Aircraft Tax Deductions in the Year You Buy: A Placed-in-Service and Financing Playbook

This playbook is for buyers who will use a piston aircraft in their business and want the first tax year to go right. Work through it in order: dates first, then the depreciation choice, then expenses, financing, state rules and loss limits.

General federal tax information as of September 2026, not tax or legal advice. Confirm each step with a CPA or aviation tax attorney for your situation.

Step 1: When is an aircraft acquired and placed in service?

Two dates govern the first year. The acquisition date decides whether 100% bonus depreciation applies at all. It is available for property acquired after January 19, 2025, and a purchase is generally treated as acquired when the written binding contract is signed. The placed-in-service date decides which tax year gets the deduction. An aircraft is placed in service when it is ready and available for its business use, which is not necessarily the day you close.

Build a paper trail showing the date: bill of sale, FAA registration application, insurance binder, airworthiness sign-off and a first log entry. The second copy of the registration application ("pink copy") lets you operate within the United States until the certificate arrives or the FAA denies the application. There is no longer a 90-day limit (14 CFR 47.31).

Working back from December 31:

• October–early November: get pre-qualified (typically 1–3 business days), shortlist aircraft and agree the ownership structure with your tax advisor.
• Signed purchase agreement: underwriting typically takes 1–2 weeks once the lender has it.
• In parallel: pre-buy inspection, title and lien search, escrow instructions and insurance quotes.
• Closing: typically 2–4 weeks from application. If you need a December placed-in-service date, aim to sign by mid-November and leave room for squawks found in the pre-buy.

Step 2: Should you take bonus, Section 179 or regular MACRS this year?

The mechanics (5-year vs. 7-year classes, the Section 179 limits of $2,560,000 and $4,090,000 for 2026, ADS and recapture) are in the aircraft depreciation guide. For the purchase year, the choice usually comes down to this:

Step 3: Which operating expenses can you deduct from day one?

Once the aircraft is in service and flying for business, the business-use share of ordinary operating costs is generally deductible. How that share is measured, and what counts as business use, is covered in business use of an aircraft for tax.

Step 4: How does financing interact with bonus depreciation?

Depreciable basis is what the aircraft cost you, including the part paid with borrowed money. A financed aircraft is therefore depreciated on its full business-use cost, exactly like a cash purchase. What financing changes is cash flow:

• Principal is never deductible. It repays the loan that funded a cost you already depreciated.
• Interest is deductible only for the business-use share. Large businesses may also be subject to the business interest limitation. Most small piston owners are not, but ask.
• Lenders underwrite the aircraft and the borrower, not the deduction. AOPA cites a 15% minimum down payment for post-1960 singles, and 20-year terms are generally available on single-engine loans of $75,000 or more.

Worked example: a $385,000 aircraft placed in service in October 2026

Illustrative only, not a quote or tax advice. A used high-performance single costs $385,000. The buyer puts $57,750 down (15%) and finances $327,250 at an illustrative 8.00% APR for 20 years, a payment of $2,737 a month. The aircraft is placed in service in early October 2026, so three payments fall in 2026. Business use is projected at 75%. Operating figures are assumptions: 40 hours at 15 gal/hr of 100LL at $7.24/gal, a $5,000 annual insurance premium, $600/month hangar and $2,000 of squawks.

• Estimated tax effect: at an assumed 35% combined marginal rate, about $105,244, but only if the owner has enough income and no loss limit applies (see Step 6).
• Cash out in 2026: $57,750 down, $8,212 in loan payments ($1,678 of it principal) and $9,394 of operating costs, for $75,356 before any sales tax.
• Read it correctly: the first-year tax effect can exceed the cash put in, but it is a deferral. The owner still makes the remaining payments, and a later sale is recaptured as ordinary income. The personal 25% of the cost is never deductible.

Model your own payment with the aircraft loan calculator. Rates as of September 2026 generally run from about 7% to 10%, depending on credit, aircraft age, loan size and down payment.

Step 5: Does your state follow the federal deduction?

• Income tax conformity. Not every state follows federal bonus depreciation or the federal Section 179 limit. California is a well-known example. In non-conforming states you add back part of the federal deduction and depreciate more slowly on the state return, which can change whether electing out of bonus makes sense.
• Sales and use tax. This is a separate tax on the purchase, owed where the aircraft is based. It often exceeds the state income tax effect. See aircraft sales tax by state.
• State registration and property taxes. Some states charge annual aircraft registration fees or personal property tax. Ask your advisor what applies where you hangar the aircraft.

Step 6: Which limits can defer a first-year aircraft deduction?

A large bonus deduction does not always reduce this year's tax dollar for dollar. Ask your CPA to check:

• Excess business loss limit. Owners who are not corporations can deduct only a limited net business loss against wages and investment income in one year; the rest carries forward.
• Passive activity rules. If the aircraft sits in an entity, such as a leasing LLC, where you do not materially participate, losses may be passive and usable only against passive income.
• At-risk rules. Losses are generally limited to the amount you have at risk, which matters for some financing and entity structures.
• Net operating losses. Losses carried forward can generally offset only up to 80% of taxable income in a later year.
• Later years. Business use must stay above 50%, or excess depreciation is recaptured. A sale is recaptured as ordinary income, and aircraft no longer qualify for like-kind exchanges.

Year-end checklist for a business aircraft purchase

• Contract signed after January 19, 2025, with a copy of the dated agreement kept
• Aircraft airworthy, insured and available for business use by December 31, and documented
• Ownership entity, borrower, FAA registration and named insured all match
• Flight log set up before the first flight, with business purpose fields
• Acquisition costs (sales or use tax, pre-buy, escrow, title) separated from operating costs
• Loan interest statement requested from the lender for the partial year
• State conformity and sales and use tax reviewed with your advisor
• Bonus, Section 179 or regular MACRS chosen with your CPA before the return is filed

How this guide differs from related guides

This page is the first-year playbook: timing, expenses, financing and state checks. Recovery periods, conventions and recapture math are in aircraft depreciation after the 2025 tax law. What counts toward the 50% test, and who should own and borrow, is in business use of an aircraft for tax. Finding the right professional is covered in how to hire an aviation tax advisor, and entity questions in owning an aircraft in an LLC.

Frequently asked questions

General information as of September 2026. Figures in the example are assumptions for illustration, not a loan quote or tax advice. Confirm with a CPA or aviation tax attorney for your situation.