U.S. climate action may look different after the 2024 presidential election, especially across transportation decarbonization. While the future of the electric vehicle industry has been a topic of political debate, another transport issue warrants scrutiny: why U.S. tax laws incentivize bad climate decisions. In this edition, we take a closer look at Sections 168 and 179 of the Internal Revenue Code (IRC) and how they are having a negative effect on transport decarbonization.
(Note: This is a general overview of the stated IRC sections and should not be considered official tax advice.)
‘Incentivizing’ private jet purchases
As it stands, Section 168(k) of the IRC is incentivizing activities that contribute to higher transport emissions. Under this provision, a “qualified property” is eligible for bonus depreciation if it meets one of a long list of characteristics. One example of eligible property that has an adverse impact on transport decarbonization is private aircraft.
“Qualified property” includes property with a general depreciation recovery period of 20 years or less. It’s through that qualifying language that businesses can depreciate a private aircraft. The allowances and benefits associated with purchasing a private jet increased from 50 percent to 100 percent during Trump-era changes through the 2017 Tax Cuts and Jobs Act.
While the incentives are in the process of phasing out, businesses were allowed 100 percent bonus depreciation on their taxes from 2017 to 2022 if they purchased a private jet and placed it in service by Dec. 31, 2022. The bonus depreciation in 2024 has dropped to 60 percent, going down to 40 percent in 2025, 20 percent in 2026 and sunsetting in 2027, with some special delays in sunsetting for qualifying “transportation property” and “certain aircraft.”
Given the private jet must be predominantly used for a “qualified business use,” the IRS is increasing audits to determine which wealthy individuals may be flying for leisure while noting the plane was for business use.
While bonus depreciation is designed to encourage businesses to invest in new equipment and assets by giving an immediate tax benefit during the year of purchase, such tax changes were noted to greatly increase the sale of private jets, which is harmful from a climate perspective. Research from Polaris Market Research projects the business jet market to reach $41.82 billion by 2030, with North America accounting for 67 percent of all business aircra