The Aircraft Loophole That Lets Any Business Erase Millions in One Tax Year

If your business owns, or is about to own, a private aircraft, the tax code lets you deduct the entire purchase price in the year you place it in service. Under the bonus depreciation rules in Internal Revenue Code Section 168(k), a qualifying new or used business jet can be written off 100% in year one, no phase-in, no ceiling on the aircraft’s price. The One Big Beautiful Bill restored the full 100% deduction permanently for qualifying property, and it is one of the widest-open loopholes in the current code.

The Reveal: One-Year Write-Off, Any Price Tag

Bonus depreciation lets a business deduct the full cost of qualifying tangible property in the year it is placed in service instead of spreading it across a MACRS schedule. Aircraft used in a trade or business are 5-year MACRS property, and they qualify. A $20 million jet, financed or paid in cash, can generate a $20 million deduction against ordinary business income in year one, provided the aircraft meets the business-use tests. There is no dollar cap on bonus depreciation, which is what makes it different from the Section 179 expensing election most small-business owners already know.

The Proof

The authority is IRC Section 168(k). The Tax Cuts and Jobs Act of 2017 set 100% bonus depreciation, then began phasing it down after 2022. The One Big Beautiful Bill (OBBBA) reversed that phase-down and made 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025. The IRS confirmed OBBBA’s broader tax framework in IR-2025-103, released October 9, 2025, which sets the tax year 2026 inflation adjustments alongside OBBBA’s permanent provisions. Aircraft depreciation itself is governed by Section 168, with the “listed property” and business-use guardrails sitting in Section 280F.

Who It Is For, Who It Is Not

This is a business deduction. The taxpayer must be a trade or business (Schedule C, an S-corp, a C-corp, a partnership, or an LLC taxed as one) that places the aircraft in service for qualified business use. Personal owners cannot use it. Passive investors are limited by the passive activity rules under Section 469. Charter and leasing structures can qualify, but bare leasing to a related party can throw the aircraft into a slower alternative depreciation system. And any use for entertainment, amusement, or recreation is nondeductible under Section 274, no matter how the aircraft is depreciated.

How To Use It in 2026

1. Acquire the aircraft and place it in service before December 31, 2026. “Placed in service” means ready and available for its assigned business function, not just delivered.
2. Document that qualified business use exceeds 50% of total flight hours in year one. The IRS treats aircraft as “listed property” under Section 280F, so flight logs must show business purpose, passengers, and route.
3. Elect 100% bonus depreciation on Form 4562 with the return. If you do not want bonus, you must affirmatively elect out class-by-class.
4. Allocate any personal or entertainment use out of the deduction under the Section 274 disallowance rules and the SIFL (Standard Industry Fare Level) imputed-income calculation for passengers.
5. Pair the write-off with a profitable year. The corporate profits backdrop is strong: total U.S. corporate profits hit $4,426.5 billion in Q1 2026, up 12.8% year over year, giving businesses ample taxable income to offset.

The Fine Print

The 50% qualified business use test is the trap. If business use drops to 50% or below in any year during the aircraft’s recovery period, Section 280F triggers recapture: you must recompute depreciation under the slower straight-line alternative method and add the excess back into income in the year use falls. A single soft year of personal trips can claw back a multimillion-dollar deduction.

Two more gotchas. First, entertainment flights are permanently disallowed under Section 274(a), and the disallowance is calculated on occupied seat hours, not just aircraft hours. Second, state conformity varies: many states decouple from federal bonus depreciation, so the state tax bill on a jet purchase can be materially different from the federal one.

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