Fractional jet ownership, also known as shared ownership or timeshare, is a huge part of the corporate world. Executives and business owners alike appreciate it because it offers numerous benefits. In fact, the annual utilization rate of fractional jet ownership has been set between 145 and 387.5 flight hours, with 16.8% of all private jet deliveries in 2023 going to fractional ownership programs.
Several factors, mostly related to operational efficiency, can be attributed to this massive adoption of timeshare, but one particular stands out: the associated tax benefits. But what are these tax advantages? That’s the purpose of this article. It’ll explain the key tax benefits available to businesses that have embraced fractional jet ownership, how they work, and why they matter.
Business Use Tax Advantages
Beyond the initial investment, many day-to-day costs of operating a jet share can be tax-deductible when used for business. These costs include fuel, maintenance, crew payments, and insurance. Companies can also deduct fees paid to the organization that manages their jet share.
The scope of deductible expenses often surprises new owners of fractional jets. Beyond the obvious costs, businesses can typically deduct expenses like in-flight catering for business meetings, ground transportation coordinated through the fractional provider, and communications equipment and services used during flights. They can also deduct training programs for company employees who coordinate flight operations and professional fees related to aviation tax planning and compliance.
Consider a typical business trip scenario: A company transports executives to three cities in two days for client meetings. The entire trip, including fuel surcharges, catering for in-flight business discussions, and positioning legs to pick up additional executives, might cost $30,000.
If the company is in the 35% tax bracket, effective documentation of business purposes could result in tax savings of $10,500 on this single trip. The secret is connecting each flight to a business purpose. If an executive is flying to meet clients or attend a conference, keeping documents that show why the trip was necessary for business makes it much easier to justify the deductions if questions ever come up.
Accelerated Depreciation Deductions
The tax code offers a series of benefits to fractional jet owners through accelerated depreciation provisions. The TCJA of 2017 allowed qualified aircraft owners to front-load depreciation, with a scheduled reduction of 20% per annum. This began with an 80% deduction in 2023, followed by 60% in 2024, further decreased to 40% in 2025, and will finally reach 20% in 2026.
Consider a business acquiring a $4 million fractional jet in 2024: they could potentially claim a $2.4 million depreciation deduction in the first year alone. This accelerated depreciation can be particularly advantageous for businesses experiencing high-income years or seeking to offset substantial gains.
However, these benefits are not handed freely to any business invested in timeshare. Owners must maintain meticulous documentation such as comprehensive flight logs documenting business use, detailed maintenance records, and complete purchase agreements and ownership records.
Avoiding or Reducing State Sales Tax
Here’s something many people don’t consider; the location where a jet share is purchased can make a big difference in the total tax paid. Some states, like Delaware and Montana, offer significant tax advantages for aircraft purchases. In fact, Delaware doesn’t charge any sales tax on aircraft at all.
The impact of state tax planning can be substantial. For example, a $4 million fractional share purchased in a state with a 6% sales tax would incur $240,000 in sales tax. By contrast, structuring the purchase through a tax-advantaged state could eliminate this cost entirely. The savings can then be reinvested in additional flight hours or other business needs.
However, tax-advantaged purchases require careful planning and proper structuring. Organizations need to account for aspects such as the main base of operations for the aircraft; where flights most commonly occur; the company’s existing business presence in various states; and compliance requirements in different jurisdictions.
Smart planning around these state tax differences can lead to major savings. However, it’s important to work with an expert who understands aviation tax law. These professionals can help choose the best state and structure for the purchase while staying within the law.
Supporting Charities While Saving on Taxes
A jet share can also help businesses give back to the community while earning tax deductions. A donation of hours can sometimes be tax-deductible, similar to many other types of charitable contributions. Private aviation can have a lot of different charitable applications. Some real-world examples include flying medical specialists to remote areas for free clinics; transporting emergency supplies during natural disasters; providing flights for veterans’ support programs; supporting wildlife conservation efforts; or helping with search and rescue operations.
The tax benefits in charitable flying can be huge. If, say, a company decides to donate 25 hours of flight time at $15,000 an hour, that would probably go to a $375,000 charitable deduction. Again, actual tax savings depend on the tax rate for the company and various other factors, but its effect on both the community and the company’s tax position can be really massive.
Tax Benefits Based on Ownership Structure
The way jet ownership is structured can affect tax benefits. The aircraft might be owned through a business, a separate company, or another legal structure. For example, a separate LLC might work well for a company that wants to isolate aviation liability and potentially lease the aircraft to other users. Conversely, a direct corporate ownership structure might be better for a business that uses the aircraft exclusively for its own operations.
The tax implications will then vary in each ownerships. For instance, an LLC might offer more flexibility in allocating costs and tax benefits among multiple users while a direct corporate ownership might simplify compliance and record-keeping. A trust structure might help with estate planning while providing aviation access. Special purpose entities might help optimize state tax treatment.
The goal is to find an arrangement that works best for the specific situation while maximizing tax advantages. Fractional jet ownership can be a smart way to enjoy private air travel while saving on taxes. The secret lies in understanding the available benefits and maintaining accurate records. While the tax regulations may be complex, the benefits can be maximized with the right tax aviation advisor. Remember that tax laws change over time, so it’s worth reviewing strategies regularly. With proper planning and guidance, businesses can enjoy both the convenience of private air travel and significant tax savings.