Business Aircraft Depreciation in 2026: How 100% Bonus Depreciation Works for Jet Buyers
- 100% bonus depreciation for aircraft placed in service in 2026
- Made permanent by the One Big Beautiful Bill Act (OBBBA)
- Applies to both new and pre-owned aircraft
- Deduction based on the full purchase price, financed or cash
- Placed in service by December 31, 2026, with more than 50% business use
How Business Aircraft Depreciation Works in 2026
Business aircraft acquired and placed in service in 2026 qualify for 100% bonus depreciation under current federal tax law. You can deduct the full cost of the aircraft in the year it is placed in service instead of spreading the deduction across five or seven years. The rule applies to both new and pre-owned aircraft.
The 2026 rule is permanent. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, and removed the phase-down schedule from the 2017 tax law. Under that old schedule, a 2026 aircraft purchase would have qualified for only 20% bonus depreciation. Today, the full 100% applies, with no scheduled sunset.
The standard method most businesses otherwise use is MACRS (Modified Accelerated Cost Recovery System). Under MACRS, business aircraft fall into a five-year or seven-year recovery period depending on how they are operated. Part 91 aircraft, used for business transportation without compensation, follow the five-year schedule. Part 135 aircraft, operated commercially under FAA charter authority, use a seven-year recovery period. The deduction is spread across those years using the double declining balance method, which front-loads the write-off but still makes you wait years to recover the full tax benefit.
Bonus depreciation replaces that multi-year schedule with immediate expensing. Instead of deducting 20% in year one and spreading the remaining 80% across the next several years, you write off the entire purchase price when the aircraft is placed in service. The tax benefit becomes a single-year decision instead of a multi-year cash flow consideration, which changes how buyers evaluate the net cost of an acquisition.
Business use must exceed 50% in the year you place the aircraft in service, and every year after. If business use falls to 50% or below in a later year, depreciation recapture applies: the IRS recharacterizes part of the prior deduction, and you include the excess in taxable income for the year the shortfall occurred. Business use is typically measured by flight hours, so confirm the measurement method and recordkeeping requirements with your tax advisor. Logbook entries, trip logs, and contemporaneous records establish your business use percentage if the IRS asks.
Bonus depreciation is calculated on the full purchase price of the aircraft, no matter how you pay for it. A buyer who pays cash and a buyer who finances 80% of the purchase receive the same deduction. That makes the tax benefit independent of your capital structure, and it is why a financed aircraft purchase can produce first-year tax savings larger than the cash required at closing.
Standard Aircraft Depreciation Life Under MACRS
When you finance an aircraft, the standard MACRS schedule creates a timing problem. Your loan payments start right away, but the tax relief arrives in slices spread across five or seven years. Principal, interest, insurance, and hangar costs all begin the month you close, while the deduction that offsets them comes in fractions: weighted toward the early years, but still spread across the full recovery period.
| Operation | How it's used | MACRS recovery period |
|---|---|---|
| Part 91 | Business transportation without compensation | 5 years |
| Part 135 | Commercial operation under an FAA charter certificate | 7 years |
Business aircraft fall into a five-year recovery period under Part 91 operations, or seven years if the aircraft operates under a Part 135 charter certificate. MACRS front-loads deductions with the double declining balance method, so year one delivers more relief than year four. Even so, the schedule was designed for assets that lose value steadily, not for assets you are paying down on a loan term that may be shorter than the depreciation window. It matches deductions to an asset's declining value. It does not match them to a monthly loan payment.
The gap shows up most clearly in years two through four of a typical loan. Your payment stays the same, but the annual MACRS deduction has tapered, so the tax benefit no longer keeps pace with the cash you are spending. If your loan term is six years and your depreciation schedule is five, the final year of payments has no matching deduction at all, because most of the basis has already been claimed.
