On July 4, 2025, President Donald Trump signed into law comprehensive tax-and-spending legislation that the White House dubbed the “One Big Beautiful Bill.” Among the included policies was reinstating 100% bonus depreciation for qualified business aircraft acquisitions retroactive to Jan. 20, 2025. The 100% bonus depreciation provision allows businesses to purchase capital equipment, including aircraft, and claim 100% of the depreciation in the first year versus spreading it over several years.
Before this legislation passed, bonus depreciation was phased down to 40% in 2025 and was scheduled to be completely phased out by 2027. Under the new act, 100% bonus depreciation is made permanent – remaining available in future years with no scheduled phase-down – though it remains subject to future legislative changes.
The business aviation industry is surging, with demand for pre-owned aircraft far outpacing available supply and most 2025 production slots for new aircraft are long sold out. For those who need an aircraft in 2025 for operational or tax reasons, the pre-owned market may be the only viable option.
While bonus depreciation is a powerful tool, it requires careful navigation of multiple sections of the tax code. One section determines if a taxpayer qualifies for bonus depreciation, and another section determines how much is deductible and the documentation required.
It is important for tax-motivated aircraft buyers making a mad dash to the finish line to understand how an aircraft is considered placed in service to fulfill the income tax requirements under the Internal Revenue Code.
What does placed in service mean?
IRS regulations define placed in service as the date when property is “first placed in a condition or state of readiness and availability for a specifically assigned function” [Regs. Sec. 1.167(a)-11(e)(1)(i)].
Signing a purchase agreement, putting down a deposit or even prepaying for the entire aircraft is not sufficient to place the aircraft in service. The taxpayer must hold legal title of the aircraft, and the aircraft must be ready and available for its intended business use.
Flying a business flight is one clear way to demonstrate that an aircraft has been placed in service. However, it is not an absolute requirement. The key consideration is whether the plane is available and ready for its assigned function. For instance, if the aircraft is sitting in the hangar, crewed and fully prepared for a business trip, but bad weather prevents departure, it can still be argued that the plane has been placed in service.
That said, it would be wise to schedule and complete at least one bona fide business flight before year-end to clearly establish that the aircraft is being used for its intended purpose.
What about green aircraft?
A green aircraft – delivered with an airworthiness certificate but lacking a completed interior or paint – poses a unique challenge. While it can technically fly, it is not in a condition suitable for its assigned function of transporting passengers for business trips. As such, a green aircraft would not meet the placed in service requirement for depreciation.
The race to close in 2025
Successfully closing on a business aircraft involves more than simply finding one that fits your mission and budget. The next steps typically include securing financing and engaging a reputable maintenance facility to conduct a prepurchase inspection. Just as critical is assembling a team to manage the acquisition and implement an ownership structure that satisfies tax and Federal Aviation Administration requirements.
With the deadline of Dec. 31, 2025, approaching, buyers aiming to capture 100% bonus depreciation must act quickly and assemble an experienced team to manage the acquisition.
Bottom line: If your goal is to place an aircraft in service in 2025 and maximize tax benefits, the clock is ticking.
Daniel Cheung, CPA, is the principal of Aviation Tax Consultants. Daniel is a board member of Angel Flight West (angelflightwest.org) and he encourages readers to identify a charity that aligns with one’s values and enjoy some very satisfying flying!