On January 1 2013, Congress passed the American taxpayer relief act of 2012. But what does this mean for the aviation industry? Well, the biggest impact is that a 50% bonus depreciation was extended for new aircraft purchased and delivered in 2013.
In addition, new orders placed in 2013 and delivered by 12/31/14 will also qualify for 50% bonus depreciation as long as the contract qualifies under the long-lead production exception.
The items needed in the contract in order to qualify under long-lead exception clause are as follows:
1. Cannot be part 135 aircraft
2. Contract must be signed by 12/31/13
3. A nonrefundable deposit of either 10% or $ 100,000 whichever is LESS.
4. There has to be at least a 5% liquidation damages if the client fails to perform.
5. Please note that it takes at least four (4) months to deliver.
The act also extends through 2013 and enhanced version of code section 179 for small business expensing. The code section 179 dollar limit for expensing tangible personal property is extended to $ 500,000 through the end of 2013 with a 2 million investment dollar limit.
This allows expensing of improvements to the aircraft that might have needed to be capitalized over a 6 year period in the past such as interior fit up and improvements. However, if you spend more than 2 million in total improvements, you no longer qualify for this special section 179 deduction, so it is meant for small businesses.
For more information about this new Tax Relief Act, and what it means for you – visit www.guardianjet.com and visit our Learning Center section that has several white papers available.