Bonus depreciation removes this problem. MACRS still exists and still governs assets that do not qualify for full expensing, but for aircraft acquired and placed in service in 2026, the five-year or seven-year table is the fallback, not the starting point. When a financed aircraft qualifies for 100% bonus depreciation, the full deduction is available in year one, lining up the tax relief with the financing commitment you just made, while loan payments spread across a term you choose based on cash flow and balance sheet strategy.
How 100% Bonus Depreciation Replaces the Multi-Year Schedule in 2026
The standard MACRS schedule spreads your deduction across five or seven years. Bonus depreciation eliminates the wait. Under current federal tax law, qualifying business aircraft acquired and placed in service after January 19, 2025, including every qualifying aircraft placed in service in 2026, are eligible for 100% bonus depreciation. You deduct the full purchase price in the year the aircraft enters service.
Acquisition date and placed-in-service date are two separate tests. The aircraft must be acquired after January 19, 2025, and placed in service by the end of the tax year you want to claim it in. Aircraft bought under a binding contract signed before January 20, 2025 generally fall under the old phase-down rates. However, IRS Notice 2026-11, issued in January 2026, clarifies that some aircraft delivered on or after January 20, 2025 may still qualify for 100% bonus depreciation even if the purchase agreement was signed earlier. If your purchase involves an older contract, have your tax advisor review it against that guidance.
You are not required to use bonus depreciation. You can elect out for a class of property and use the standard multi-year schedule if spreading deductions across several years fits your tax situation better. Few aircraft buyers make that election, since most prefer the immediate deduction, but your CPA can model both approaches.
When you claim 100% bonus depreciation, the aircraft's cost basis is fully expensed in year one. There are no remaining deductions in years two through five. That creates a very different cash flow profile from the standard schedule, especially when you finance the purchase, because the full tax benefit arrives at once while loan payments continue over the term.
Bonus depreciation applies to new and pre-owned aircraft alike. A factory-new aircraft delivered in 2026 and a pre-owned aircraft purchased the same year receive the same treatment, provided both meet the business use requirements and are placed in service by December 31, 2026. Because the provision is permanent, 2027, 2028, and later years operate under the same rules. Tax law can still change, so verify current provisions with your tax advisor before finalizing any purchase. Stepping up from your current plane? An aircraft upgrade loan follows the same placed-in-service rules.
The placed-in-service deadline for a 2026 deduction is December 31, 2026. If you take delivery on January 2, 2027, the deduction moves to your 2027 return. That is why buyers aiming for a year-end closing typically start the financing process in October or early November, leaving enough time for underwriting, title work, and a pre-purchase inspection without pushing the transaction into January.
Bonus Depreciation and Financing: Why the Deduction Uses the Full Purchase Price
When you finance a business aircraft, your lender funds the purchase and you take title. From that point, the IRS treats the entire purchase price as a depreciable asset placed in service, regardless of how you structured the payment. The deduction is based on the aircraft's acquisition cost, not the cash you put down at closing.
The full cost is the depreciable basis
That distinction changes the economics of a financed purchase. Your first-year deduction equals the full purchase price. The down payment and the financed balance both count toward the depreciable basis, because you own an asset with that total value and you have taken on responsibility for the debt.
The tax code does not ask what percentage you paid in cash. It asks what the aircraft cost and whether it qualifies. If both answers meet the requirements under current federal tax law, the deduction applies to the full amount.
The leverage effect
This creates a leverage effect that many buyers underestimate. A buyer who finances most of an acquisition still writes off the full purchase price in year one and receives the same federal tax benefit as a cash buyer, while putting up only a fraction of the capital. The down payment is typically a small percentage of the total cost, but the tax savings are calculated on the entire figure.
The financed portion does not reduce your deduction because you are responsible for repaying it. The loan is your obligation, secured by the aircraft, and the full cost of the asset is what you paid up front plus what you owe. Depreciation follows the asset's cost basis, and that basis includes financed amounts.
