The IRS makes it possible for business owners to depreciate vehicles and other equipment used to operate a business. You can depreciate some or all of the plane's purchase price, up to $250,000 per year, to account for the decline in value caused by wear and tear. To qualify for the deduction, you must use the airplane in the operations of your business. The amount that you can write off is determined by the price of the airplane and the percentage of time the plane is used for business purposes. The IRS allows you to claim depreciation only for the portion of the time the plane is used for business.
Gather the required paperwork. To write off business equipment, you must have the sales receipt of the airplane and your company's last year balance sheet and profit and loss statement.
Visit the IRS website at IRS.gov and obtain Form 4562 and the form's instructions. Click the "Forms and Publications" link at the top of the page and click "All Forms and Publications." Type the name of each form in the "Search" field to locate the form. You can complete and print each form directly from the website.
Determine which method of depreciation best suits your business's finances. The IRS allows two methods: Section 179, and the modified accelerated cost reduction system. The Section 179 method allows business owners to deduct some or all of the depreciation in the year that they purchased the airplane. The MACRS method allows you to deduct the depreciation over eight years, with a limitation of 14.29 percent the first year. If your business generated a great deal of profit, it may be best to use the Section 179 method. If you're in doubt, consult a tax professional.
Begin working on your business income tax return using the information from your company's last year balance sheet and profit and loss statement. A sole proprietor or single-member LLC must complete Form 1040 and Schedule C. A partnershis or multiple-member LLC must file Form 1065 and Schedule E. Corporations must complete Form 1120, and S corporations must use Form 1120S. Stop when you reach the section that requests information on business profit or loss, or depreciation.
Complete Form 4562 to determine the amount of your business's depreciation deduction using the airplane sales receipt, and any other information on depreciable vehicles or equipment.
Report the total depreciation amount in the "Expenses" section on Schedule C or Schedule E, or the "Depreciation" section on Form 1120, 1120S or 1065.
Complete your business income taxes and submit the forms by the tax deadline, which is generally April 15. File the airplane's sales receipt, your company's last year balance sheet and profit and loss statement, and any other documentation with your records. The IRS requires that you retain important tax documents for a minimum of three years.
- If you deduct depreciation using Section 179 and sell or dispose of the aircraft before the eighth year, the IRS will require you to repay the depreciation amount for the years that you depreciated but did not own the plane.
- Writing off depreciation reduces your business's net income or increases the net loss, which will reduce your tax or increase your refund.
- If you also use the plane for personal use, you can claim only a percentage of the depreciation amount. For example, if you use the airplane for 90 percent business and 10 percent pleasure, the IRS allows you to claim only 90 percent of the depreciation amount.
- Obtain all of your business income tax forms from the IRS website.
Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.