Owning a private jet has always required careful planning, not just around the purchase itself but also the tax treatment that follows. With the passage of the One Big Beautiful Bill Act in July 2025, the landscape has shifted dramatically. Businesses now have the ability to claim 100 percent bonus depreciation on qualifying aircraft, a provision that makes strategic tax planning more valuable than ever.
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Why aviation-specific tax planning matters
Aircraft are unlike any other business asset. They combine high upfront cost with strict federal and state tax rules, and they demand close attention to how each flight is logged. While many companies rely on trusted CPAs, aviation taxation is specialized and requires in-depth knowledge of how purchase structures, usage rules, and IRS compliance standards interact.
Without aviation-specific guidance, buyers risk overpaying in sales and use taxes, missing out on deductions, or facing costly penalties if an audit reveals non-compliance. Proper planning ensures that the financial benefits of ownership are realized without unexpected liabilities.
Sales and use tax: location and structure
One of the earliest and often most overlooked decisions in a jet purchase is where the transaction takes place. State tax rules vary widely. Some states, such as Montana and Delaware, impose no sales tax on aircraft. Others offer exemptions if the aircraft departs the state promptly after delivery, often referred to as “flyaway” provisions. Still others, like California, may technically allow exemptions but attach conditions that are impractical for most businesses.
Ownership structure also influences outcomes. Many companies create a separate entity to hold the aircraft, often called a leasing company, which then rents the plane back to the operating business. In certain states this spreads sales tax liability across lease payments instead of requiring it in full upfront. The approach can provide significant cash-flow advantages, especially if the aircraft is sold or upgraded before the tax would have otherwise been recouped.
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The return of 100 percent bonus depreciation
The most significant development of 2025 is the reinstatement of 100 percent bonus depreciation for jets purchased and placed in service after January 19, 2025. This provision allows businesses to deduct the entire cost of an aircraft in the year it is acquired, rather than depreciating it gradually over its useful life.
To qualify, several requirements must be met. The aircraft must be ready and available for its intended use and must complete at least one flight in the tax year it is placed in service. More than half of all flight hours must be tied to legitimate business purposes. Pre-owned aircraft are eligible, provided the buyer or any related party has not previously used them. Importantly, flights taken for entertainment or recreation cannot be included in the deduction, and detailed flight logs must be maintained to substantiate business use.
This immediate deduction can dramatically reduce taxable income in the year of purchase, freeing up capital and creating opportunities for reinvestment. It also encourages transaction velocity, as owners can now upgrade more frequently without being locked into long depreciation schedules.
Compliance and the risk of recapture
The benefits of bonus depreciation come with strict conditions. If at any point the aircraft’s business use drops below 50 percent, the IRS can recapture part of the deduction. In such cases, depreciation must be recalculated using the straight-line method, and any excess bonus depreciation is added back as ordinary income in the year of non-compliance. The resulting liability can be substantial, making ongoing documentation as important as the initial planning.
It is also important to recognize the difference between federal and state treatment. While the federal government now allows full bonus depreciation, many states have decoupled from the rule. States such as California and New York may require taxpayers to add back some or all of the federal deduction, leading to state tax obligations even when federal taxable income is zero.
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Structuring ownership for long-term efficiency
How a jet is owned and operated can create long-lasting tax consequences. For some businesses, holding the aircraft within the main operating entity is sufficient, especially if the plane is used exclusively for internal business travel. More commonly, though, buyers establish a separate entity to hold the aircraft, which provides both liability protection and tax flexibility.
In situations where charter operations are part of the plan, additional considerations come into play. Chartering may qualify for exemptions in certain states, but it also subjects the aircraft to Part 135 FAA regulations and requires close coordination with both legal and tax advisors. Fractional ownership presents a different profile, often simplifying state tax obligations while preserving many of the same federal depreciation benefits.
Who benefits most from the new law
The businesses best positioned to take advantage of 100 percent bonus depreciation are those that can demonstrate consistent business use. Companies with multiple locations, professional service firms meeting clients across the country, or enterprises managing distributed assets are prime examples. The ability to deduct the full cost of the aircraft immediately can significantly reduce taxable income in the year of acquisition, providing a powerful incentive to invest in aviation as a business tool.
Planning ahead
The reinstatement of bonus depreciation has created a unique window of opportunity, but the rules are complex and the stakes are high. While the ability to deduct the full cost of an aircraft in the first year is attractive, those savings depend on careful execution. Decisions about where to close the purchase can determine whether significant sales tax applies. The way ownership is structured can shape both federal and state tax outcomes for years to come. Even something as straightforward as keeping accurate flight logs is critical, since deductions can be lost if business and personal use are not properly documented.
Business leaders who plan early and involve aviation tax experts are in the best position to capture the full benefit of the law. With the right strategy, they can maximize deductions and protect against pitfalls such as depreciation recapture or state tax add-backs, ensuring the financial advantage of aircraft ownership is fully realized.
Final thought
Private aviation has always required careful strategy, but with the passage of the One Big Beautiful Bill Act, the rewards for smart planning are greater than ever. By combining proactive sales and use tax decisions, sound ownership structures, and rigorous compliance with business-use rules, companies can unlock the full value of aircraft ownership in 2025 and beyond.
Own The Jet dives deep into the world of private jet ownership, operations, and the private aviation lifestyle.
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