Forget Cash for Clunkers. Airplane operators have bonus depreciation as a powerful incentive to upgrade. But you’ll have to act quickly. The federal Economic Stimulus package that allows for the special depreciation benefit expires at the end of 2009.
What’s more, the IRS has expanded the expensing election of Section 179 of the tax code that allows for increased depreciation deductions for small business taxpayers. A qualifying small business taxpayer is allowed to expense up to $250,000 in capital purchases for assets placed in service in 2009. As with bonus depreciation, the expanded expensing provision expires Dec. 31.
The Economic Stimulus program allows for a bonus first-year 50% depreciation of the cost of acquiring or upgrading business equipment, over and above the normal first-year depreciation based on a five- or seven-year schedule. For aircraft primarily used for non-commercial purposes, the recovery life is normally five years; for commercial aircraft, the recovery life is seven years.
The remaining basis of the asset (after subtracting the 50% already deducted) will be written off over the remaining recovery life, usually using an accelerated method.
So what does that mean for you? According to officials at Twin Commander Aircraft, for owners who convert their standard TPE331 engines to the Dash 10T configuration, the entire cost of the upgrade qualifies for bonus depreciation. If you purchase a core and convert, all new components and their installation qualify for bonus depreciation. The company’s Grand Renaissance program, which results in a completely refurbished and upgraded Twin Commander, also qualifies for bonus depreciation.
All new improvements qualify for the depreciation and expensing benefits, but note that the improved aircraft must be placed in service before the end of 2009. Thus, the Dash 10T and/or Grand Renaissance upgrades must be completed and the aircraft placed in service prior to January 1, 2010.
As you would expect, there are many caveats associated with bonus depreciation and the expanded expensing election, so it is important that you consult an experienced aviation tax advisor to get all of the details, company officials advise.
For more information: 360-435-9797 or TwinCommander.com.