The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for aircraft purchases. For business owners evaluating an acquisition in 2026, this is the single most important variable in the capital equation. The December 31 deadline is not forgiving.
Prior to the One Big Beautiful Bill Act, signed on July 4, 2025, bonus depreciation had been phasing down incrementally since 2022, falling from 100% to 80%, then 60%, then 40%. Business aircraft buyers were working with a shrinking tax advantage and an uncertain legislative timeline. The OBBBA permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025, with no scheduled phase-down (property placed in service between January 1 and January 19, 2025 falls under the prior 40% phase-down rate instead).
For aircraft buyers, this is not a minor adjustment. The ability to immediately expense the full purchase price of a business aircraft in the year of acquisition, against active income when properly structured, fundamentally changes the net cost calculus of an upgrade. A $2 million turboprop purchase is not a $2 million cash outlay when 100% of that cost can be deducted in Year One against a 37% marginal rate.
The provision applies to both new and pre-owned aircraft. A 2019 TBM 930 with 1,400 hours qualifies for the same immediate expensing as a factory-fresh TBM 980. This extends the tax advantage well beyond the buyers of new aircraft and into the broader pre-owned turboprop and piston market where FLYING Finance operates daily.
Bonus depreciation under the OBBBA is permanent, not subject to the phase-down schedule that governed the 2017 TCJA provision. This means 2027, 2028, and beyond are equally favorable from a tax timing perspective, provided the aircraft qualifies under Section 280F business use requirements. For the statutory language, see H.R.1, One Big Beautiful Bill Act and IRS Publication 946 (How to Depreciate Property).
On January 14, 2026, Treasury and the IRS issued Notice 2026-11 (IRS announcement). Until proposed regulations are published, taxpayers may rely on the existing bonus depreciation regulations with the dates updated: January 19, 2025 replaces September 27, 2017. Three points matter most to aircraft buyers:
The same law raised the Section 179 expensing limit to $2.5 million, with the phaseout beginning at $4 million of qualifying purchases, both indexed for inflation. Section 179 can only be used up to your taxable business income for the year and, for aircraft, still requires more than 50% qualified business use. Bonus depreciation has no income limit, so most aircraft buyers lead with bonus depreciation and use Section 179 selectively. Your tax advisor can model the combination.
The core of the bonus depreciation strategy is Marginal Tax Rate Arbitrage. When you deduct the full value of a multi-million dollar asset in a single year, you receive what is effectively an interest-free deferral from the federal government. It is not free money. The depreciation recapture conversation happens at sale. But it is deferred, and the time value of that deferral is substantial.
The calculation is straightforward. For a high-net-worth individual operating through a pass-through entity at a 37% marginal federal rate:
For a C-Corporation at the 21% federal rate, the calculation is more modest but still meaningful:
Timing note: the down payment is due at closing, while the tax savings arrive when you file (or sooner, through lower estimated tax payments). The figures above also assume you have enough taxable income to absorb the deduction this year. See loss limits below.
Bonus depreciation is a timing benefit, not a permanent exclusion. Taking 100% in year one reduces your tax basis in the aircraft to zero. When you later sell, any gain up to the amount you deducted is generally taxed as ordinary income under Section 1245, not at capital gains rates. And since 2018, aircraft can no longer be traded through a like-kind exchange to defer that gain; like-kind exchanges are limited to real property. The benefit is real, because you hold the tax savings for years and can reinvest them, but plan for the tax due at sale. See IRS Publication 544 (Sales and Other Dispositions of Assets).
Uses the purchase price and tax rate selected in the calculator above. Assumes 100% bonus depreciation was taken and the same marginal rate applies at sale. Illustrative only; not tax advice.
Bonus depreciation is taken in the tax year the aircraft is placed in service, not when the purchase agreement is signed, not when the LOI is executed, and not when the deposit is paid. The aircraft must be in your possession and available for its intended business use before December 31 of the tax year in which you intend to claim the deduction.
For calendar-year taxpayers, which is most individuals and pass-through entities, this means the aircraft must fund and close before the end of the calendar year. A closing that slips to January 2 costs you an entire year of tax deferral. On a $2 million aircraft at a 37% marginal rate, that slip is worth $740,000 in deferred tax, effectively a $740,000 increase in your net acquisition cost.