Example: Cash Flow Impact of a Financed Aircraft Purchase in 2026
The following example uses hypothetical figures to show how financing and bonus depreciation interact. The numbers are for illustration only and do not reflect actual pricing, rates, or tax outcomes for any specific transaction.
Suppose a business buys a jet for $2 million in 2026, finances 80% of the price, and pays a 37% marginal federal tax rate. The down payment at closing is $400,000. The financed amount is $1.6 million, repaid over 10 years at 7% interest, which works out to annual loan payments of about $223,000.
Under 100% bonus depreciation, the year-one federal deduction is $2 million: the full purchase price, not the equity contributed. At a 37% rate, that produces $740,000 in federal tax savings.
Here is the financed buyer's year-one cash position:
- Down payment paid$400,000
- Loan payments made in year one$223,000
- Federal tax savings$740,000
- Net cash position after all threeabout +$117,000
Now compare a cash purchase of the same aircraft
- Purchase price paid$2,000,000
- Federal tax savings$740,000
- Net cash outlay in year one$1,260,000
The buyer put $400,000 down, made $223,000 in loan payments, and received $740,000 in tax benefit. After all cash movements, the buyer is about $117,000 ahead in year one while holding title to the aircraft.
Now compare a cash purchase of the same aircraft. The buyer writes a $2 million check, receives the same $2 million deduction, and recovers $740,000 in tax savings. The net cash outlay in year one is $1.26 million.
Both buyers own the same aircraft with the same year-one tax benefit. The difference is liquidity. The cash buyer ends year one $1.26 million out of pocket, while the financed buyer ends about $117,000 ahead, a gap of roughly $1.38 million. That capital stays available for operations, payroll, inventory, or other investments that earn their own return.
Loan payments are spread across the term, and the interest portion remains deductible as a business expense. The depreciation deduction is taken immediately and in full, no matter how much principal has been repaid.
This is why financing and bonus depreciation work well together. The tax law bases the deduction on the asset's cost, not the buyer's equity in it, so a financed acquisition generates the same write-off as a cash purchase while requiring a fraction of the capital up front, and in many scenarios it produces a positive cash position in the first year. Already own an aircraft? See whether an aircraft refinance loan could improve your cash flow.
Section 179 for Aircraft vs. Bonus Depreciation in 2026
Section 179 expensing and bonus depreciation both allow accelerated write-offs in the year an aircraft is placed in service, but they follow different rules and suit different buyers.
| 2026 factor | Section 179 | 100% Bonus Depreciation |
|---|---|---|
| Deduction limit | $2,560,000 | No dollar cap |
| Phase-out | Begins at $4,090,000 of qualifying equipment; eliminated at $6,650,000 | No phase-out |
| Taxable income limit | Cannot exceed taxable business income | No taxable income limit |
| Can create a loss | No | Yes, for pass-through entities with sufficient basis and material participation |
| Can be combined | Yes, your tax advisor can model the right combination | |
For tax years beginning in 2026, the Section 179 deduction limit is $2,560,000. The deduction begins to phase out dollar for dollar once total qualifying equipment placed in service during the year exceeds $4,090,000, and it is eliminated entirely at $6,650,000. Section 179 also cannot exceed your taxable business income for the year. If your business does not generate enough taxable income, Section 179 provides limited benefit no matter what the aircraft costs, and larger acquisitions can phase out of eligibility altogether.
Bonus depreciation has no dollar cap, no phase-out, and no taxable income limit. A financed aircraft purchase qualifies for the full deduction in year one regardless of the purchase price, your total equipment spending for the year, or whether your business shows taxable income. For pass-through entities with sufficient basis and material participation, bonus depreciation can create or increase a loss that offsets other income. That difference matters most to buyers financing aircraft that cost more than the $2.56 million Section 179 limit, and to capital-intensive businesses whose annual equipment purchases regularly pass the $4.09 million phase-out threshold.
