Super Wealthy Americans Pause Purchases of Private Jets & Yachts Hoping for Trump’s Tax Triumph

Super Wealthy Americans Pause Purchases of Private Jets & Yachts Hoping for Trump’s Tax Triumph

Edited by: TJVNews.com

Amid the approaching presidential election, members of the ultra-wealthy 1% are strategically pausing their purchases of high-ticket items such as private jets and yachts, anticipating potential tax savings should Donald Trump reclaim the presidency, as was reported on Friday in the New York Post. This calculated delay stems from a belief that Trump’s election could lead to the reinstatement of favorable tax provisions from the 2017 Tax Cuts and Jobs Act, which significantly benefitted high-net-worth individuals.

The 2017 legislation, championed by Trump during his first term, included a particularly advantageous tax deduction known as 100% depreciation. According to the information provided in the Post report, this provision allows businesses to deduct the full cost of certain capital investments—such as jets and yachts used predominantly for business purposes—directly from their tax bills. For example, under this rule, a $40 million jet would translate to a $40 million deduction, which at the average tax rate of 37% for the wealthiest Americans, could mean nearly $15 million in tax savings.

These deductions are not only applicable to the initial purchase price but extend to operational costs as well, provided these expenses are justified as business necessities, such as flying to meetings or hosting clients. The current trajectory of tax policy, however, has seen these benefits being phased out. Indicated in the Post report was that the allowable deduction for capital investments has decreased from 80% last year to 60% this year and is scheduled to further reduce to 40% in 2025, reaching zero by 2027 unless there is legislative intervention to extend or restore the cuts.

This looming reduction in tax advantages has motivated affluent individuals and business owners to adopt a wait-and-see approach. A bi-coastal business owner, contemplating substantial investments in both a jet and a yacht, exemplifies this trend. He told The Post, “If I can save millions on my taxes by waiting a few more months, I will.” His statement reflects a broader sentiment among the wealthy, who are aligning their investment decisions with potential political and legislative changes that could favor their financial interests.

Donald Trump’s communication with influential circles about his intentions to restore the 2017 tax cuts further fuels these expectations. As was noted in the Post report, at a recent fundraiser in Palm Beach hosted by hedge fund manager John Paulson, Trump reiterated his commitment to reinstating these tax provisions, a pledge that has resonated strongly with his wealthy supporters and potential donors.

Amid the backdrop of the Palm Beach International Boat Show, where over 800 boats were showcased and more than 55,000 visitors attended, the potential impact of the upcoming presidential election on luxury asset purchases became a focal point of discussion among industry insiders. According to the Post report, a source involved with the event highlighted a palpable sense of anticipation, with many attendees deliberating whether to delay purchasing decisions until after the election, reflecting broader trends within the luxury sectors of yachts and private jets.

The consideration of postponing such significant investments is driven by the Republican Party’s promises to reinstate full tax write-offs for certain business expenses, including those associated with the operation and purchase of yachts and jets, the Post report said. These incentives are highly attractive to businesses and wealthy individuals, offering substantial financial benefits that can significantly influence purchasing decisions.

The yacht and private jet industries are notoriously discreet, often characterized by private sales and a clientele that values confidentiality. This privacy extends to the sales figures of events like the boat show, which remain undisclosed, adding an element of mystery to the market’s dynamics. However, the Post report pointed out that the sentiment among potential buyers at the show was clear, with many opting to wait and see how the political landscape evolves, especially regarding tax policy, before committing to large expenditures.

This strategic postponement is corroborated by trends noted by industry experts such as Michael Mikolay, CEO of Mikolay Jet Group. The report in the Post said that Mikolay has observed a slowdown in demand across various classes of private aircraft. For instance, the market for super-midsize jets, such as the Gulfstream G280 or Bombardier Challenger 300 — capable of flying distances like New York to London — has seen a dip. These aircraft, while luxurious and efficient, come with a hefty price tag starting around $12 million. Similarly, demand for ultra-long range aircraft, which can cost upwards of $75 million and cover distances from New York City to the Middle East, like the Bombardier Global 6000 or Gulfstream G700, has also softened.

