Aviation Finance

Acquiring a private jet is a significant financial commitment that extends well beyond the purchase price. Understanding your financing options, tax implications, and total cost of ownership before you sign anything is the difference between a good deal and an expensive lesson.

MAIN FINANCING STRUCTURES FOR AIRCRAFT ACQUISITION

Conventional aircraft loan: A lender provides a loan secured by the aircraft, you make monthly payments over a fixed term, and you own the aircraft outright at the end. Terms typically range from five to fifteen years with loan to value ratios between 70 and 85 percent.

Operating lease: You pay to use the aircraft for a defined period without taking ownership. At the end of the term you return the aircraft. This structure keeps the asset off your balance sheet and provides flexibility if your needs change.

Finance lease: Similar to a conventional loan in that you assume the risks and rewards of ownership, but structured as a lease for accounting or tax purposes. You typically have a purchase option at the end of the term.

Dry lease: An arrangement where you lease the aircraft from another owner without crew. You operate the aircraft under your own certificate and are responsible for all operating costs.

KEY TAX CONSIDERATIONS FOR AIRCRAFT OWNERS

Bonus depreciation: The Tax Cuts and Jobs Act introduced bonus depreciation for qualifying aircraft, allowing owners to deduct a significant portion of the purchase price in the year of acquisition. Bonus depreciation rates have been phasing down and the rules are complex. Work with a tax advisor who specializes in aviation before structuring your purchase.

Personal use allocation: If you use your aircraft for any personal travel, the IRS requires you to allocate a portion of expenses to personal use which affects your deduction. Get qualified tax advice before your first flight.

Sales and use tax: Aircraft purchases are subject to sales and use tax in most states, though many states offer exemptions for aircraft used in interstate commerce or for charter. The rules vary significantly by state. Do not assume your purchase is tax exempt without confirming with a qualified aviation tax attorney.

WHAT TO LOOK FOR IN AN AVIATION LENDER

Work with lenders who specialize in aircraft financing. They understand aircraft values, maintenance implications, and the operational realities of private jet ownership in ways that general commercial lenders do not. Ask about their experience with your specific aircraft type, their appraisal process, and their requirements for insurance and maintenance reserves.

COMING SOON

We are building a directory of aviation finance specialists who understand the unique needs of private jet owners. In the meantime contact us at chris@privatejetnation.com with any finance questions.