When Your Client Wants to Own a Private Jet
A private jet is cash-hungry, revenue-capable equipment. And like any asset, whether it belongs on the balance sheet comes down to variables you can model.
I buy apartments for a living. I have more than $10 billion in transactions under my belt. Every building I buy has to clear the same bar: what it returns must outweigh what it costs. That means underwriting every deal.
A plane works the same way. Three variables determine whether it pencils. Your clients need you to run all three before anyone signs anything.
The Tax Question
The first conversation you should have with your client isn’t about the aircraft. It’s about their tax return.
The One Big Beautiful Bill Act made 100% bonus depreciation permanent for qualified property acquired and placed in service after Jan. 19, 2025, which means the full purchase price of an aircraft can be deducted in the first year. If the client is buying it for both personal and business use, the deduction is the purchase price multiplied by the percentage of flight hours for official business use.
A client in a top federal bracket in a state like California or New York faces a combined marginal rate approaching 50%. On a $10 million plane used only for business, that’s roughly $5 million in taxes eliminated in year one.
Now layer in financing. Twenty percent down means $2 million in equity committed. The depreciation generates $5 million in tax savings. The client is $3 million ahead before wheels-up.
The catch is that the IRS classifies aircraft as listed property. The deduction is valid only if the plane logs more than 50% of qualified business use, and that test doesn’t run once. It resets annually. Slip below the line in any subsequent year, and the depreciation the client has already taken is recaptured as taxable income.
It’s worth noting that the depreciation can only offset active income if it is owned by the client’s business or a disregarded LLC. A separate entity leasing it out to the business, even if both are owned by the client, risks trapping the deduction as a passive rental loss. Passive losses can’t touch active income.
Your client needs the tax structure built before closing, not cleaned up after a notice lands. Participation and business use are documented contemporaneously from day one, and the entity structure is reviewed by an aviation tax specialist before anyone signs.
Hour-for-Hour
After the first year, a more basic question takes center stage: how much will the client actually fly?
A midsize jet can run $1 million or more in annual fixed costs regardless of use. Insurance, hangar, crew. Those invoices arrive whether the client flew 400 hours or 40.
That makes the real cost of ownership a per-hour calculation. Total annual carrying cost divided by hours flown. A plane running $1 million in fixed costs at 400 hours a year works out to $2,500 per flight hour on overhead alone. Cut the flying in half, and that figure doubles. At 100 hours, it’s $10,000 per hour.
The crossover point against chartering equivalent trips falls around 200 hours a year. Above that, ownership wins. Below it, your client is paying a premium for a parked craft.
Nobody walks into a broker’s office and says they’ll fly 60 hours. They say 250. They’re thinking about the investor meetings they’d schedule if travel were easier and the family trips they’ve been deferring to avoid connections.
Ask for charter logs. If they’ve been chartering regularly, odds are they can put a plane to good use. If they haven’t been chartering at all, ask why they’ll suddenly fly four hours a week once they own the metal. The hours they want to fly to justify their purchase have no place in the equation.
Making Downtime Count
The third question is who uses the plane when the client doesn’t.
A jet sitting at an FBO between the owner’s trips earns nothing. Placed on a Part 135 charter certificate through a management company, that same aircraft produces revenue every hour someone else occupies the cabin. A light jet in a thin market might offset 20% of annual ownership costs through charter. Heavy iron based out of Teterboro or Van Nuys can approach 50%.
A management company negotiates fuel and maintenance at fleet rates that a single tail number will never see. They carry the crew payroll and own Part 135 compliance, which means the client gets an airplane, not a small aviation business to run. The owner’s trips take priority. Charter fills what’s left.
The due diligence question for you, as an advisor: Does the management company have a genuine charter requirement for where the aircraft is based? A company operating 10 jets out of Teterboro with a waitlist is a different proposition than a two-plane outfit at a regional field with no inbound traffic. If the charter revenue projection is the linchpin of the ownership case, you need to pressure-test who’s actually booking flights, not just whether the proforma looks clean.
The final and perhaps most important consideration here is the tax implication. In most cases, chartering through a management company will qualify as a passive business activity. That means it counts toward the crucial 50% qualified business use test. It also means that the bonus depreciation can be partially categorized as a passive loss that cannot touch the client’s active income.
The solution? Don’t charter in year one. Then, once the asset has already been bonus-depreciated as an active loss, the client can begin chartering without penalty.
Your Opportunity
Odds are that, by the time they come to you, your client has already decided they want the plane. And odds are it was an emotional decision.
The value you add is telling them what the broker won’t: a purchase that doesn’t work on paper won’t work on the tarmac. That conversation is harder than writing the check. It’s also the reason they’ll call you first next time around.