The two provisions can be combined. A buyer who acquires several pieces of qualifying property in 2026 might apply Section 179 to smaller items and use bonus depreciation for the aircraft, or apply Section 179 first against active income and layer bonus depreciation on top. Your tax advisor can model the right combination based on your entity structure, marginal rate, and total qualifying purchases for the year.
Qualification Requirements for the Aircraft Tax Write-Off
Meeting these four requirements determines whether your aircraft qualifies for the deduction in the year you close.
More than 50% business use, measured by flight hours
The aircraft must be used for qualified business purposes more than 50% of the time, measured by flight hours in the tax year. Personal flights, entertainment flights for non-employee guests, and trips that fail the business necessity test all count against that threshold. Hours logged for genuine business operations, such as client meetings, site visits, oversight of multiple locations, and employee transport between company facilities, count toward qualification. The business total for the year must exceed half of the aircraft's total flight time.
The December 31 deadline is firm
For a 2026 deduction, the aircraft must be placed in service by December 31, 2026. Placed in service means the aircraft is available and ready for its specific business use, which generally happens at delivery, once you take possession, the FAA registration is complete, and the aircraft is airworthy. A purchase agreement signed in November with delivery in January does not count toward the 2026 return. The date you close and receive the aircraft determines the tax year.
Documentation starts before the purchase
Keep a flight log that records each trip's business purpose, departure and destination airports, flight time, and passengers. Generic entries such as "business travel" will not hold up in an audit. Each entry should connect the flight to a specific business activity, for example, "meeting with Dallas branch manager to review Q4 performance" or "site inspection for Tulsa property acquisition." Many buyers set up the logging system before delivery and train pilots and scheduling staff on the standard from day one, because rebuilding six months of flight records after the fact rarely produces audit-ready evidence.
Pre-qualification matters for year-end closings
Buyers financing an aircraft in the fourth quarter of 2026 should have their tax advisor review the intended business use and confirm the aircraft will meet the thresholds before closing. That avoids completing a December transaction expecting a full deduction, only to learn afterward that the use case does not qualify or that the entity structure creates passive activity limits on the usable deduction. Starting the financing process early leaves time for that review and for fixing any issues before the placed-in-service deadline.
Depreciation Recapture and State Tax Treatment
Recapture on sale
When you sell a business aircraft after claiming bonus depreciation, recapture rules may apply. Talk with your tax advisor about how gain on the sale will be characterized and how much of the previously claimed deduction may be taxed at ordinary income rates rather than capital gains rates.
Changes in business use
If business use falls to 50% or below in any year after you claim the deduction, recapture also applies. Ask your tax advisor about the specific requirements and how changes in business use affect prior deductions. This is why AGL requires tax pre-qualification before approving year-end closings: we confirm that your CPA has reviewed the business-use structure and that the aircraft is expected to meet the requirements going forward, not just in year one.
State tax treatment varies
Some states do not conform to federal bonus depreciation, so check your state's rules with your tax advisor before assuming the deduction carries over to your state return. For a financed aircraft purchase through AGL, that can mean taking the full federal deduction in 2026 while spreading the state benefit across several years, a timing difference you will need to track annually.
Why Getting Pre-Approved Early Matters for a 2026 Deduction
The placed-in-service deadline for a 2026 bonus depreciation deduction is December 31, 2026. That is not the contract date or the deposit date. It is the day you take delivery and register the aircraft. A purchase that closes on January 2, 2027 delivers no deduction on your 2026 return, no matter when negotiations began or how much you spent on due diligence.
Closing delays push more year-end aircraft transactions into January than any other single factor. Title issues come up in the final search. Liens turn out to be older or more complicated than the seller disclosed. Escrow instructions go through several rounds of revision because the buyer's and seller's attorneys disagree on indemnity language. None of these delays is unusual, and any one of them can stretch a closing timeline that looked clean in October.
Pre-approval with AGL aircraft financing takes financing off the table as a variable. When underwriting is done before you have an aircraft under contract, the lender's side of the closing moves quickly, because the credit decision, documentation, and funding commitment are already in place. That removes one of the three factors that decide whether a December transaction closes in December or slips into January. The other two are title work and the seller's ability to perform.
