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Depreciating an in progress, home built

Palamedes

Palamedes

Well Known Member
Does anyone here have any advice or experiences that they would care to share regarding depreciating an aircraft you're building?

I own my own company and I figure if I "sell" my tools and each part to that company as I purchase it, I can depreciate it over time to help offset some of the costs.

But not sure the ramifications or if there are any gotchas. I'm going to talk to my accountant about this next week, but if anyone has any advice at all on the topic I'd love to hear it.

Thanks
 
Best to ask a good tax man...but I can't see any reason to do it (at least on paper). Is this personal property or a business asset? Is this offsetting some other income, taxes or gains? Part of a Corp/LLC or personal? Me thinks it might be tough to explain to the auditor (been there done that), but maybe not....each persons situations are wildly different.

I'm not much help at all I'm afraid, though I do utilize the services of an expensive but good accounting firm to manage my complicated (at least to me) assets & liabilities (taxes, depreciation schedules, etc...).

Cheers,
Stein
 
Not to mention what the FAA would say come Airworthiness Certificate time when you have to state you built the airplane for "recreation and education." But this has been discussed ad nauseum in previous threads. Just use the Search function on this topic. You're not the first person who has thought of depreciating or deducting home building assets or expenses.
 
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The other thing to keep in mind is all of the aluminum parts you are riveting together are not yet legally considered an airplane until you get the first C of A. From a Personal Property tax standpoint this is good cause otherwise the tax man would be wanting his share during the build process.
 
My thought is, how do you depreciate an asset that is legally not allowed to be used for commercial purposes?

Of course I am not an attorney or tax accountant. I did not even sleep in a Holiday Inn last night so, I could be all wet on this thought.
 
RVbySDI makes the best point yet.. I need to talk to accountant.. but it may not be possible..

I was hoping it would .. but oh well.. sounds lik enot.
 
Palamedes said:
RVbySDI makes the best point yet.. I need to talk to accountant.. but it may not be possible..

I was hoping it would .. but oh well.. sounds lik enot.
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Except he is completely wrong. I guess even after years of ad nauseum discussions, this is still completely misunderstood and still misstated.

First, why the plane was built has nothing to do with its use.
Second, There is nothing that prevents EAB's from being used for commercial purposes. Please lets get this straight.
Third, there are huge differences between the IRS business use, and the FAA commercial use. They have nothing to do with each other.
Forth, well thats enough for now.
 
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If there is an RV owner among us who is depreciating the value of their tools and their airplane, as the original poster stated, would you please speak up? We'd like to know, so we can do it too. 😳
 
I've owned several small companies, but I can't see where there would be a big tax savings on the depreciation of builder tools.

IMHO, There's not enough money in the tools to be worth the effort and it raises the potential for a visit/audit from the tax man.
 
not sure about the tools; but, if you us your plane for the purpose of your business you can deduct it over a 6 year period under MACRS. You can only deduct your plane when it is done and flying. Once it is flying You have to keep and report the hours flown for business and any personal. The percent of personal hours for pleasure you use the plane will not be deductible. So if you fly a total of 100 hrs and 90 of it was for business and 10 for personal then 90% of the total cost of maintaining the plane, fuel, insurance and any other expense would be deducted for that year; 10% would not. It is real easy to keep track of since we all keep a log book. The business trips have to be legit though you can't fly over to a pancake breakfast and deduct it because you talked to Joe about your company.
I write my plane off every year, and have ever since the first year I had my license. I wish I could deduct it as I built it because I have a pile of money into my rv10 already.
 
I have worked with several people who depreciate their RV's. Tools, not so much. The rules on depreciating an aircraft start when it first becomes an aircraft (airworthiness inspection and first flight), not during the build. Unless the parts can be used by your business, you can't start the depreciation until it's an airplane. There is currently a special bonus depreciation schedule allowed by the IRS which allows a large portion to be depreciated in the first year.

It would be a legit business trip if you fly to meet with Joe to talk about your business and have pancakes while you're there.
 
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rv7boy said:
If there is an RV owner among us who is depreciating the value of their tools and their airplane, as the original poster stated, would you please speak up? We'd like to know, so we can do it too. 😳
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One that comes to mind, was if you had a business that manufactured products to be specifically installed in RVs. You would need an RV to use for prototyping and testing. I think this would be an appropriate use viewed by the IRS, but like others have stated, make sure your tax adviser is on board with the approach.

I'm doubtful you'll get many folks volunteer their tax status. Nobody wants to call attention to themselves by the IRS.
 
More good advice guys.

I will most assuredly be actually using the plane to fly back and forth to meet clients. There is no "fibbing" about the use, it will be for business a lot of the time. Also pleasure of course.. I mean come on it's an airplane =)
 
This has been a well traveled line of thinking but in the end the result is the same. Unless you want a visit from the IRS forget about depreciating your kit and tools. The only feasible way I can see them being depreciable is if you own a education center and are building the aircraft as part of an educational program that people pay for.
This would have to be a legit business with numerous students, not just you and your significant other:D.
A flying RV could be depreciated if used in a commercial operation. I'm not one hundred percent sure on this though.
As far as I know, those are your options. Oh, lest I forget, if you own a buisness that requires you to travel you can depreciate all associated costs of that travel.
You're playing with fire if you don't have a solid reason to deduct. Boats, planes and RV's (recreational vehicles) are all red flags to the IRS.
 
Jesse,

More then 50% of your time on a trip has to be business related in order to right it off so if your eating pancakes at a flying and just take a few minutes or a number of minutes to talk about your business it more then likely will not be able to legally deduct it as a business trip. I'm referring to casual talk in this this senario.
 
Just don't forget that when you sell it someday you will have to recapture as income any net revenue over the depreciated basis. This strategey works best for an asset whose value depreciates rapidly.
 
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