A new era of 100% first-year depreciation for aircraft is here, but eligibility hinges on contract timing, delivery/placed-in-service dates, and precise business-use documentation amid interim guidance from the IRS.
Background and legal framework for 100% bonus depreciation
100% bonus depreciation is a federal tax rule that, when available, can let a taxpayer deduct the full qualifying cost of an aircraft in the first year it is placed in service. It can pull a large portion of depreciation deductions forward.
Regular MACRS depreciation, by contrast, spreads deductions over multiple years under a set schedule. For aviation buyers, timing is the hinge.
The Tax Cuts and Jobs Act (TCJA) set bonus depreciation on a phase-down path, which created different outcomes depending on when an aircraft was placed in service in early 2025. The One Big Beautiful Bill Act of 2025 (OBBBA) then changed the direction by permanently reinstating 100% bonus depreciation for qualifying property acquired and placed in service on or after its effective window.
That “permanent” label can reduce planning anxiety, yet the transition period created edge cases for aircraft deliveries. IRS Notice 2026-11, issued January 14, 2026, addresses one of the biggest aviation edge cases: written binding aircraft purchase contracts signed before the effective-date shift, where the aircraft is delivered and placed in service after that shift.
The notice is interim guidance, which generally means taxpayers may rely on it while Treasury and the IRS work toward final regulations. Reliance still calls for careful facts and paperwork. Aircraft deals are rarely one-size-fits-all.
Highlight the exact contract cutoff date (January 19, 2025), effective dates (January 20, 2025 onward), and the eventual 100% bonus depreciation eligibility window.
| Date/Event | Threshold/Rule | Impact on eligibility |
|---|---|---|
| January 19, 2025 | Contract timing marker for certain written binding aircraft purchase contracts | Can preserve access to the post-effective-date 100% bonus depreciation framework, subject to other tests |
| January 20, 2025 | OBBBA effective start for permanent 100% bonus depreciation | Shifts many qualifying aircraft to 100% first-year treatment if acquired and placed in service on/after this date |
| December 31 (year-end) | Placed-in-service deadline for the tax year | Missing year-end can push deductions into a later year, changing results |
| January 14, 2026 | IRS Notice 2026-11 issuance date | Provides interim rules for pre-effective-date contract situations and reliance posture |
Interim guidance is in effect; rely on Notice 2026-11 with professional advice until final regs become effective.
Key expansion for pre-effective date contracts
IRS Notice 2026-11 addresses a common aviation timeline problem: contracts can be signed long before an aircraft is delivered. Manufacturing slots, customization, and certification steps can push delivery out by months or years.
The notice allows certain buyers with earlier contracts to still reach 100% bonus depreciation when delivery and placement in service occur later, if they meet the other requirements.
A “written binding aircraft purchase contract” is more than a handshake or a refundable deposit. In many cases, it must be enforceable under state law and require meaningful damages if the buyer walks away.
A mere reservation, a letter of intent, or a deal that is freely cancelable typically will not carry the same weight. Think of it like a firm purchase obligation versus a place in line.
Accounting method matters too.
- Accrual-basis taxpayers generally look to when obligations are fixed and determinable, alongside delivery and placed-in-service timing. That can make them more likely to fit within the notice’s contract-based approach, depending on deal terms.
- Cash-basis taxpayers often face tighter substantiation around when payments are made and what, exactly, was paid for. That does not bar the benefit, but it can raise proof issues.
Ownership form is another dividing line. Bonus depreciation generally ties to depreciable ownership.
Whole aircraft ownership and fractional ownership may qualify if the taxpayer owns an interest that is depreciable and the aircraft otherwise meets the tests. Jet cards and charter arrangements usually do not create depreciable ownership, so they typically do not produce bonus depreciation for the cardholder or charter customer.
Below are common scenario descriptions (the interactive tool will present a structured comparison of these scenarios).
- Scenario A: Binding contract signed before the cutoff; delivery later. Contract on or before January 19, 2025; delivery and placed in service after the OBBBA effective window begins — may qualify for 100% bonus depreciation if other tests are met.
- Scenario B: Non-binding “slot” agreement, refundable deposit. Contract on or before January 19, 2025; delivery after the cutoff — higher risk of failing the “written binding” standard; outcome may shift to general rules.
- Scenario C: Binding contract signed after the cutoff. Contract after January 19, 2025; delivery after the cutoff — evaluated under the post-effective-date acquisition and placed-in-service rules.
- Scenario D: Fractional share purchase with true ownership interest. Contract and delivery timing vary — may qualify if the share is depreciable ownership and usage tests are satisfied.
A simple example shows why facts matter. Buyer 1 signs an enforceable purchase contract with meaningful damages, then takes delivery and begins business operations with the aircraft soon after.
Buyer 2 signs a document that allows cancellation with minimal cost and relies on a jet card for the same missions. The missions can look identical. The tax outcome may not.
