Page 20 - March 18 TNT

2017 Tax Cuts & Jobs Act
How the New Law Impacts Business Aviation.
by Suzanne Meinters-Levy
After years of debate, tax reform has arrived. The late-year 2017 passage and signing of the Tax Cuts and Jobs Act (TCJA) has reshaped the business and individual tax landscape. The TCJA provides excellent tax opportunities for businesses of all
sizes to invest in general aviation aircraft but requires careful planning and review to ensure that deductions are preserved. Below you will find a few highlights of the new law, along with discussion points to consider with a trusted advisor.
Full Equipment Expensing for Eligible Aircraft Purchases, New and Pre-Owned
Perhaps most notably, the TCJA revised the bonus depreciation provisions pursuant to Section 26 U.S.C §168(k) of the Internal Revenue Code to allow for 100 percent bonus depreciation for qualifying new and pre-owned aircraft purchased and placed in service after Sept. 27, 2017, gradually phasing down beginning in 2023. This is a historic shift of an incentive that has usually only applied to factory new purchases.
Additionally, Section 179 expensing elections have increased substantially, allowing additional first-year write-offs for equipment and component parts placed in service. This makes 2018 an attractive time to add to your fleet or change aircraft, or alternatively to replace or upgrade major components of your business aircraft. In order to use bonus depreciation, the equipment must be used at least 25 percent of the time for qualified business use (a term of art that must be closely evaluated by each taxpayer) and at least 51 percent of the time for total business use.
Elimination of 1031 Exchanges for Equipment
The TCJA has eliminated the 1031 exchange for tangible personal property, a tool commonly used by owners replacing their business aircraft to avoid the impact of depreciation recapture when an aircraft is being sold only to be replaced by another business aircraft. For exchanges already in process before year-end 2017, TCJA allows the completion of the exchange provided the relinquished aircraft was sold (or, in the case of a reverse exchange, the replacement aircraft was acquired) before year-end. While the elimination of 1031 exchanges is a disappointment for the industry, the expansion of deductions available under the revised 168(k) and Section 179
18 • TWIN & TURBINE
March 2018