The Post report said that Mikolay also pointed out that the current market for pre-owned jets is facing a surplus, with supply outstripping demand. This observation is reflected in the sales figures: between October 2023 and March 2024, there were 719 jets sold, a decline from the 815 jets sold during the same period the year prior.

These trends suggest a cautious approach among buyers, who are sensitive to changes in economic policies that could affect their investment returns. As explained in the Post report, the possibility of restored tax benefits plays a significant role in this dynamic, potentially leading to deferred decisions on high-value purchases until after the election’s outcome is clear.

The situation in the yacht market presents a varied picture. According to super yacht broker Jamie Edmiston, the most luxurious yachts—those costing upwards of $65 million—continue to attract international buyers without a noticeable decline in sales, as per the information contained in the Post report, However, the market for slightly less expensive yachts, ranging from $40 million to $65 million, is experiencing a softening. This indicates that while the ultra-luxury segment remains resilient, the broader market is becoming more cautious, likely due to economic factors and the anticipation of potential changes in tax policy.

Tax considerations are particularly influential in the decision-making processes of those purchasing luxury assets for business purposes. As was reported by the Post, one source in the jet industry noted that while personal luxury expenditures such as purchasing a high-end Birkin bag may proceed uninhibited, investments in business assets such as jets are scrutinized more closely for potential tax savings. The possibility of major tax incentives, such as those seen in previous administrations, can lead to deferred purchasing decisions. The report added that business owners, understanding the substantial savings that could arise from favorable tax legislation, are inclined to delay acquisitions until the fiscal environment becomes clearer.

This sensitivity to tax implications is not unique to the super-wealthy but is a common factor across all economic segments—everyone seeks to minimize their tax liabilities within the bounds of the law. This strategic financial behavior is especially pronounced during election years, as noted by Amanda Applegate, a partner at Soar Aviation Law. The Post reported that she observed that sales typically slow down in presidential election years, with the slowdown becoming more pronounced as the election nears, particularly around August.

David Hernandez, Chair of Business Aviation and Regulation practice at the law firm VedderPrice, provided insights to the Post concerning the challenges and strategies involved in these high-stakes investments.

Hernandez advises his clients on the risks associated with delaying purchases in anticipation of more favorable tax treatments. While the lure of potential tax savings is significant, this strategy does not come without its pitfalls, as was detailed in the Post report. One major risk is the possibility of increased prices at the end of the fiscal year. Sellers are often aware that buyers who delay their purchases in hopes of capitalizing on tax breaks might become desperate as the year closes. This can lead to inflated prices, negating some of the financial benefits the buyer might have gained from any new tax incentives.

Moreover, Hernandez highlighted another growing concern that is making potential buyers hesitant: increased scrutiny by the IRS. As was noted in the Post report, following an announcement in February, the IRS has ramped up audits of jet owners, particularly targeting high-income individuals who might be using these expensive assets for personal rather than business-related travel. IRS Commissioner Danny Werfel emphasized that with expanded resources, the IRS is intensifying its efforts to ensure that those who claim business deductions for aircraft are genuinely using them for legitimate business purposes, such as flying to meet clients or oversee investments, the Post added. This move is part of a broader initiative to ensure that high-income groups meet their tax responsibilities without exploiting loopholes.

The IRS’s focus is on verifying the actual use of private jets that are written off as business expenses. This means that owners need to be diligent about documenting their use of the aircraft to substantiate their tax deductions. Pointed out in the Post report was that the misuse of such deductions for personal travel, such as trips to vacation destinations like the Bahamas, could lead to significant penalties and back taxes, adding a layer of financial and legal risk to owning a private jet.

This enhanced scrutiny has added a “chilling factor” to the market, as potential buyers must now weigh the benefits of owning a private jet against the increased risk of audits and the implications of being found non-compliant with tax laws. The combination of potentially higher prices due to strategic purchasing delays and the risk of rigorous tax audits is reshaping how individuals approach the acquisition of luxury aircraft.