The math is not the motivation, if you have a big year and you’re about to write the IRS a check for $1 Million Dollars, not doing so is the motivation!

I've had similar results this month. I checked in on 10 Mustangs that would meet my specs. 1 of them was just going under contract (it was very well priced, new paint, up to date, and single owner since new). 1 other has since been withdrawn. Of the remaining 8, I get contacted by several of the brokers on a semi-weekly basis. My gut says there's more downside to pricing coming in the weeks and months ahead. I know that several of the one's I'm tracking are listed because the current owner is moving up to something bigger. I've owned 2 Bonanzas, and didn't find it twice as good as owning 1. My imagination suggests owning 2 Citations is even less fun.

Meaning no benefit at all for the time value of money? That must have been taught in the econ or management class I missed.

5% seems woefully underestimated.

If you can offset 100% of the cost versus profit this year versus 1/7th of that each year for 7 years, in this time of moderate inflation and good investment return, the impact is FAR more than 5%.

If you put the saved money in an SP500 fund, you are WAY WAY ahead of 5% benefit.

I'd put the benefit at 25%, perhaps more. As inflation increases and investments do better, the value increases significantly.

If bonus depreciation goes into effect, the buyers will get a 25% benefit, but the aircraft prices won't go up 25%, so the buyers win if it passes. Uncertainty slows sales, it always does.

Mike C.

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5% seems woefully underestimated.

If you can offset 100% of the cost versus profit this year versus 1/7th of that each year for 7 years, in this time of moderate inflation and good investment return, the impact is FAR more than 5%.

If you put the saved money in an SP500 fund, you are WAY WAY ahead of 5% benefit.

I'd put the benefit at 25%, perhaps more. As inflation increases and investments do better, the value increases significantly.

If bonus depreciation goes into effect, the buyers will get a 25% benefit, but the aircraft prices won't go up 25%, so the buyers win if it passes. Uncertainty slows sales, it always does.

Mike C.

Meaning no benefit at all for the time value of money? That must have been taught in the econ or management class I missed.

When did aircraft depreciation get limited to 7 years straight line? Last I knew business aircraft are depreciated under a 5 year MACRS schedule. That will significantly impact your made up math.

Some of the people I know taking advantage of bonus depreciation to buy aircraft aren't on a 5-year steady line of income or tax liability. Most often they've had a "liquidation event" meaning they've sold a business or asset that is going to result in abnormally high income in a single year. They need the write off this year, not over the next 5. Once that money is paid in taxes it's gone.

You can pencil out the math and say maybe it's only a 5% difference overall because they'll pay the tax anyways over 5 years, but that's not how this type of business person operates. They'll double, triple, or 10x the money saved in taxes over that 5 year period by investing and business activity. It's usually how they got to the point of needing the bonus depreciation in the first place.

Every answer I’ve seen here makes an assumption about the buyer’s finances that is common, but not always true. If the assumption is not correct it radically changes the equation.

As I said, it affects everyone differently.

Bonus points for the first person to figure out the assumption.

That they have the cash to start with.
You come out ahead if you have the cash to invest vs giving it to uncle sam, but if you don't have it to start with your investment return is zero so it's a different math problem.

Usually there are look back and carry forwards. There may be some unusual circumstances but I don't think enough to move aircraft prices.

That they have the cash to start with.
You come out ahead if you have the cash to invest vs giving it to uncle sam, but if you don't have it to start with your investment return is zero so it's a different math problem.

If they didn't have taxable income, why would they do Bonus Depreciation?

One factor that is missing is justification. "I want the jet"... claiming Bonus Depreciation gives me a reason!

in 2021 I had a really good year in the oil business, it was an unusually high income year for me, so I bought a company vehicle to offset the tax hit. Worked well.

In 2023 I "needed" another company vehicle, so I did it again. My CPA argued for straight line, but in my head I justified the expenditure. I would rather put $30k down on a vehicle than send that $30k to the IRS.

Add a couple of zeroes and airplane buyers make the same decisions for the same reasons.

CPA's understand math, just not always motivation.

Multiple possible reasons, but if you are expecting significant profits in years 2-4 there may still be some benefit over 5 year MACRS.

While non-rational motivation can be a factor, I don't think we saw that impact the plane market when the last bill passed in 2017. If anything, the boost to buying came before expiration. I think most people will see this year's tax bill as "I have 4 years to buy xxx" not I need to buy it right now. If there is a change in aircraft prices from bonus depreciation, it is going to be small.

Now if there was bonus depreciation this year coupled with tax rates dropping significantly next year, that would be a real motivation to buyers. It ain't happening.

Multiple possible reasons, but if you are expecting significant profits in years 2-4 there may still be some benefit over 5 year MACRS.

While non-rational motivation can be a factor, I don't think we saw that impact the plane market when the last bill passed in 2017. If anything, the boost to buying came before expiration. I think most people will see this year's tax bill as "I have 4 years to buy xxx" not I need to buy it right now. If there is a change in aircraft prices from bonus depreciation, it is going to be small.

Now if there was bonus depreciation this year coupled with tax rates dropping significantly next year, that would be a real motivation to buyers. It ain't happening.