H.R. 598 Includes Bonus Depreciation, Increase To Section 179 Expensing Return

Want some good economic news for a change? Aviation Tax Consultants, which helps aircraft owners navigate the taxation travails inherent to such a large purchase, tells ANN that House Resolution 598 -- the "American Recovery and Reinvestment Tax Act of 2009," better known as the stimulus bill -- contains a number of provisions that will impact general aviation in a positive manner.

Like we said, it's a welcome change of pace.

According to the firm, the Act includes the return of 50 percent bonus depreciation for new aircraft purchases, retroactive to January 1, 2009. Qualified aircraft for bonus depreciation include factory new aircraft, manufactured in 2009 or prior years. Prior model year aircraft can qualify if it has been used only as a demonstrator aircraft by the manufacturer or dealer, and never titled to a taxpayer.

"We do expect similar language that will allow bonus depreciation for aircraft orders placed in 2009 and delivery occurring in 2010," ATC notes.

Section 179 Expensing allows a small business taxpayer to deduct up to $250,000 of capital improvement for the year of acquisition, in lieu of recovering these costs over time through depreciation. This incentive is subject to a phase-out once capital expenditures exceed $800,000. Taxable income limitation is applied both at the corporate and individual level in order to take advantage of this expensing provision.

Another provision in the stimulus package is the election to carryback current year net operating loss (NOL) for three to five years. Current law allows carryback of loss for only two years. This provision will have limited utility to most taxpayers as you can take advantage of this provision if your current year business or individual income tax returns create a significant net operating loss.

For owners who took advantage of extended delivery provisions for bonus depreciation in 2008, when you take delivery of your new aircraft in 2009, fifty percent bonus depreciation will be taken on your 2009 income tax return. If the depreciation creates a net operating loss on your 2009 income tax return, you will have the option to carry the loss back up to five tax years and receive income tax refunds from prior years.

The House of Representatives passed its stimulus bill Wednesday evening. The bill now faces debate and a vote in the Senate.

FMI: www.aviationtaxconsultants.com, Read H.R. 598