aircraft tax benefits

Seeing Tax Benefits of Aircraft Investment

June 25, 2020 |  Business

One way to lessen the financial impact of the current economic situation may seem counterintuitive, but it’s particularly effective: capital investment, specifically aircraft.

Businesses and organizations that are able to put resources toward aircraft purchases will see benefits beyond time-saving and increased productivity. The CARES Act allows these groups to realize significant tax relief, freeing up cash for other priorities. JetHQ can guide you through the process.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act restored taxpayers’ ability to deduct current year tax losses against income from a prior tax year. This is called net-operating loss carryback (NOLCB) and can create an immediate tax refund.

The NOLCB can be carried back up to five years ago to realize full advantage of the plan. That’s beneficial on a couple of fronts. Not only does it give businesses a greater range of tax returns to counter, it also offers the opportunity to qualify the net-operating loss to the higher 35% corporate tax rate that was effective before the 2017 Tax Cuts and Jobs Act reduced it to 21%.

aircraft tax benefits

Purchasing an aircraft in 2020 can be an economic boon for businesses. With 100% bonus depreciation in effect right now a company could convert the entire purchase price into eliminating current and older taxes, creating a quick tax refund that increases cash liquidity and flexibility.

Here’s an example: a business buys a $5M business jet in 2020. With an estimated $1M in 2020 business income wiped out, the new CARES Act allows $4M of NOLCB to be carried back as far as 2015. In that year, the $4M would be applied to up to that same amount of business income. With the 35% tax rate in effect that year, that results in an immediate $1.4M refund. If that year’s income is less than the NOLCB, it can be used in 2016 to 2019 years instead, until it’s fully applied.

JetHQ’s highly qualified team has the experience to navigate through complex tax and regulatory issues. Our sales professionals can find the right aircraft for clients’ needs and overall investment strategy.

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