Our Guide to Business Jet Depreciation: What to Know When Selling Your Aircraft

Always talk to your trusted tax or accounting professional for financial advice.

Business jet depreciation is inevitable. Much like a car or a smartphone, value begins dropping immediately with first use and as technology continues to develop. When it comes time to resell your smartphone, car, or private jet - unless it’s a collector’s item - you cannot expect to turn a profit or even recoup your money. In this way, none of these are smart investments, but rather necessities - making depreciation a fact of life.

But small business jets and long-range business jets depreciate at different rates - and value greatly depends on a number of factors, including cycles, avionics, maintenance records, and overall condition.

Calculating Business Jet Depreciation

Depreciation claims on your business jet can be made using one of two recovery periods:

MARCRS or GAAP.

Modified accelerated cost recovery system (MARCRS) is the main system employed in the United States by the Internal Revenue Service (IRS) to calculate asset depreciation. Generally accepted accounting principles (GAAP), on the other hand, calculate the total cost of the private jet, how long it will last before replacement, and how much it could sell for at the end of its useful life. The Financial Accounting Standards Board requires public companies in the U.S. to follow GAAP during the compilation of financial statements.

Using either of these calculations, you can follow one of three methods: the straight-line method; sum of year’s digits method; or double-declining balance method. The straight-line method is the most common, while the double-declining balance method produces rapid depreciation at the beginning before tapering off. The sum of year’s digits method is the least aggressive depreciation calculation method. Your accounting professional can determine which is best for your business jet.

Which Business Jets Depreciate Most Quickly?

Three factors affect depreciation: age, hours, and features. Jet class should also be taken into consideration.

● Age: The older the aircraft, the more maintenance it requires, making the overall value lower than a newer business jet.

● Hours: The more hours or cycles an aircraft has, the less it is worth. Hours are equivalent to miles on the odometer for cars.

● Features: As technology advances, outdated equipment becomes obsolete, thus dropping the value of an aircraft.

Thus, an older aircraft with high hours and obsolete technology will have depreciated significantly and be valued at less than newer models - or even models of the same age with fewer cycles or hours. Two aircraft that are the same age Jet class depreciation averages also vary. For example, over the course of the first five years, small business jets depreciate by about 23 to 25 percent, while large or long-range business jets depreciate by 26 percent. This depreciation slows as years pass.

A Note on Current Depreciation Tax Claims

The Tax Cuts & Jobs Act of 2017 allowed private jet owners to enjoy 100% bonus depreciation on their assets. However, this ends for tax year 2022, and will be phased out by 20% each following year. For example, for the 2023 tax year, you can claim 80% bonus depreciation.

Although you can still claim some amount of depreciation on business assets, the percentage will be significantly less.

How to Avoid Depreciation

Depreciating assets will always depreciate, but you can avoid the bulk of rapid depreciation by purchasing used business jets for sale rather than brand-new from the manufacturer. 

You also can intentionally purchase business jets that depreciate more slowly than their counterparts. Jets that tend to depreciate at a slower rate than others (in the last five years of production) include:

● Gulfstream G650 (large business jet)

● Gulfstream G350 (large business jet)

● Hawker 4000 (large business jet)

● Pilatus PC-24 (mid-size jet)

● Cessna Citation III (small business jet)

Time to Sell Your Business Jet?

When it’s time to sell your jet, or if you’re ready to upgrade your private jet to a new model, work with an International Aircraft Dealers Association (IADA) Accredited Dealer.

These dealers have taken an oath to uphold the most ethical business practices while working only in their clients’ best interests and can demonstrate their excellence and expertise in the private aviation industry. They also are able to list business jets for sale on AircraftExchange.com, the exclusive listing site of IADA, so jet shoppers worldwide can see your listing. 

To find your nearest IADA Accredited Aircraft Dealer, visit AircraftExchange online.