FLYING Finance has closed turboprop transactions in 10 business days from a complete application to funded loan. The October start recommendation accounts for pre-buy inspection variability, not lender speed. The pre-buy, not the financing, is typically the critical path item in a year-end close. See the full loan process timeline →
Counting back from Thursday, December 31, 2026. Thanksgiving (Thursday, November 26) and Christmas (Friday, December 25) take working days out of the schedule, so the real deadline arrives earlier than the calendar suggests.
| Target date | What needs to be done |
|---|---|
| By Friday, October 30 | Apply and get pre-approved. A complete file is usually pre-approved in 1–2 business days, and a pre-approval strengthens your offer. |
| By Friday, November 13 | Aircraft selected, LOI signed, deposit in escrow, and a pre-buy inspection booked with a type-experienced shop. |
| By Wednesday, November 25 | Pre-buy complete and squawks negotiated. Get your final application package to us before Thanksgiving. |
| December 1 to 11 | Lender approval, loan documents, title search and escrow (typically 5 to 7 business days), and insurance bound. |
| Target close: by Friday, December 18 | Fund and close. This leaves the holiday weeks as a buffer for anything that slips. |
| December 21 to 30 | Buffer only. Escrow agents and lenders run reduced holiday schedules, so do not plan a first closing attempt for this week. |
| Thursday, December 31 | Last day for the aircraft to be placed in service for a 2026 deduction. |
Placed in service means closed, delivered and available for its intended business use, not just under contract. 100% bonus depreciation applies to new and pre-owned aircraft acquired and placed in service after January 19, 2025 and used more than 50% for qualified business use. Many states do not follow federal bonus depreciation. This is not tax advice; confirm your situation with your aviation CPA.
Bonus depreciation for aircraft is governed by IRC Section 280F, which classifies aircraft as "listed property," a category subject to stricter substantiation requirements than standard business equipment. The core requirement is that the aircraft must be used more than 50% for qualified business purposes in the year the deduction is claimed.
Below 50% business use, bonus depreciation is not available and the taxpayer is limited to straight-line depreciation over a longer recovery period. Between 50% and 100%, the bonus depreciation deduction is prorated to the business use percentage. If business use drops below 50% in a subsequent year, depreciation recapture rules apply.
The leasing entity structure, a separate LLC that owns and dry-leases the aircraft to your operating company, is the mechanism that converts passive depreciation into an active deduction. The full structure, including the grouping election under Treasury Regulation 1.469-4, is covered in detail in the Piston to Turbine Transition Guide. See also the dry lease and wet lease guide for the FAA operational structure requirements.
A $2 million deduction only saves tax if you have income it can offset. Three rules decide that for individual owners and pass-through entities:
C-corporations are not subject to these three limits in the same way, which is one reason entity choice matters. Model the deduction against your actual income before counting on the full year-one savings.
Financing interest is a separate deduction from depreciation. Section 163(j) generally limits business interest deductions to 30% of adjusted taxable income, though smaller businesses under the gross-receipts threshold are exempt. Large interest and depreciation deductions in the same year can interact, so if your business carries significant debt, have your advisor model both together.
Two rules catch owners who mix business and personal flying. Under Section 274, costs tied to entertainment flights by owners, officers and other specified individuals are generally not deductible, which reduces the deductible share of the aircraft's costs. And when an employee or owner-employee flies personally on a company aircraft, the value of that flight is generally imputed as taxable income, usually calculated with the IRS Standard Industry Fare Level (SIFL) formula. Neither rule bars bonus depreciation on its own, but both affect your business-use percentage and the net benefit. Keep a log of every flight with its date, passengers and business purpose.
The OBBBA operates at the federal level. A significant number of states do not conform to federal bonus depreciation and require taxpayers to add back the federal deduction on their state return, then apply a slower state depreciation schedule. In states with meaningful income tax rates, this creates a real state tax liability even when federal liability is zero.
State conformity changes frequently as legislatures respond to federal tax law changes. The table below reflects general conformity status as of mid-2026. Verify current status with your CPA for your specific jurisdiction before closing.
One of the most consequential aspects of the OBBBA provision is its application to pre-owned aircraft. Prior bonus depreciation rules under the 2017 TCJA allowed used property to qualify. The OBBBA maintains this treatment, meaning a buyer of a five-year-old TBM 930 receives the same 100% first-year deduction as the buyer of a new TBM 980.
From a capital efficiency standpoint, pre-owned aircraft in the three-to-seven-year vintage window often produce the best combination of tax benefit and value stability. A new aircraft takes its largest depreciation hit in the first 12 to 24 months of ownership. The buyer absorbs a 20–30% value decline while simultaneously taking the full deduction. A three-year-old aircraft has already absorbed that initial decline. The buyer takes the full deduction against a more stable asset value floor.
The three-to-seven-year vintage maximizes Tax Alpha, meaning the after-tax return advantage generated by combining a depreciated purchase price with a full bonus deduction, while minimizing exposure to further value decline. The full analysis of vintage selection and capital efficiency is in the Piston to Turbine Transition Guide. Browse three-to-seven-year turboprops currently available on AircraftForSale.com For the strategic case behind that move, see The Piston Ceiling, our breakdown of when the Year One tax reduction alone can outweigh the total cash required at closing..
