Ultra-wealthy people postpone buying new yachts and jets in hopes of Trump tax cuts

Lydia Moynihan

politics

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by Lydia Moynihan

The top 1% are waiting until after the presidential election to buy big-ticket items like jets in hopes of saving millions of dollars in taxes if Donald Trump wins, the Post says. I found out.

“We're waiting until after November,” one coastal source considering buying both a jet and a yacht for his business told the Post.

“If I could wait a few more months and save millions of dollars in taxes, I would.”

If you are a business owner, or even someone who is paid as a consultant through an LLC, you can deduct the cost of purchasing a jet or yacht if you use it for business expenses such as flying to meetings or entertaining clients. can.

Separate tax credits also allow you to claim operating expenses.

According to CNN, President Trump told a group of billionaires at a recent Palm Beach fundraiser hosted by hedge fund manager John Paulson that restoring the 2017 Tax Cuts and Jobs Act is a priority. He is said to have said.

One of those reductions was 100% depreciation, or deducting from taxes the entire cost of a yacht or jet used as a business expense.

This equates to a $40 million jet being deducted from your taxes by $40 million. That's nearly $15 million in savings, considering the average tax rate for the wealthiest Americans is 37%.

The amount that can be deducted from taxes on capital investments (investments like jet planes that help businesses grow) fell from 80% last year to 60% this year, consistent with how the 2017 tax cuts were implemented. .

Unless the tax cuts are reinstated, it will drop to 40% in 2025, 20% in 2026, and 0% in 2027.

President Trump's comments behind closed doors have so far not been reflected publicly.

But officials at the Palm Beach International Boat Show in March, which featured more than 800 boats and attracted more than 55,000 visitors, told the Post that the main topic of discussion was One was whether to wait until after the election, he said.

The boat show did not disclose sales figures. The yachting and private jet industry is extremely private.

“Many of us are waiting to see what happens in the election…Republicans are promising 100% write-offs to save businesses,” the Florida-based source added.

Prices for jets and yachts appear to indicate slowing demand.

According to Mikolai Jet Group's CEO, demand has declined in recent months for ultra-medium jets that sell for as low as $12 million to ultra-long range aircraft that sell for up to $75 million. It is said that they are doing so. Michael Maicole.

Super-medium aircraft like the Gulfstream G280 and Bombardier Challenger 300 can fly approximately 3,500 miles, or the distance between New York and London.

Ultra-long range aircraft like the Bombardier Global 6000 and Gulfstream G700 can fly more than 8,000 miles, the distance from New York City to the Middle East.

“Basically, there is more supply than demand right now,” Mikolai said, especially regarding the second-hand market.

From October 2023 to March 2024, 719 aircraft were sold, down from 815 in the same period last year.

Superyacht broker Jamie Edmiston said the largest yachts, which can cost more than $65 million and typically attract overseas buyers, haven't been hit, while the $40 million The market for slightly cheaper yachts in the $65 million to $65 million range is softening, he said.

The jet industry official said his business customers are more sensitive to tax implications such as depreciation rates, as opposed to customers buying for leisure purposes.

“If you want to buy your wife a Birkin, you'll spend the money, but if you're looking to buy a jet for your business and can save millions of dollars, you'll wait,” the source added. Ta.

“Wealthy people, like everyone else, want to save money on taxes, and if there is a legal way to do so, they will do so.”

Amanda Applegate, a partner at Soar Aviation Law, said sales typically drop before an election, saying “you always see a slowdown in presidential election years,” but the trend is He added that the closer you get to the moon, the more noticeable it becomes.

David Hernandez, chairman of the business aviation and regulatory practice at law firm Vedder Price, told the Post that waiting for a more favorable tax regime doesn't always work, and some sellers may end up with higher bills. Customers were warned that this could occur.

“If you're in a hurry to buy a plane at the end of the year, sellers know you're desperate, so they're likely to raise the price,” he added.

Hernandez added that another fear factor scaring potential jet buyers is the increased audits of jet owners announced by the IRS in February.

“With expanded resources, the IRS will work in this area [private aircraft] ” IRS Commissioner Danny Wuerffel said earlier this year.

“These aircraft audits help ensure that high-income individuals are not acting in disregard of their tax obligations.”

The IRS is asking whether the person who buys the plane with their taxes is actually using the plane for business expenses, i.e. to visit customers or the factories in which they have invested, as opposed to jetting off to the Bahamas for a long weekend. It is expected that this will be verified.

But Hernandez advises his clients not to worry as long as they're not doing anything illegal. “If you haven't done anything wrong, no one cares.”

Sources from both countries who told the Post they are waiting to buy said they intend to buy the yacht and jet no matter what and just want to be smart about their timing.

“There's great value in having a boat…I can lock the audience up on a yacht for three hours and not be able to walk around anywhere and discuss business with me,” he added.