Cessna Citation XL
Full-time W-2 crew salaries cover all 400 annual hours (50 owner + 350 charter). Texas property tax uses the Part 135 commercial aircraft formula. One-time $10,000 conformity fee included in Year 1; not recurring.
Footprint: 51.83 × 55.67 = 2,885 sq ft Rate: $1.85/sq ft/month × 12 = $22.20/sq ft/yr
Annual Hangar Cost: 2,885 × $1.85 × 12 = $64,044
Taxable value = FMV × (1.5 × revenue TX departures) ÷ 8,760
Total departures: 400 hrs ÷ 2.0 avg hrs/departure = 200 Texas departures (60%): 120
Fraction: (1.5 × 120) ÷ 8,760 = 2.055% of FMV
Taxable value: $3,500,000 × 2.055% = $71,925 Tax @ 2.0%: $1,439/yr
Part 91 business aircraft formula: $3,500,000 × (1−40%) × 2.0% = $42,000/yr
Annual savings from Part 135 placement: $40,561
Subtotal salaries: $368,000 Benefits burden @ 22%: $80,960
Total annual crew cost: $448,960 — covers all 400 hours; captains rotate per Part 135 duty limits
AuxAdvantage at ~$30/APU hr Annual cost: $1,200
| Hangar — KEDC | 2,885 sq ft × $1.85/mo × 12. Escalated 2.5%/yr. | $64,044 |
| Management Fee (Part 135 Operator) | $5,000/mo. Scheduling, dispatch, charter marketing, FAA compliance, maintenance coordination, record-keeping, owner reporting. Does not include maintenance labor, parts, or fuel. | $60,000 |
| Texas Property Tax (commercial formula) | FMV $3,500,000 × 2.055% taxable fraction × 2.0% effective rate = $1,439. Declines as FMV drops. Saves $40,561/yr vs. Part 91 formula of $42,000. Annual protest rights available. | $1,439 |
| Hull & Liability Insurance (Part 135) | $3.5M hull; $100M+ third-party liability; passenger liability per Part 135 requirements. Part 135 operator retains operational liability on all charter flights. Escalated 2.5%/yr. | $48,000 |
| W-2 Crew — 2 Captains + 1 SIC | CAP 1 $150K, CAP 2 $130K, SIC $88K. Salaries $368,000 + 22% benefits burden $80,960. Covers all 400 annual hours. Escalated 3%/yr. | $448,960 |
| Crew Recurrent Training | Annual simulator event: CAP 1 ~$14,000, CAP 2 ~$14,000, SIC ~$9,500. Part 135 requires annual proficiency checks. Full cost borne by owner (W-2 employees). Escalated 3%/yr. | $37,500 |
| APU Program (AuxAdvantage) | ~10% utilization = 40 APU hrs/yr × $30/hr. Covers scheduled inspections and unscheduled events. Escalated 2.5%/yr. | $1,200 |
| Scheduled Maintenance (non-program) | 400 total annual hours. Non-program items scale with cycles. Texas maintenance tax exemption applies (TAC §3.280) — all repair work for a certificated carrier is exempt from Texas sales tax. Escalated 5%/yr. | $55,000 |
| Avionics & Subscriptions | Jeppesen, SiriusXM, ForeFlight Pro, Primus 1000 database cycles, ADSB-In, Part 135 compliance software. Escalated 2.5%/yr. | $8,400 |
| One-Time Conformity Fee | FAA conformity inspection, manual additions, enrollment on Part 135 certificate. Year 1 only — not recurring. | $10,000 |
| Miscellaneous Fixed | Interior detailing, exterior wash cycles, ground handling retainer, logbook/records, LLC annual costs (~$300/yr Texas franchise tax). | $3,600 |
| Total Fixed Annual Costs — Year 1 (incl. one-time conformity) | $738,143 | |
David receives 85% of gross charter revenue and pays his own variable costs on all 400 hours. Charter fuel, handling, and catering are David's expense in this structure — not deducted from gross before the 85/15 split. Engine and airframe programs run on all 400 hours.
Covers: scheduled inspections, HSI (2,500 hrs), overhaul (5,000 hrs), unscheduled shop visits, LRU replacements, rental engines. At 400 hrs/yr, first HSI arrives in ~6.25 years from new.
| Fuel — Jet A (all 400 hours) | 217 GPH (PW545A) × $6.50/gal × 400 hrs. Owner pays all fuel including on charter flights. Escalated 3%/yr. | $564,200 |
| PA+ / ESP — Engines (all 400 hours) | $550/hr/engine × 2 engines = $1,100/hr blended × 400 hrs. Full program cost borne by owner. Escalated 4%/yr. | $440,000 |
| ProParts — Airframe (all 400 hours) | ~$175/hr × 400 hrs. Covers avionics LRUs, actuators, wheels, brakes, motors, gauges. Escalated 4%/yr. | $70,000 |
| Landing Fees & Ground Handling (all 400 hrs) | ~$250/hr blended average all flights. Owner pays all handling including on charter flights. Escalated 2.5%/yr. | $100,000 |
| Catering & Cabin Supplies (all 400 hrs) | Charter: 297.5 occupied hrs × $150 = $44,625; Owner: 50 hrs × $50 = $2,500; Repo: $0. Total $47,125. Escalated 2.5%/yr. | $47,125 |
| Total Variable Costs — Year 1 (400 hours) | $1,221,325 | |
Repositioning (15% of 350 hrs): 52.5 hrs × $3,000/hr = $157,500
Gross charter revenue: $1,793,750 Blended rate check: (0.85 × $5,500) + (0.15 × $3,000) = $5,125/hr
David's 85%: $1,524,688/yr Operator retains 15%: $269,063
No Texas sales tax on these payments — commercial carrier exemption applies.
