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29 Mar 2024, 01:54 [ UTC - 5; DST ]


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 Post subject: 100% Bonus Depreciation
PostPosted: 18 Jan 2024, 10:22 
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We’ve been hearing rumors for some time that Congress was working on legislation that would restore Bonus Depreciation (Immediate Expensing) to the previous 100% limit.

It appears that Senate Finance Committee Chairman Ron Wyden and House Ways and Means Committee Chair Jason Smith have reached a deal in principle that if passed would restore 100% Bonus Depreciation.

https://www.grantthornton.com/insights/ ... o-of-bills

https://www.forbes.com/sites/kellyphill ... on-credit/

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 18 Jan 2024, 10:34 
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Good news for those in the jet business!

Forbes was behind a paywall. Do you know of any indication of what years it will apply to? Will they include 2023?

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 18 Jan 2024, 10:54 
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This is what we received recently on our tax information service at our CPA firm -

Bonus depreciation: The proposal would reinstate 100 percent bonus depreciation retroactive to January 1, 2023. (Under the TCJA, the bonus depreciation rate phased down to 80 percent in 2023 and 60 percent in 2024.

Good news for business!


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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 18 Jan 2024, 11:29 
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Username Protected wrote:
Good news for those in the jet business!

Forbes was behind a paywall. Do you know of any indication of what years it will apply to? Will they include 2023?


Hobby is correct, the intent at least is that it would be retroactive.

The big question is when will this pass, hopefully Daniel or one of our tax guys will weigh in, but I assume most folks who purchased in 2023 will have to file at 80% and then amend that return once the law passes.

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 07:45 
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I’m a republican and prefer low taxes, but as an airplane owner this sucks. The minute after this bill was originally passed in 2017, every high performance aircraft doubled in price. For those on a W2, there is zero benefit, but yes for business owners it’s a boon. In the end, I don’t thinks it’s healthy for price discovery in the aircraft market. So for those W2 earners who are looking to upgrade, I would get comfortable in what you have or start a business.


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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 10:32 
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Username Protected wrote:
For those on a W2, there is zero benefit

Who do you think designs, builds, maintains, and services these airplanes? Bonus depreciation was all about stimulating the sales of airplanes and expanding the market, which created jobs. And it did just that.

I personally think depreciation is government theft, particularly in high inflationary times. You buy an asset but then can't offset your profits by only a fraction of it per year. Meanwhile the future dollars you get back are worth less than those today.

For a 7 year property like an airplane, it has a noticeable effect. For 39 year real estate, it is a huge factor, you end up paying taxes on today money and getting only a fraction of the present value back over time, something like 30%, so you paid taxes on 70% of the value of the property for profit you didn't make.

IMO, all business property should be 100% expensed in the year you buy it. That's when it cost you money, so get the tax benefit then.

Either that, or the depreciation needs to have inflation escalators.

Mike C.

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 12:33 
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One of the articles that Chip linked to is from June 2023.
So, is this still in the works? or is it something that is still working its way through the swamp still?

Any estimate as to when it could be passed?


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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 12:40 
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Username Protected wrote:
...The minute after this bill was originally passed in 2017, every high performance aircraft doubled in price...


That's not exactly what I recall, granted I pay a lot more attention to the turbine market than I do the piston market, I did briefly consider buying a 182 in June of 2020... and it is true that they have doubled since then. However, I do not recall any real increases in 2017 -2019

I do agree that Bonus Depreciation has driven prices up, but it is just one factor, not the factor. (and it happened after Uncle gave us all our own money) I suspect that since airplanes are a very tangible asset, with a very active trading market (think gold) they have responded to inflation more than say real estate. In other words; it isn't just that aircraft demand has gone up so prices followed and it's not just that people pay too much in December desperate for a tax break... they do. But, it is also that it takes more of our new built-back-better dollars to purchase the same asset because each dollar is worth less than it was in 2020.

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Last edited on 19 Jan 2024, 14:58, edited 2 times in total.

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 12:43 
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Username Protected wrote:
For a 7 year property like an airplane, it has a noticeable effect. For 39 year real estate, it is a huge factor, you end up paying taxes on today money and getting only a fraction of the present value back over time, something like 30%, so you paid taxes on 70% of the value of the property for profit you didn't make.

IMO, all business property should be 100% expensed in the year you buy it. That's when it cost you money, so get the tax benefit then..


Not to mention there is an expense associated with tracking depreciation, the affect of recapture, the complexity of 1031 exchanges etc etc. It's almost like there is a lobby of lawyers and accountants that want to perpetuate all this needless complexity... oh wait.

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 12:57 
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Username Protected wrote:
I’m a republican and prefer low taxes, but as an airplane owner this sucks. The minute after this bill was originally passed in 2017, every high performance aircraft doubled in price. For those on a W2, there is zero benefit, but yes for business owners it’s a boon. In the end, I don’t thinks it’s healthy for price discovery in the aircraft market. So for those W2 earners who are looking to upgrade, I would get comfortable in what you have or start a business.


Here’s a graph of turboprop values, I chose the 1978 MU2, but it’s value has stayed flat according to the book, I suspect reality is that if you could find one to buy, it would be twice what the book says, there just hasn’t been many trading because it is a settled market, meaning the people who have them don’t want to sell!

But, look at the turboprop index, values stayed flat after Bonus Depreciation passed, even declined slightly. Then Cobid and the stimulated printing press.


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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 12:58 
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Username Protected wrote:
One of the articles that Chip linked to is from June 2023.
So, is this still in the works? or is it something that is still working its way through the swamp still?

Any estimate as to when it could be passed?


It's being tied to a bill to increase the child tax credit, likely to make it more palatable to the average person so I'd assume it has a good chance of passing. NPR was discussing the merits of the child tax credit portion this morning.


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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 13:00 
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For perspective here’s the sane data going back to 2000


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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 14:00 
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Username Protected wrote:
One of the articles that Chip linked to is from June 2023.
So, is this still in the works? or is it something that is still working its way through the swamp still?

Any estimate as to when it could be passed?


The first article goes back to when it was just a "maybe" and the second went into the "agreement" part, so what was recently announced is that there is agreement and they are moving forward. I'm confident that Tuesday's announcement means that it is going to happen as it would be politically disadvantageous to both parties to dangle it and not provide it.

Here's an article that doesn't have a paywall https://www.usatoday.com/story/money/ta ... 242035007/

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 14:48 
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Username Protected wrote:

Not to mention there is an expense associated with tracking depreciation, the affect of recapture, the complexity of 1031 exchanges etc etc. It's almost like there is a lobby of lawyers and accountants that want to perpetuate all this needless complexity... oh wait.


Gee, but you can depreciate a racehorse in three years.

Hmmm.

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 Post subject: Re: 100% Bonus Depreciation
PostPosted: 19 Jan 2024, 23:30 
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Chip: I only bought the MU2 because it’s seemingly insulated from all this. Yes, the price rose with inflation, but not on tax policy or bonus depreciation. Curious what a phenom 100 price looks like from 2017 on? You have that chart at your fingertips?


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