Bonus depreciation tax laws were never never meant to be used by rich pilots to avoid W2 income tax. Good luck to you and your CPA with your inevitable IRS audit in 18 to 24 months.

 

Its not what they are meant to be used as. Its what the laws are legal to be used as.

Do you think a self employed business owner really needs a 150k G wagon for whatever business they have? absolutely not. But it hits the weight minimum and is driven around for "business" so it gets the bonus depreciation. Its legal, but is most cases its not morally right.

Do you think most of the front half of every plane you fly needs to be paying for expensive seats? Are the seats in the back not satisfactory? When the business buys the seats, they are now a business expense and the tax liability for whatever business is now less. That surely does not invite an audit and keeps you getting paid twice a month.



Don't hate the player- hate the game. Taxes are a game. If it was not a game the government would just tell you exactly how much you owe each year. They leave it up to you.

Pay a good accountant that knows all the legalities to make the game work for you.

 

An audit would be about as dramatic as a sick call verification. Here's my paperwork.

The tax laws were meant for investors and developers who risk capital in support of economic growth. The fact I have a W2 from an air line is irrelevant. The tax code is a rule book. Just like the PWA, the better you know the rules and follow them the more you can benefit.

The tax code was written by rich politicians with lots of earnings from capital gains and passive income. Earned income, especially from high W2 earners gets hit the hardest. It's an easy target. Risking capital to provide housing or a place of business is rewarded. Come on in, the water is fine.
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As long as they can as a couple meet the test for active participation in the business they will have no issues with the IRS. Those running into audit problems usually are actually passively involved and can't use the depreciation against other income like Delta earnings. Depreciation does however have to be recaptured at some point. Lots of ways to delay that but the bill does come due.

 

They’re used by business owners to write off depreciation of certain assets. Who the business owner is should not (and does not) change the equation, either in reality or even ethically.

 

It may be a lower bill when it finally does come due. For simplicity sake assume a taxpayer took 100,000 in depreciation deductions, resulting in a 37,000 tax savings. The bill for depreciation recapture is 25,000. In the meantime the taxpayer has use of 37,000 for other investments. Executing a 1031 or 721 exchange kicks the can further down the road.
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The goal is to kick the can until you kick the bucket and your heirs inherit it with a stepped up basis...

 

winning.


filler

 

What he did is certainly fine but if he had jumped into the best house he could afford he would have generated a tremendous amount of equity in recent years. He could sell the fancy house and pay cash for a nicer house than he has now and bank a bunch of cash on top of that.

 

Not everyone wants a massive house. Some people don’t want to be in the rat race of ever increasing escalating consumption and fancy and fancier everything. Plus he saved money all along by not paying for “the best house he could afford.”