American Taxpayer Relief Act of 2012 Extends Bonus Depreciation for Aircraft

As part of the American Taxpayer Relief Act of 2012 -- the legislation that was the product of the “fiscal cliff” negotiations in Washington -- Congress extended 50% bonus depreciation for qualifying aircraft acquired prior to January 1, 2014. This provision was scheduled to expire and would not have been available for aircraft acquired after December 31, 2012. Bonus depreciation is subject to certain limitations, as noted below. However, if the limitations are met, the effect is that an aircraft purchaser can deduct half of the cost in the first year of use. The 50% bonus depreciation has been available for some time, and has been routinely extended by Congress.

Bonus depreciation is available pursuant to §168(k) of the Internal Revenue Code. In order to qualify, the following requirements must be met:

  • The original use of the aircraft must commence after December 31, 2007;
  • The aircraft must be acquired (or be subject to a written binding contract entered into) after December 31, 2007 and before January 1, 2014; and
  • The aircraft must be placed into service prior to January 1, 2014 (or January 1, 2015, for aircraft that qualify as “longer production period property” and certain non-commercial aircraft).

These requirements are unchanged from those in existence prior to the passage of the American Taxpayer Relief Act of 2012 -- the legislation merely pushes out the acquisition and in service deadlines by one year.