Photo: Just Plane History
The tax break on corporate jets that President Obama mentioned six times in his speech on reducing the deficit (and raising the debt ceiling) yesterday amounts to very little for the amount of attention he gave it.You’d think it’d save the country billions. In reality, a Democratic aide estimates that all it saves is about $3 billion over 10 years, and the corporate aviation tax expert we spoke to says he doubts it would even save the country that much.
We asked Kent Jackson of Jackson & Wade, a jet law firm, to tell us what the tax break is all about.
“It’s just about extending the depreciation schedule — the time period over which corporations can write off the purchase of a corporate jet — from 5 years to 7 years.”
“If you buy an expensive item for your company, a large piece of equipment like a copy machine or a building, for example, the IRS has a depreciation schedule so that you can write it off as a business expense, but not all at the same time.”
For buildings, he says, the timeline to write off the expense is around 19 years. For planes, it’s currently 5 years. If Obama gets rid of the tax break, it would extend that to 7 years. Not a big change! Especially because corporations don’t usually own that many jets — a huge fleet would be 3, says Jackson — and they cost around $60 million at the high end, which is very little to company’s bottom lines.
On top of this, if the company charters its plane out while it’s not in use, they company already has to write the expense off over 7 years instead of 5. Many companies do this, says Jackson, for the obvious cost benefits.
In other words, it looks like President Obama might have exaggerated the how much good this tax break for hedge fund managers, millionaires, and billionaires will do to reduce the deficit.