Important Factors Considered By Professionals Before Aircraft Tax Planning

For private aircrafts operators, it is essential to retain the service of an attorney who knows about the aviation tax. It is equally important to retain the service of a CPA who knows about the federal tax or state tax pertaining to aviation. An aviation CPA and an aviation tax attorney can assist the aircrafts operators by limiting the liability exposure and through aircraft tax planning. It is essential for the businesses or the individuals owning aircrafts to limit the liability exposure alongside trying to reduce the tax liability through deductions, exemptions and benefits. The assistance of a tax attorney and CPA is essential in this scenario.

To limit the liability exposure, it is essential for the aircraft operators or owners to verify to the authorities that they have appropriate insurance coverage with sufficient limits. It is equally important for the aircraft operators to ensure that the insurance policy covers all relevant parties and all types of operations. It is important for an aircraft operator or owner to retain the service of experts for aircraft tax planning. An aviation attorney or aviation CPA can assist an aircraft operator or owner with state and federal tax planning. The aircrafts being used for business can be depreciated using two methods. The MACR method of depreciation is used for the aircrafts being used for business for a period of 5 years. If an aircraft has been used for air-transportation, then MACR is available for an aircraft of 7 years.

The MACR stands for Modified Accelerated Cost Recovery system which may be available for the new aircrafts. The ADS (Alternative Depreciation System) is for the aircrafts being used for trading or business for more than 6 years. If an aircraft is being used for air-transportation, then 12-year ADS is available for the aircraft. This is a straight-line depreciation. A tax attorney or a CPA has to consider the depreciation system during the aircraft tax planning.

There is limited option to depreciate an aircraft which is being used for personal reasons or being used by the related party of an owner or operator. The accelerated depreciation under the MACR system is available for the aircrafts which are being used primarily (at least 50% of the time) for business or trading for a taxable year. In this scenario, an aircraft can receive depreciation under the MACR system despite being used for personal reasons. Thus, an aviation CPA or tax attorney has to consider a variety of factors during aircraft tax planning.

An aviation CPA or tax attorney has to consider if an aircraft is used for entertainment before the aircraft tax planning. The non-business use of an aircraft by the owner or others is going to negatively impact the depreciation calculations and deductibility of the costs pertaining to an aircraft. For more information visit here: Advocate Consulting Legal Group, PLLC.