In the hours and days immediately following
the tragic attacks on America of 9/11, there
was much speculation about the effects on
the general aviation industry. While the
events of September 11, 2001 have had a
significant impact on the economy as a whole,
sales of personal aircraft in Michigan have
experienced a surprising boost. Certainly,
the convenience of personal transportation
has played a major role in this increase
as airport lines and security have become
more time consuming. The reduction of flights
resulting from the airline cost-cutting
have limited flexibility for the business
person and affected the productivity of
companies relying on commercial transportation.
These factors alone can’t explain surge
of people joining the flying community for
more than just pleasure. Rebates, low and
0% interest rates, training allowances,
and yes, even the IRS played a role in creating
an environment that has introduced more
people to the benefits of aircraft ownership
and had an effect similar to that seen after
the passage of the General Aviation Revitalization
Act of 1995.
The IRS is here to help you? Well, believe
it or not, a new tax law passed earlier
this year represents a renewed attempt
by our nation’s leaders to jumpstart
the economic recovery. The bill applies
to new airplanes acquired after September
10, 2001, and before September 11, 2004,
and provides tax savings from economic
stimulus provisions included in the Internal
Revenue Code designed to encourage investment
in capital assets. Visit your local airport
and you’re sure to see plenty of forty
and fifty year old aircraft operating
for both business and pleasure. Even prior
to the new tax law, Congress recognized
that capital investment is an important
part of our economy, and therefore allowed
a five year depreciation of these assets.
To further encourage investments, they
do not require the depreciation to be
spread evenly over the five years, but
through a concept know as “double declining
balance,” greatly accelerate depreciation
during the first two years of ownership.
Now with the additional incentives of
30% bonus depreciation on new airplanes,
tax deferral opportunities are greatly
expanded.
So how might a business person benefit
from these new changes? First of all,
the impact of these depreciation changes
greatly reduce net cash investment for
the purchase of a new airplane. Specifically,
an operator in the 40% tax bracket who
can successfully write off his aircraft
ownership expense may have no cash investment
in the airplane during the first four
years. Additionally, when properly structured,
many taxpayers have an opportunity to
convert personal use into business use.
The Internal revenue code provides an
optional method of taxing an individual
for personal use of an aircraft which
many times amounts to less than 10% of
the actual deductions flowing from the
investment. Consult your tax professional
prior to purchasing your new airplane
or ask your Aircraft Dealer for the name
of an Aviation Tax Specialist to set up
your purchasing entity.
And you say you’re not a pilot? Local
aircraft dealers like Suburban Aviation,
Inc. in Lambertville, Michigan will actually
teach you to fly your new airplane and
even reimburse your expenses when you
purchase a new Cessna airplane from them.
Most of today’s pilots learned to fly
in a Cessna airplane and the majority
of these pilots continue to experience
the freedom and flexibility that flight
offers in one of Cessna’s many single
engine models. For 75 years, Cessna has
been the leader in general aviation aircraft
providing a safe and reliable alternative
to commercial airlines and the automobile.
So if your business can benefit from
improved efficiency and tax savings, why
not consider a company airplane? There
are few tax saving opportunities as effective
as fully depreciating an aircraft on a
five year accelerated basis, and with
today’s interest rate environment, a
well-structured transaction often results
in little or no after tax cash flow holding
costs during the early years of ownership.
Of course, arriving at your meeting on
time and with all your luggage can also
be pretty convincing!
About the Author Pat Redmond, Brighton,
Mi usa airplanenoise@airplanenoise.com
http://www.airplanenoise.com
Pat Redmond, helps business owners who
are tired of long lines and baggage claims,
fly their way to freedom! Enjoy dinner
with your family tonight! To learn more
about the General Aviation Business, sign
up for more FREE tips like these, visit
her site at http://www.airplanenoise.com
