Business use necessary to avoid immediate depreciation recapture
April 19, 2020
If you have taken advantage of accelerataed tax depreciation in the past, it is critical that you continue to monitor your business use percentage, especially in this current economic and public health environment. For a taxpayer who has utilized bonus depreciation, Section 179 Expensing, or MACRS depreciation method, the tax code requires at least 50% business use in every tax year during the depreciable life of the aircraft.
For example, you utilized 100% bonus depreciation in 2018 when you acquired your aircraft. If your business use drops below 50% this year, you will trigger the recapture of the bonus depreciation taken in 2018, and you are required to recompute depreciation on a straight line method. Excess depreciation taken in 2018 (compared to straight line depreciation amount), will be reported as taxable income this year.