Most year-end closings that miss the deadline do so because the buyer waited to apply for financing until after signing the purchase agreement. At that point, underwriting, appraisal, and document collection run alongside title work and the pre-buy inspection, and a delay in any one of them stalls the rest. Pre-approval reverses that order. Financing is finished while you are still evaluating aircraft, so once you find the right one, the purchase can move as fast as the title allows.
Starting early avoids that crunch. A pre-approval can be applied to a different aircraft without restarting underwriting, as long as the new aircraft meets the same underwriting criteria. If your first deal falls through late in the year, you can move to another listing without going back to the beginning of the financing process.
1. Financing — removed by pre-approval
2. Title work
3. The seller's ability to perform
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Frequently Asked Questions
Yes. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for qualifying property, including business aircraft, acquired and placed in service after January 19, 2025. An aircraft acquired and placed in service by December 31, 2026, with more than 50% qualified business use, can be fully expensed on your 2026 federal return. There is no scheduled phase-down under current law.
Yes. The 100% bonus depreciation provision applies to both new and pre-owned aircraft, as long as the aircraft meets the business use requirements, is acquired after January 19, 2025, and is placed in service during the tax year. A 2018 King Air 250 with documented maintenance history receives the same immediate expensing treatment as a factory-new aircraft delivered the same year.
Aircraft acquired under a binding contract signed before January 20, 2025 generally fall under the old phase-down rates rather than 100%. However, IRS Notice 2026-11 clarifies that some aircraft delivered on or after January 20, 2025 may still qualify for 100% bonus depreciation even when the agreement was signed earlier. Have your tax advisor review the contract terms and delivery timeline against that guidance.
Yes, but most buyers do not need to. Bonus depreciation has no dollar limit and no income cap, so it covers the full purchase price in year one. Section 179, capped at $2,560,000 for 2026 with a phase-out starting at $4,090,000, is usually reserved for other equipment purchases in the same year, or used when a buyer wants to limit the deduction to taxable income rather than create a loss. Your CPA can model which combination works best for your situation.
The IRS requires contemporaneous records showing the aircraft meets the more-than-50% business use threshold. That means flight logs with the date, departure and arrival airports, purpose of each flight, and passenger names for business trips. Corporate minutes or resolutions documenting the acquisition and its business purpose strengthen your position, as does a written use policy that restricts personal use. The documentation requirement continues every year the aircraft is in service.
The deduction is based on the full purchase price, not the cash you contribute at closing. When you finance an aircraft with a down payment, the year-one deduction under 100% bonus depreciation applies to the entire purchase price. The IRS treats the full cost as a depreciable asset placed in service when you take delivery, regardless of how the purchase was funded.
State treatment varies. Some states conform to federal bonus depreciation, others require add-backs that force depreciation over a standard schedule, and some fall in between. As a result, you may receive the full federal deduction in 2026 but spread the state benefit across several years, a timing difference you will need to track annually. Consult your tax advisor about the rules in each state where you file.
Start as early as possible. The aircraft must be placed in service by December 31, 2026, and closing delays can push a purchase into 2027 even when everything is under contract. Most buyers targeting a year-end closing begin financing in October or early November. Pre-approval with AGL sets your loan structure and documentation early, which removes financing as a variable once you find the right aircraft. Pre-approval terms generally remain valid for a reasonable period and can be applied to a different aircraft in the same category and price range without restarting underwriting.
Have more questions? Visit our aircraft financing FAQ page.
Get Pre-Approved Before the December 31, 2026 Deadline
Lock in your financing now so the right aircraft can close, and be placed in service, in time for your 2026 deduction. Review your business use structure with your tax advisor, then let AGL handle the lending side.
This page is for general information only and is not tax or legal advice. Tax outcomes depend on your specific facts. Consult a qualified tax advisor before making any purchase decision.