The aviation community had its own special fireworks display on July 4th, 2025, when Donald Trump signed into law his ‘One Big Beautiful Bill’ (OBBB), throwing a life-line to the aircraft sales and manufacturing community that had stalled somewhat in the last two years due to ongoing economic uncertainty. You can say what you will about the sitting President’s actions in his first 6 months in office, but the aviation community saw the much needed 100% Bonus Depreciation provision brought back into law just two years into the ‘phase-out’ that came from Trump’s last piece of epic tax law reform with the Tax Cuts and Job Acts (TCJA) from 2018. Furthermore, Congress, for the first time since the inception of Bonus Depreciation in the 2002 tax year, made Bonus Depreciation a permanent part of the tax code.

The phase-out of Bonus Depreciation, agreed to in the TCJA in 2018, started with the reduction of Bonus Depreciation from 100% to 80% in the 2023 tax year, 60% in the 2024 tax year and 40% to start the 2025 tax year. Had the phase-out continued, Bonus Depreciation would have been reduced to 20% in 2026 and eliminated altogether in the 2027 tax year. The additional first year deduction (Bonus Depreciation) of qualified business property, which aircraft fall under, was instituted in response to the economic crisis that followed the terrorist attacks in the United States in 2001. The idea behind the deduction was that Congress wanted to incentivize the purchase of certain NEW manufactured machinery and goods and thus spur job growth by ‘fast tracking’ the depreciation deduction of aircraft from the typical 5-year depreciation schedule for a Part 91 aircraft and 7-year schedule for commercial aircraft.

The additional first year Bonus Depreciation deduction was only 30% for the 2001 tax year, then raised to 50% in 2003 and eventually 100% in 2010. However, the tax deduction was never permanent tax law until 2025 and it was always a bargaining chip for partisan negotiations anytime the tax law was set to expire. The agreement in 2018 to phase-out Bonus Depreciation seemed more disincentive than just the removal of a garden variety tax deduction and tax practitioners all agreed that many aircraft buyers would postpone plans to purchase new aircraft in light of the return to the ‘normal’ 20% depreciation deduction that most aircraft generated in their first year. Little did anyone realize that Congress would actually try to bring back 100% Bonus Depreciation in 2024, retroactive to the 2023 tax year, which would effectively eliminate any phase-out. Unfortunately, extremely contentious Presidential elections often lead to Congressional ‘grid-lock’ and the bill to resurrect Bonus Depreciation for 2023 died in the Senate.

One key ‘gotcha’ with this new law for some aircraft buyers this year, is that aircraft placed in service on January 19th or before will NOT be eligible for 100% Bonus Depreciation. Aircraft placed in service between January 1st and January 20th will only be eligible for 40% Bonus Depreciation, the phase-out amount for 2025 set by the TCJA. Unfortunately, the OBBB set January 20th, 2025 as the first day that all the provisions of the new law were enacted. It is not coincidental that January 20th was Trump’s second inauguration day.

But Summer 2025 has started off with a big bang as the aviation community rejoiced on July 4th in celebration of the birth of our nation AND the resurrection of the real Bonus Depreciation!!!!

In other, not so rosy, tax news, while the Internal Revenue Service has been severely weakened by the 25% reduction in its work force, they are approaching aircraft taxation enforcement with the same aggressiveness as they have always used. New audits are still hitting every day and even though they may take years to conclude, the IRS won’t slow down enforcement, as ‘fear’ is their most powerful weapon. Don’t be caught off-guard thinking they won’t focus on your aircraft should you be unlucky enough to become a target.

Click on the ‘Schedule Call’ button at the top of the page for a free consultation on how 100% Bonus Depreciation can reduce your tax burden AND how we can structure your ownership and operation to protect you from the IRS.