Aircraft Depreciation Schedule: MACRS, Bonus, and Cost Segregation

What is the MACRS recovery period for a business aircraft?

A business aircraft operated under FAR Part 91 falls in the 5-year MACRS class; an aircraft used in commercial transportation under Part 135 falls in the 7-year class. Both use the 200% declining balance method switching to straight-line, with the half-year convention by default and a mid-quarter convention triggered if more than 40% of the year's asset additions land in Q4. The classification turns on predominant use, not legal title. An aircraft owned by an LLC but flown overwhelmingly on the owner's Part 91 business missions is a 5-year asset under Rev. Proc. 87-56 asset class 00.21. The same airframe placed on a Part 135 certificate and flown primarily for paying charter customers shifts to class 00.22 and the 7-year schedule.

The mechanical schedule for 5-year MACRS, half-year convention, runs 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, 5.76%. For 7-year property the percentages are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, 8.92%, 8.93%, 4.46%. Those are the base figures before any §168(k) bonus layer.

How does §168(k) bonus depreciation apply to aircraft in 2024 and 2025?

Bonus depreciation under §168(k) is in active phaseout: 60% in 2024, 40% in 2025, 20% in 2026, and zero in 2027 unless Congress extends it. The taxpayer takes the bonus percentage of basis in year one, then applies the normal MACRS table to the remaining basis over the recovery period. For a $20 million aircraft placed in service in 2024 and qualifying for 60% bonus, the year-one write-off is $12 million of bonus plus 20% of the remaining $8 million ($1.6 million MACRS), for a $13.6 million first-year deduction before any cost segregation.

Used aircraft qualify for bonus depreciation post-TCJA, but only on the first acquisition by the taxpayer — §168(k)(2)(E)(ii) requires that the property not have been previously used by the taxpayer or acquired from a related party. The "binding contract" rule under §168(k)(2)(E)(i) matters when production or delivery straddles a phaseout year: the bonus percentage is generally locked at the rate in effect when the binding written contract was signed, not delivery. For long-lead aircraft like a new Global 7500 or G700 ordered in 2022 and delivered in 2025, this distinction can move millions.

Certain aircraft qualify for the §168(k)(2)(B) longer production period extension, pushing the phaseout schedule out by one year for transportation property with a production period exceeding one year and a cost exceeding $1 million. Most business jets meet the threshold.

Does the qualified business use test under §280F still apply?

Yes. §280F(b) requires more than 50% qualified business use to claim MACRS at all — fail the test and the aircraft drops to the alternative depreciation system (ADS) straight-line over 6 years (Part 91) or 12 years (Part 135), and bonus depreciation is denied entirely. Worse, a drop below 50% in a later year triggers recapture of prior bonus and accelerated MACRS as ordinary income.

Qualified business use excludes personal entertainment flights and most flights for 5% owners and related parties — those count against you under the §280F(d)(6)(C) anti-abuse rules. Charter flights operated for a related party at fair market value can count as qualified business use, but the documentation has to be airtight: contemporaneous flight logs, passenger manifests with business purpose for each leg, and a defensible time-and-occupied-seat allocation method per Treas. Reg. §1.274-10.

How does cost segregation accelerate aircraft depreciation?

A cost segregation study disaggregates the airframe purchase price into components with shorter recovery periods or that qualify for §179 expensing. On a $30 million large-cabin jet, a typical study might carve out $2-4 million of interior furnishings, certain cabin electronics, entertainment systems, and removable equipment as 5-year property even when the airframe sits in the 7-year Part 135 class. Engines remain part of the airframe basis; you cannot break them out as a separate shorter-lived asset under current IRS positions.

The economic value depends on whether bonus depreciation is still available. With 60% bonus in 2024, cost segregation on a Part 91 aircraft already in the 5-year class adds modest value — most of the basis is already being written off fast. On a Part 135 aircraft in the 7-year class, the spread between 7-year and 5-year MACRS, combined with bonus on the reclassified components, can be meaningful. Once bonus hits zero in 2027, cost segregation regains real importance as the primary acceleration lever.

The IRS Cost Segregation Audit Techniques Guide explicitly addresses aircraft, and examiners look for engineering-based studies rather than rule-of-thumb allocations. A study prepared by a firm without aviation-specific engineering credentials is an audit flag.

What about §179 expensing for aircraft?

§179 is rarely the right tool for a business jet. The 2024 expensing cap is $1.16 million with a $2.89 million investment phaseout — any aircraft purchase blows through the phaseout immediately and reduces the §179 deduction to zero. §179 can apply to smaller pistons or used turboprops bought by a small operator whose total annual capex stays under the phaseout, but for a Citation, Phenom, or anything larger, §168(k) bonus is the operative provision.

How do passive activity and at-risk rules interact?

§469 passive activity loss rules will trap aircraft depreciation in many ownership structures. An owner who places the aircraft in a leasing LLC that dry-leases to an operating company generates passive losses under §469(c)(2), and those losses can only offset passive income — not the owner's W-2 or active business income. Material participation in the leasing activity under the §469(h) tests, or grouping elections under Treas. Reg. §1.469-4 to combine the leasing entity with an active trade or business, are the standard workarounds. Get the grouping election filed in the first year; retroactive grouping is administratively difficult.

The §465 at-risk rules cap deductions at the taxpayer's economic exposure. Nonrecourse aircraft financing is not at-risk, so a highly leveraged purchase can have substantial deductions suspended even when MACRS and bonus math look attractive on paper. Qualified nonrecourse financing from a commercial lender against the aircraft itself generally is treated as at-risk under §465(b)(6) analogues applied by practice, but the analysis is fact-specific and worth running before closing.

What documentation does the IRS expect on audit?

Contemporaneous flight logs identifying every leg by date, route, passengers, and business purpose; a written aircraft use policy; board minutes or written consents authorizing the purchase and use; the §280F qualified business use computation worksheet for each year; and a SIFL or fair-market-value imputed income calculation for any personal entertainment use under §274(e)(2) and the Treas. Reg. §1.274-10 disallowance rules. Aircraft are a perennial IRS exam priority. Treat the documentation file as if examination is certain — because for high-basis aircraft taking large first-year deductions, it nearly is.