Flying privately can be amazing. No waiting, no lines, just a quick car ride to the airport and you’re in the air 15 minutes after arriving, enjoying a catered meal. But a plane is a different type of purchase than a car, boat, real estate, or other type of asset – this is a complex and highly regulated area. Before you buy a private jet, think about the following:
There are many important considerations to keep in mind before buying a private jet, including:
Private jets can be very expensive, both to purchase and to maintain (more on that in a minute). They often cost you money whether you fly often or stay on the ground. It’s important to carefully consider the costs involved and ensure that you have the financial resources to support the investment.
How do you quantify the cost of owning a private jet in the first place?
Well, the initial purchase price of the jet will be a significant upfront cost. Do you have the necessary liquid funds? If you are considering financing your purchase, be sure to carefully research your options and consider the terms and conditions of any loan agreements.
Also keep in mind that the cost of fuel will vary depending on the size and type of jet, as well as the frequency of use.
If you do not have a place to store the jet, you will need to factor in the cost of hangar rental or other storage options. On average, the cost of a hangar for a small to mid-size private jet can range from $50,000 to $100,000 per year, while the cost for a larger jet can be upwards of $250,000 or more per year.
When you’re considering buying a private jet, it’s important to conduct a comprehensive needs assessment. How often will you use the jet and for what purposes? Where do you need to be, and when, and how often? Do you fly more than 200 hours per year? (If not, buying a private plane may not be worthwhile.)
Conducting a needs assessment can help you determine the size and type of jet that will best meet your needs. Outline each trip you’re planning to take, including flight times. Compare aircraft performance. Honestly identify your needs versus wants.
Private jets require regular maintenance and inspections to ensure they are safe and reliable, repairs, and parts replacements, which can be costly. Be sure to factor in the costs of maintenance and consider the availability of service centers in your area.
According to industry estimates, the average annual cost of maintenance for a small to mid-size private jet is typically in the range of $100,000 to $400,000, while the cost for a larger jet can be upwards of $1 million or more.
Depending on the size and type of jet, you may need to hire a crew to operate it. This can include pilots, flight attendants, and maintenance personnel. You may need to take into consideration training expenses as well as the crew’s availability and schedule to ensure they can be on hand when the plane is needed.
It’s important to have insurance to protect your investment and cover any potential liabilities.
The cost of insurance for a private jet can vary widely depending on the size and type of jet, as well as the specific coverage needs and preferences of the owner. On average, the cost of insurance for a small to mid-size private jet can range from $50,000 to $100,000 per year, while the cost for a larger jet can be upwards of $200,000 or more per year.
It’s important to note that these costs can vary significantly depending on the specific risks and exposures of the jet, as well as the terms and conditions of the insurance policy. For example, a jet that is used for commercial purposes or flies internationally may have higher insurance costs than a jet that is used primarily for personal travel.
To get a more accurate estimate of the insurance costs for a specific jet, it’s a good idea to consult with a jet insurance specialist or aircraft insurance provider. They can help you assess your coverage needs and provide quotes for different policy options.
Private jets are subject to a variety of regulations, including those related to safety, maintenance, and pilot qualifications. Be sure to understand these regulations and ensure that you are able to comply with them.
Benefits of Owning a Private Jet
Owning a private jet can provide a number of income tax benefits, depending on how the jet is used and how ownership is structured. Here are a few potential tax benefits to consider:
- Depreciation: Private jets are classified as business assets and are eligible for depreciation deductions, which can reduce the taxable income of the owner.
Private jets are eligible for bonus depreciation tax treatment, which allows the owner to accelerate the depreciation deductions for the jet and claim a larger deduction in the year the jet is placed in service. Under the current tax laws, the bonus depreciation rate for private jets is 100%, which means that the owner can claim a deduction equal to the full cost of the jet in the year it is placed in service. This can be a significant tax benefit for private jet owners, as it allows them to fully depreciate the jet over a shorter period of time and reduce their taxable income.
- Charitable contributions: If the private jet is donated to a charitable organization, the owner may be able to claim a charitable contribution deduction for the fair market value of the jet.
- Business use: If the private jet is used for business purposes, the owner may be able to deduct a portion of the operating costs, such as fuel and maintenance expenses, as business expenses.
- Rental income: If the private jet is rented out to third parties, the owner may be able to claim rental income on their tax return.
It’s important to note that these tax benefits may be subject to certain restrictions and limitations, and it’s a good idea to consult with a tax professional to understand the specific tax implications of owning a private jet.
Rather than owning a private jet outright, many affluent families prefer using a service like NetJets.
NetJets is a private aviation company that allows customers to purchase fractional ownership in a private jet or to purchase individual flights on a private jet. Some of the benefits of using NetJets rather than owning a private jet outright include:
- Shared ownership: With NetJets, you can purchase a fractional ownership in a private jet, which allows you to share the costs of ownership with other customers. This can be a more affordable option than owning a private jet outright.
- Flexibility: NetJets allows you to purchase individual flights on a private jet, rather than committing to a full ownership interest. This can be a more flexible option for those who only need occasional private aviation services.
- Professional management: NetJets handles the maintenance and operation of the private jets, which can be a time-saving and convenient option for customers.
- Wide range of aircraft: NetJets offers a wide range of aircraft to choose from, including jets, turboprops, and helicopters. This allows customers to select the aircraft that best meets their needs each time they fly.
- Worldwide access: NetJets has a global network of aircraft and service centers, which allows customers to access private aviation services around the world.
If you are thinking about buying a private jet, it’s a decision you shouldn’t take lightly. Consider your needs and wants as well as the costs, the benefits, and the alternatives available to you.
Here at Delap Wealth Advisory, we provide coordinated wealth advisory and financial mentorship. We deliver proactive planning strategies, goal-based financial solutions, and evidence-based investment management. Our team understands the unique intricacies, challenges, and opportunities clients face as it pertains to their complete wealth picture – including decisions like whether to buy a private jet. Let’s start a conversation today to see how we can help you.
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