I was talking to a dealer a couple days ago, he has two SETP deals sitting on his desk waiting for the tax bill to pass.

Bonus depreciation should be thought of as tax deferral, not tax elimination.

But you get to use the money you didn't send to the government until you sell the asset and recapture the depreciation.

For me, I've been using the government's money for the last ~6 years, which was a very good time to be using someone else's money. So I my case I'm way ahead.

But I know the day is coming when I'll sell the airplane and tax will be due.

I think you can roll it forward by buying a more expensive asset, but that's just a shell game. At some point the party's over.

I have a client who has used us to purchase two used aircraft and order a new one over the last three years, his CPA said "you're just kicking the can down the road" to which he said "as long as it says IRS on that can, I will keep kicking it!"

We'll do one more this year and then his new airplane will deliver, at that point he'll own it for years and not worry about the recapture.

It effectively eliminates some taxes because you get to deduct today dollars which are more valuable than deducting future dollars.

In real estate, the 39 year depreciation schedule is killer. You get only a fraction of the true value back in deductions, so you effectively paid taxes on income you didn't actually earn.

Mike C.

My experience of humanity makes me wonder how of the behavior that is changed by changes in depreciation has taken on a life of its own and is really just FOMO.

That is part of it! One of the reasons we have such a complex taxation system is the fact that it is designed to incentivize businesses to make investments.

It is truly a carrot and a stick.

It's pretty simple, the less in tax a company pays, the more they invest back into said company. They hire more people and buy more stuff, the people they hire pay taxes on their wages and buy stuff, all the stuff gets taxed.

Can you imagine the tax revenue just one aircraft generates on an annual basis?

In real estate, the 39 year depreciation schedule is killer. You get only a fraction of the true value back in deductions, so you effectively paid taxes on income you didn't actually earn.

Mike C.

Except if the money saved this year is going to be owed next year, you typically don't invest it in things that won't be liquid or produce quick returns.

The overall benefit to the government of the entire depreciation scheme is minimal compared to allowing full year one expensing, but they do use it as a psychological tool. All the non-accountants/tax lawyers would be better off if we scrapped the entire convoluted system and just allowed full expensing at purchase and then tax the return on sale.