Historical Trends of Bonus Depreciation for Privation Aviation

Bonus depreciation has been one of the most impactful tax incentives in the U.S. for businesses investing in capital assets, including private aircraft. Over the last two decades, this provision has undergone significant changes, expanding, expiring, returning, and transforming in response to broader economic conditions and shifting legislative priorities.

Understanding these historical trends is critical, especially as we enter a new phase in 2025 under the Optimal Business Benefit Basis (OBBB) Act, which reinstates 100% bonus depreciation retroactively to January 20, 2025

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2001–2003: Introducing Bonus Depreciation as Economic Stimulus

In the aftermath of the September 11 attacks and the early 2000s recession, the U.S. economy was under severe pressure. Businesses cut capital spending, consumer confidence dipped, and unemployment rose.

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To jumpstart economic activity, the Job Creation and Worker Assistance Act of 2002, signed under President George W. Bush, introduced a 30% bonus depreciation rate. This was designed to encourage businesses to invest in new equipment and property, giving them the ability to deduct a substantial portion of the cost up front.

In 2003, the Jobs and Growth Tax Relief Reconciliation Act raised the bonus depreciation rate to 50%, expanding the program’s effectiveness and helping offset the sluggish pace of capital investment.

2004–2007: Expiration and Economic Stability

After 2003, bonus depreciation was allowed to expire. From 2004 through 2007, there was no bonus depreciation available.

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This decision was partly due to the economy's relative stabilization — GDP growth returned to healthy levels, and policymakers were less focused on stimulus-driven tax breaks. During this period, businesses reverted to using standard MACRS (Modified Accelerated Cost Recovery System) depreciation schedules.

2008–2010: The Great Recession and Renewed Stimulus

The financial crisis that began in 2008 brought severe economic contraction, collapsing credit markets, and plummeting consumer demand. In response, the Economic Stimulus Act of 2008 reintroduced 50% bonus depreciation, once again as a way to encourage capital spending.

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President Barack Obama continued this trend. Through the American Recovery and Reinvestment Act (ARRA) and the Small Business Jobs Act, bonus depreciation remained in place during 2009 and 2010, at a rate of 50%.

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These policies aimed to provide businesses with immediate tax relief and offer liquidity during one of the most significant downturns in modern history.

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2011: Temporary Return to 100% Bonus Depreciation

The Tax Relief Act of 2010, passed during President Obama’s tenure, included a bold tax stimulus provision: 100% bonus depreciation for qualified property placed in service in 2011. This was a direct response to the sluggish recovery, designed to rapidly spur private investment and encourage job growth.

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For industries like aviation, this had an immediate impact. Business owners could fully expense the cost of an aircraft, dramatically reducing their taxable income and freeing up capital.

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2012–2016: Gradual Reduction and Policy Normalization

In 2012, the 100% provision was allowed to sunset, reverting back to 50% bonus depreciation, where it remained through 2016.

During this time, the U.S. economy experienced moderate growth. Policymakers viewed the reduced depreciation rate as a compromise — still offering an incentive for investment but beginning to phase out crisis-level support.

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The PATH Act (Protecting Americans from Tax Hikes Act of 2015) formally extended the 50% rate through 2017, aiming to provide stability and predictability for businesses planning long-term capital investments.

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2017–2022: The TCJA and a New Era of Full Expensing

In 2017, just before the Tax Cuts and Jobs Act (TCJA) was enacted, the bonus depreciation rate remained at 50%. That changed dramatically after TCJA passed under the Trump administration.

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Starting in 2018, businesses could once again claim 100% bonus depreciation on both new and used qualifying assets. This was a landmark change: previously, bonus depreciation had only applied to new property.

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From 2018 through 2022, companies took advantage of this favorable treatment by accelerating asset purchases, particularly aircraft. For high-net-worth individuals and corporations looking to reduce tax liabilities, this became a key driver of private jet acquisitions.

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2023–2024: TCJA Phase-Down Begins

The TCJA provisions included a scheduled sunset for bonus depreciation:

• 2023: Reduced to 80%
  
• 2024: Further reduced to 60%
  

These reductions reflected long-term budget concerns in Congress, as well as the goal of phasing out temporary tax relief measures implemented during the previous administration.

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Despite the reduction, private aviation still offered compelling deductions, but the window for full expensing was visibly closing, prompting many buyers to accelerate aircraft purchases before year-end deadlines.

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2025 and Beyond: OBBB Act Reinstates 100% Bonus Depreciation

On January 20, 2025, a new administration signed the Optimal Business Benefit Basis (OBBB) Act, which reinstated 100% bonus depreciation, retroactive to the inauguration date.

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The OBBB Act doesn’t just reinstate full expensing — it aligns tax treatment with demonstrable business outcomes. Under this legislation, businesses that use aircraft in a manner directly tied to revenue generation, executive management, logistics, or client development will find it easier to justify deductions.

This is especially important for private aviation. Aircraft used for legitimate business purposes — when supported by documentation — are now again eligible for immediate full expensing under the revised bonus depreciation framework.

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Importance:

This moment is historically significant. The reinstatement of 100% bonus depreciation, especially after a phase-down period, represents a rare opportunity for businesses to:

• Maximize tax savings in the first year of asset ownership
  
• Accelerate investment in capital-intensive operations.
  
• Strengthen mobility, productivity, and client service through aviation.