Bonus Depreciation Updates Post-Second Inauguration

The landscape for bonus depreciation has shifted significantly following the legislative actions enacted during President Donald Trump's second term. These changes, effective as of Jan. 20, 2025, have direct implications for owners and operators of business aircraft, as well as for high-net-worth individuals and corporations seeking to optimize tax planning strategies.

Overview of Bonus Depreciation

Bonus depreciation allows taxpayers to immediately deduct a substantial percentage of the purchase price of eligible business assets, including new and used aircraft, in the year the asset is placed in service. This accelerated depreciation is a powerful tool for managing taxable income and cash flow, particularly in capital-intensive sectors such as business aviation. I.R.C. § 168(k).

Key Legislative Changes: OBBB and TCJA

Originally, the Tax Cuts and Jobs Act (TCJA) permitted 100 percent bonus depreciation for qualified property – including aircraft – acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023, with the original phasedown schedule reducing the bonus depreciation percentage by 20 points each year after 2022 and the deduction finally sunsetting in 2026. However, the One Big Beautiful Bill Act (OBBB) was signed into law on July 4, 2025, reversing the phasedown and permanently reinstating 100 percent bonus depreciation for qualified property – including business aircraft – acquired and placed in service after Jan. 20, 2025.

Additionally, the definition of eligible property was clarified to include a broader range of aircraft modifications and upgrades, provided they meet the requirements for original use or substantial improvement. I.R.C. § 168(k)(2). There may also be opportunities for new aircraft purchased under a binding contract prior to Jan. 20, 2025, that are placed in service after that date, provided certain conditions and exceptions to the general rule are met, to qualify for 100 percent bonus depreciation.

For aircraft and other long-lead-time assets, the binding written contract rule was retained, allowing taxpayers to lock in bonus depreciation rates based on the date of contract execution, not just the in-service date. I.R.C. § 168(k)(2).

Practical Implications for Aircraft Owners and Operators

• Tax Planning Opportunities: Aircraft purchasers can fully expense the cost of eligible aircraft in the year placed in service, significantly reducing current-year taxable income. I.R.C. § 168(k). The continued inclusion of used aircraft expands planning flexibility for buyers in the secondary market. I.R.C. § 168(k)(2)(A). Qualifying improvements may also be eligible, allowing for strategic planning around major refurbishments. I.R.C. § 168(k)(2).
• Compliance Considerations: Careful documentation of acquisition and in-service dates is critical to secure eligibility under the revised rules. I.R.C. § 168(k)(2). Custom or long-lead-time aircraft must ensure that contracts are properly executed to lock in bonus depreciation rates. I.R.C. § 168(k)(2). Though federal bonus depreciation is generous, state conformity varies; consult with advisors to assess the impact on state tax liabilities.
• Strategic Considerations: The revival of 100 percent bonus depreciation creates a window of opportunity for accelerated acquisitions and upgrades.

Conclusion

The updates to bonus depreciation represent a significant opportunity for business aircraft owners and operators to optimize tax outcomes. With the restoration of 100 percent bonus depreciation, proactive planning is essential to capture these benefits and ensure compliance with the evolving regulatory framework.