"Render unto Caesar that which is Caesar's; render unto God that which is God's." -- Jesus

State Sales Tax

Most states want to be sure that the proper sales or use tax is collected, if any is due. Each state's requirements and tax rates are different. This critical and possibly expensive item should definitely be discussed with your aircraft sales professional, consultant or attorney. In many states, aircraft that will be used for revenue producing flights, like rental or lease, may be exempt from sales tax at the time of purchase. In this case, the buyer will need some sort of permit or a vendor's license to collect and pay the sales tax for the rental or lease, typically on a monthly basis.

Federal Tax

A tax professional with experience concerning aircraft should definitely be contacted. In general, an aircraft used for business can be depreciated. The fastest allowable depreciation schedule is a "5-Year Double Declining Balance" one. During the first year of purchase a "Half Year Convention" is used. This means that the plane is assumed to have been bought in the middle of the year. There is also a "Quarter Year Convention", which may only allow 1/4th the annual depreciation based on the relative asset value of the plane as compared to the rest of the business assets. At least 50% of the plane's use must be business in order to allow any depreciation, then only the actual percentage is used. So, if the plane was used 49% or less for business, you could not claim any depreciation. If the plane was used for 85% business, then that 85% portion of the allowable depreciation schedule could be claimed.

So, based on 100% allowable depreciation, a "5-Year Double Declining Balance" schedule, would work out like this for each year: