Aircraft depreciation

[scott8]

I have a Hot Air Balloon I purchased in 2022 for business and personal use.  50/50.  It was purchased in my LLC.   When entering it into the TurboTax Home and Business, what asset class, and depreciation method would be entered?  Also, purchased at the same time was a trailer and other equipment.  What asset class and depreciation method would be entered for this equipment?

Thank you

[DaveF1006]

The issue is that there is not an asset classification this can possibly fall under. After reviewing multiple internet sources and reading this IRS source, i would depreciate this using a 7-yr GDS classification. 

IRS states that any property that does not have a class life and has not been designated by law as being in any other class should be considered  a 7-yr GDS property class.  

[scott8]

Is there not an depreciation class for an aircraft?

[DianeW777]

Yes there is a class for aircraft.  It has a class life of five years under the general depreciation system (GDS) and a six year class life under the alternative depreciation system (ADS).  See the image below.  Also click the link below for rules that reference aircraft (simply search the publication for aircraft).

• IRS Publication 946  

@DaveF1006 states that there is no official class life for a hot air balloon and is correct when indicating that a seven year class life should be used for any asset that has no specific class life.  You will find that in the same tables.

[Edited: 04/13/2023 | 1:48p PST]     @scott8

[scott8]

So what depreciation method should be used for an aircraft purchased in August 2022?  Straight, ADS, 200% Declining, 150% Declining?

[DianeW777]

It depends.  If the business use is 51% or more then you can use the maximum allowed which is 200% declining balance using the half year convention.  This is the accelerated depreciation under the GDS.

TurboTax will calculate that when the correct options are selected.

• Select Tools, Machinery, Equipment, Furniture on the Describe this asset screen when adding a new asset for your business.  TurboTax knows this is seven year property.
• See the image below.... Sounds like a fascinating business.

[mp565]

January 2025.   I purchase an airplane for leaseback to a flight school (no personal use and exclusively as an investment).   With the bonus depreciation in 2025, I can depreciate 40% of the purchase price in 2025.   What is the schedule for the remaining 60%.   I know it's via the MACRS, but what exactly are the percentages?

Thank you

[DaveF1006]

Since this aircraft is technically used for personal purposes (since it is an investment), you would use as five-year MACRS schedule. Here is a schedule recorded from IRS Pub 946. Look at 5-year property on this schedule. Note, first year is 20%.