General eligibility requirements for 100% first-year deduction
Meeting a contract timing rule is not enough. Aircraft still must satisfy ongoing eligibility tests, and those tests depend on records.
1) Primarily business use (>50%)
Bonus depreciation generally requires that the aircraft be used more than 50% in a qualified business use. Tracking must be ongoing. A strong first year does not protect a later year.
If personal use later rises above the threshold, depreciation recapture can apply in many cases. Many operators find it helpful to treat flight logs like a bank ledger: each leg needs a clear “business purpose” tag, the passengers, and the business connection.
2) Predominantly U.S. use (>50%)
The aircraft generally must be used more than 50% within the United States during the period tested. Tail tracking data, mission sheets, hangar records, and fuel receipts can support location-based proof.
Flight department scheduling records that show where the aircraft was dispatched and why can also help substantiate location-based use.
3) No prior taxpayer use
The aircraft cannot have been previously used by the same taxpayer. That issue can arise with related-party transfers, certain lease structures, or situations where a taxpayer previously chartered the same tail number in a way that could be argued as prior use.
Deal structure changes facts. Paperwork must match reality.
4) Placed in service by year-end (December 31)
“Placed in service” usually means the aircraft is ready and available for its intended business use. Delivery is a strong indicator, but it may not be the end of the story.
If the aircraft is delivered yet cannot legally fly for its intended missions, or cannot be operated due to missing approvals, placement in service may slip. Early-2025 placements raised transition concerns because TCJA phase-down rules could apply to aircraft placed in service during a narrow early-year window, even if later law expanded 100% bonus depreciation.
Transition elections and practical choices
Not every taxpayer wants the largest possible first-year deduction. A transition election can allow a taxpayer, for the first tax year ending after January 19, 2025, to choose a lower bonus rate instead of 100% in certain cases.
For long-production aircraft, a separate 60% rule can apply, and the TCJA phase-down created a 40% phase-down reference point that remains part of transition planning.
Why elect less than 100%?
- Loss limits and timing. A larger deduction can create a loss that may not be usable in the current year due to passive activity, at-risk, or other limitations.
- Financing and covenants. Some borrowers prefer smoother earnings and tax profiles.
- Future sale planning. Large first-year deductions can increase later gain on sale through lower basis.
- Entity-level coordination. Individuals, pass-through entities, and corporations may experience different downstream effects.
Elections usually must be made on a timely filed return. Extensions can matter because they can preserve the ability to file “timely” while giving the buyer time to confirm delivery, acceptance, and operational readiness.
For aircraft that are constructed or substantially modified, a component election may allow eligible components to be treated separately. That can matter when some parts are placed in service earlier than the complete aircraft, or when documentation supports separate in-service dates.
| Election option | Applicable tax year | Bonus percentage | Consequences |
|---|---|---|---|
| Elect lower bonus instead of 100% | First tax year ending after January 19, 2025 | 40% | Smaller first-year deduction; more basis remains for later years |
| Long-production aircraft approach (when applicable) | First tax year ending after January 19, 2025 | 60% | May better match delivery cycles for long-production aircraft |
| Component election for constructed property | Varies by component placed-in-service timing | Depends on component eligibility | Can accelerate deductions for eligible components even if the full project timeline is staggered |
Advisory and timing considerations
January 14, 2026 matters because it marks when IRS Notice 2026-11 gave taxpayers a clearer interim roadmap. IRS notices can generally be relied on while regulations are pending, but reliance works best when facts are clean and files are complete.
Deal teams should treat eligibility as a proof exercise, not a checkbox. Contract enforceability, ownership form, method of accounting, and flight activity patterns can each change results.
Fractional owners also face layered records: management company statements, owner flight detail, and business-purpose substantiation should all align.
NBAA and other industry education forums are already devoting sessions to these questions, including an NBAA presentation scheduled for April 28, 2026, in Denver. That reflects how many operators are trying to match procurement timing with tax timing.
Gather contracts, invoices, and flight/usage logs to document business use and placement in service for qualifying aircraft.
Interim guidance is in effect; rely on Notice 2026-11 with professional advice until final regs become effective.
Tax matters require professional advice; benefits depend on individual facts and timelines.
Interim guidance may be revised; rely on updated IRS notices/regulations when issued.
IRS Guidance Tied to US Tax Law Expands 100% Bonus Depreciation to More Aircraft
The reinstatement of 100% bonus depreciation for aircraft offers significant first-year tax deductions. Eligibility depends on the One Big Beautiful Bill Act’s effective dates and specific IRS interim guidance regarding binding purchase contracts. Beyond timing, aircraft must meet strict 50% business-use and U.S.-based operational thresholds. While beneficial, taxpayers must choose between 100% deduction or lower rates based on individual loss limits and long-term financial planning.
