Tax Planning for Year-End Aircraft Purchases

An aircraft purchase involves moving parts and people. So when should you start tax planning?  The answer is simple: right away.  

Often, tax planning strategies guide the ownership and operating structure that you put in place.  This can include federal income tax planning, including eligibility for bonus depreciation, and state and local tax minimization.

First and Last Step  

I like to think of tax planning as the first and last step of the acquisition process. I recommend that you schedule a call with your aviation tax advisor and other key members of your team early in the process. 

Be pro-active and put your structure in place at the beginning. That way, you can move quickly once you identify an aircraft and leave time for state registrations, inquiries, or other tax matters that need to be addressed. 

Key Considerations Along the Way

As you move further into the process, you’ll want to identify other tax matters. These can include closing location, state exemption requirements, and initial flight plans. Be sure to address them early to properly execute your federal and state tax plan.  

Why Timing Matters

Early tax planning becomes even more important as year-end approaches. After all, aircraft transactions often spike in the fourth quarter. During this time, tax advisors and most aviation professionals have more limited availability than usual.   

That’s why you don’t want to wait until it’s too late. Start tax planning long before you purchase an aircraft. If you wait until closing, it can be too late to correct any unexpected tax consequences.

As always, please consult with your aviation tax advisor early in the process.