Key Private Aviation Tax Implications to Consider

Acquiring a private aircraft for personal use is an exciting experience, one that opens innumerable doors for frequent travelers — however, to ultimately realize the benefits of your investment, you must first ensure that you’ve fully accounted for all financial considerations, especially aviation taxes.

Too often, private aircraft owners aren’t fully informed of certain taxes that are involved in the ownership and operation of the aircraft; which are important as it relates to their operating budget and the overall aircraft ownership experience. That’s because tax considerations should be structured not only during the initial transaction, but throughout the ownership lifecycle, and can affect how you decide to utilize your aircraft.

Read the recommendations below to avoid being blindsided by private aviation taxes.

Location, Location, Location

You might be surprised to learn just how many soon-to-be private aircraft owners ignore the opportunity to create even the most basic tax plan in advance of a transaction. Generally speaking, this isn’t for lack of interest but, rather, lack of understanding. Many buyers simply lack the awareness and experience to appreciate how seemingly minor factors, such as the physical location of the aircraft at closing or the location of the hangar where they intend to house their aircraft, can affect taxes.

For example, some states place a substantial sales tax on aircraft, while others have fly-away exemptions with strict timelines and requirements. Certain states also apply use and property taxes to aircraft purchases or transactions, which can vary and are affected by a number of factors. As federal and state tax laws change over time, working with an experienced aviation advisory team during your transaction will only become more valuable and necessary.

Plan in Advance

It’s unreasonable to expect potential buyers to automatically be familiar with state aviation tax regulations and laws, especially as they pertain to private aircraft, which is why it’s important to work with a qualified aircraft consultant and aviation tax advisory firm. Although private aviation consultants aren’t able to provide complete tax advice, they can help you determine the following in advance of your purchase date:

What your regular usage will be
Where you intend to fly (and for how long)
Where you intend to store your aircraft
How tax considerations affect your ownership structure
How to identify aviation tax counsel

Your consultant can also act as a liaison between you and the seller, representing you throughout the transaction, as well as managing the process of positioning your aircraft at the right location during the time of closing for tax purposes.

Consult a Tax Attorney

In addition to determining your private aircraft usage and handling your acquisition, an aviation consultant can set you up with experienced aviation tax advisors and tax attorneys to round out your team. Aviation tax advisors and tax attorneys are well-versed in aircraft-specific tax codes and have the expertise to identify possible deductions or opportunities to maximize your tax savings by reducing the amount you pay for sales, property and ongoing use taxes. It’s impossible to emphasize enough just how important it is to work with aviation-experienced tax advisors and attorneys — only professionals with extensive industry experience will have the unique knowledge to properly address all of your tax considerations.

Your private aviation consultant should work closely with your tax team every step of the way. Even if you do your due diligence from a tax perspective, there’s a possibility that, at some point, you’ll be audited. Should this occur, your consultant, tax advisor and aviation attorney will collaborate and help represent you during the audit.

The right aviation advisory team will consistently go above and beyond for its clients, whether that entails figuring out which private aviation travel option best meets their unique needs, helping them understand how tax considerations affect their cost of ownership and operation, or tirelessly advocating on their behalf. With a collective 70 years of experience in the aviation industry under their belt and a vast network of connections, the consultants at VanAllen are uniquely qualified to usher clients through every step of the private aircraft acquisition process, as well as put them in touch with some of the best aviation tax advisors and attorneys in the industry.

To learn more about aviation tax considerations or the expert services VanAllen provides, contact us today.