Pre-approval in 1–2 business days. The financing is not the critical path. The pre-buy is. Start early. Start early.
Both new and pre-owned aircraft qualify under the OBBBA, provided the buyer has not previously used the aircraft and it is acquired in an arm's-length transaction. A used TBM 930 purchased from a third party qualifies for the same 100% bonus depreciation as a new TBM 980. Aircraft acquired from a related party or previously used by the taxpayer do not qualify.
The deduction moves to the following tax year. For a calendar-year taxpayer this means waiting until the following year's return to claim the depreciation, a one-year deferral of the tax benefit. On a $2 million aircraft at a 37% marginal rate, that one-day slip is worth approximately $740,000 in deferred tax savings. Year-end transactions require building in pre-buy inspection time, lender approval, and title work with meaningful schedule margin.
Yes. Financing the aircraft does not limit the bonus depreciation deduction. You deduct the full purchase price, not just the down payment, in the year the aircraft is placed in service. This is the mechanism that makes the math work: a 20% down payment of $430,000 generates a tax deduction on the full $2,150,000 purchase price. The loan balance does not reduce the deduction, provided the financing is recourse and the at-risk basis rules under IRC Section 465 are satisfied.
More than 50% qualified business use is required to claim any bonus depreciation under Section 280F. Between 51% and 100% business use, the deduction is prorated to the business use percentage. Below 50%, bonus depreciation is not available and the aircraft must be depreciated using the Alternative Depreciation System over a 6-year recovery period. Contemporaneous flight logs documenting business purpose for each flight are the IRS's primary substantiation requirement.
State conformity affects the after-tax economics but rarely eliminates the federal benefit. For a California-based buyer, the federal deduction is fully available but the state requires an add-back and uses its own depreciation schedule, creating a state tax liability that reduces the net benefit. The federal benefit still substantially exceeds the state cost in most cases. Your CPA should model both layers before closing. Tennessee, Texas, and Florida buyers face no state income tax impact.
When you sell an aircraft on which you claimed bonus depreciation, the IRS recaptures the depreciation as ordinary income, not at the lower capital gains rate. If you purchased a $2 million aircraft, claimed a $2 million deduction, and sell it five years later for $1.5 million, the $1.5 million sale price is taxable as ordinary income to the extent of prior depreciation claimed. The standard mitigation strategy is acquiring a more capable aircraft in the same tax year to generate an offsetting deduction. This must be planned in advance with your CPA.
FLYING Finance arranges the financing: the loan, the lender, and the closing timeline. The tax structure is your CPA's domain. What FLYING Finance can do is work backward from your target closing date to ensure the financing timeline supports a December 31 close if that is your objective. Pre-approval in 1–2 business days, full approval in 3–5 after the pre-buy, closing in 1–3 days after documents are signed. The pre-buy inspection is typically the critical path, not the financing. Starting in October gives you the margin to close comfortably.
Notice 2026-11, issued January 14, 2026, is interim guidance from Treasury and the IRS on the permanent 100% bonus depreciation created by the One Big Beautiful Bill Act. It lets taxpayers rely on the existing bonus depreciation regulations with updated dates until proposed regulations are published. It also explains the election to take 40% (60% for certain aircraft) instead of 100% in the first tax year ending after January 19, 2025, and confirms that an aircraft is not treated as acquired after the date a written binding contract for it was signed.
Taking 100% bonus depreciation reduces your tax basis to zero, so when you sell, gain up to the amount you deducted is generally taxed as ordinary income under Section 1245. Like-kind exchanges have been limited to real property since 2018, so aircraft sales can no longer defer that gain. The deduction is still valuable because you keep the tax savings for the years you own the aircraft, but plan for the tax due at sale.
Yes. Capital improvements such as avionics upgrades, interiors and engine overhauls placed in service after January 19, 2025 can qualify for 100% bonus depreciation separately from the aircraft, provided the aircraft still meets the more-than-50% business use test.
Yes, they can be combined. Section 179 now allows up to $2.5 million of expensing, phasing out above $4 million of qualifying purchases, but it is limited to your taxable business income. Bonus depreciation has no income limit. Most aircraft buyers rely on bonus depreciation and use Section 179 selectively; your tax advisor should model the combination.
Not always. Individuals and pass-through owners face the excess business loss limit, the passive activity rules and the at-risk rules, which can push part of the deduction into future years. An aircraft held in an LLC and leased to your operating company may be treated as a passive activity, so the lease structure matters. Model the deduction against your actual income with your tax advisor before counting on the full year-one savings.
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