Tax Cut Bill Increases Bonus Depreciation On New Planes

The final version of the tax cut legislation Jobs and Growth Tax Reconciliation Act (H.R. 2), now awaiting President Bush's signature, contains an increase in the bonus depreciation percentage from 30 percent to 50 percent. NBAA and GAMA were at the forefront of the effort to convince Congress to make this change.

Specifics...

• A 50 percent bonus depreciation will be available for new property (the purchaser has to be the first to use the asset) acquired after May 5, 2003 and before January 1, 2005. (The original 30 percent bonus depreciation provided that property had to be purchased before September 11, 2004.)
• There must not have been a binding contract in existence before May 6, 2003.
• The placed-in-service rules remain the same as for 30 percent bonus depreciation.
• The property must be placed in service before January 1, 2006. To qualify aircraft must cost more than $1 million and take longer than 12 months to construct.

In addition, the purchaser must use the aircraft in the trade or business of transporting persons or property and the amount of the cost eligible for bonus depreciation is limited to the value of the portion of the aircraft constructed before December 31, 2004. In the original 30 percent bonus depreciation provision, the December 31, 2004, date was September 11, 2004.

This provision accelerates when a business can take its deduction. It does not increase the ultimate amount of the depreciation deduction. However, the immediate write-off, combined with extraordinarily low interest rates, make it worth considering purchase now, rather than waiting until 2005.

FMI: NBAA's Pete West at pwest@nbaa.org, www.nbaa.org/gov/hr2_bonusdepreciation.htm