature. Please feel free to contact Nathan R. Pietila pietilanr@law.aero at Aero Law Group PC for more information. directly to discuss your specific business/personal needs.