Tax Depreciation Private Jet 2016: What You Need To Know Source Bing.com
Traveling on a private jet is a luxury that many can only dream of. But for those who can afford it, understanding the tax implications of owning a private jet is essential. Tax depreciation can have a considerable impact on the overall cost of owning a private jet, and it’s important to understand the rules and regulations that come along with it.
What is Tax Depreciation?
Tax depreciation is the gradual reduction in the value of an asset due to wear and tear, age, or obsolescence. In the case of a private jet, the depreciation is calculated over the life of the aircraft, which can range from 15 to 20 years or more. This depreciation is then used to reduce the amount of taxes the owner must pay on their jet.
2016 Depreciation Rules
In 2016, the IRS code allows for a 50% bonus depreciation on new and used business equipment purchased and placed into service. This includes aircraft, which means that owners of private jets can take a 50% bonus depreciation on their aircraft in the year it is purchased. This can result in a substantial tax savings for the owner.
Determining the Basis of a Private Jet
In order to take advantage of these depreciation rules, you must first determine the basis of your aircraft. This is the amount of money that you paid for the jet, minus any associated fees such as sales tax, registration fees, and more. Once you have determined the basis, you can then calculate the depreciation rate.
Calculating the Depreciation Rate for a Private Jet
The depreciation rate for a private jet is determined by the IRS. Generally, the depreciation rate is calculated by taking the basis of the aircraft and dividing it by the number of years that the aircraft is expected to be in service. For example, if the basis is $1 million and the expected life of the aircraft is 20 years, the annual depreciation rate would be $50,000 ($1 million divided by 20 years).
Expensing Rules for Private Jets
In addition to the 50% bonus depreciation, there are also expensing rules that apply to private jets. Under the IRS code, up to $500,000 of the cost of a jet can be written off in the year it is purchased. This can be used in conjunction with the 50% bonus depreciation to further reduce the tax liability of the owner.
Calculating the Tax Savings for a Private Jet
Once you have determined the basis of the aircraft and calculated the depreciation rate, you can then calculate the tax savings. This is done by multiplying the depreciation rate by the applicable tax rate. For example, if the depreciation rate is $50,000 and the applicable tax rate is 25%, the owner would be able to write off $12,500 in taxes each year ($50,000 multiplied by 25%).
Minimizing Taxes with Private Jets
By taking advantage of the 50% bonus depreciation and expensing rules, owners of private jets can significantly reduce their tax liability. By understanding the rules and regulations surrounding tax depreciation, owners can ensure that they are taking full advantage of all available tax savings.
Conclusion
Tax depreciation can have a significant impact on the overall cost of owning a private jet. By understanding the rules and regulations surrounding tax depreciation, owners can ensure that they are taking full advantage of all available tax savings. Knowing how to calculate the basis, the depreciation rate, and the applicable tax rate can help owners maximize their tax savings and minimize their overall cost of ownership.