| Occupied charter (85%) | 297.5 hrs × $5,500/hr × 85%. Current market rate for Citation XL in Austin metro, Q2 2026. Escalated 3%/yr. | $1,388,813 |
| Repo revenue (85%) | 52.5 hrs × $3,000/hr × 85%. No FET on repo legs. Escalated 3%/yr. | $133,875 |
| Total Charter Revenue to David | 85% of gross $1,793,750. Escalated 3%/yr in projection. | $1,524,688 |
80% LTV on $3,500,000 — current market value for a well-maintained, program-enrolled 2003 Citation XL. 20-year term; fixed rate. Annual debt service is $64,416 lower than the above-market $4.4M scenario.
Loan Structure — Indicative Terms, Q2 2026
6.5% fixed for a credit-qualified Part 91/135 buyer. 20-year fully amortizing via TVPX, Global Jet Capital, or specialty credit union programs. Closing costs $18K–$28K not included above. Lender consent required before Part 135 charter enrollment — confirm in writing before the conformity fee is paid.
Purchase price $3,500,000 reflects current market for a well-maintained, later-serial, program-enrolled example
Current market band (2026): $2.5M–$3.85M — $3.5M sits in the upper-middle; appropriate for a well-documented aircraft
Depreciation rates applied: Year 1: 3.5% | Year 2: 3.0% | Year 3: 3.0% | Year 4: 2.5% | Year 5: 2.5%
Rate normalizes at market value — no above-market premium to absorb in Year 1.
Projected exit value, end of Year 5: ~$3,021,000 Total real value loss: ~$479,000
400 hrs/yr constant. One-time $10,000 conformity fee in Year 1 only. Escalation: Fuel +3%/yr | Programs +4%/yr | Crew +3%/yr | Maintenance +5%/yr | Property tax tracks depreciation curve | Charter revenue +3%/yr | All other fixed +2.5%/yr | Debt service fixed.
| Cost / Revenue Category | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | 5-Yr Total |
|---|---|---|---|---|---|---|
| Fixed Costs | ||||||
| Hangar — KEDC | $64,044 | $65,645 | $67,286 | $68,968 | $70,692 | $336,635 |
| Management Fee | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | $315,380 |
| Texas Property Tax (Part 135) | $1,439 | $1,385 | $1,344 | $1,307 | $1,274 | $6,749 |
| Insurance (Part 135) | $48,000 | $49,200 | $50,430 | $51,691 | $52,983 | $252,304 |
| W-2 Crew (2 CAPs + 1 SIC + burden) | $448,960 | $462,429 | $476,302 | $490,591 | $505,309 | $2,383,591 |
| Crew Recurrent Training | $37,500 | $38,625 | $39,784 | $40,977 | $42,207 | $199,093 |
| APU Program (AuxAdvantage) | $1,200 | $1,230 | $1,261 | $1,293 | $1,325 | $6,309 |
| Maintenance (non-program) | $55,000 | $57,750 | $60,638 | $63,669 | $66,853 | $303,910 |
| Avionics & Subscriptions | $8,400 | $8,610 | $8,825 | $9,046 | $9,272 | $44,153 |
| One-Time Conformity Fee | $10,000 | — | — | — | — | $10,000 |
| Miscellaneous Fixed | $3,600 | $3,690 | $3,782 | $3,877 | $3,974 | $18,923 |
| Subtotal — Fixed | $738,143 | $750,064 | $772,690 | $796,032 | $820,118 | $3,877,047 |
| Variable Costs (All 400 hrs) | ||||||
| Fuel (Jet A) | $564,200 | $581,126 | $598,560 | $616,517 | $635,012 | $2,995,415 |
| PA+ / ESP — Engines | $440,000 | $457,600 | $475,904 | $494,940 | $514,737 | $2,383,181 |
| ProParts — Airframe | $70,000 | $72,800 | $75,712 | $78,740 | $81,890 | $379,142 |
| Landing Fees & Handling | $100,000 | $102,500 | $105,063 | $107,689 | $110,381 | $525,633 |
| Catering & Cabin Supplies | $47,125 | $48,303 | $49,511 | $50,748 | $52,017 | $247,704 |
| Subtotal — Variable | $1,221,325 | $1,262,329 | $1,304,750 | $1,348,634 | $1,394,037 | $6,531,075 |
| Debt Service | ||||||
| Annual Loan Payment (fixed) | $250,524 | $250,524 | $250,524 | $250,524 | $250,524 | $1,252,620 |
| TOTAL CASH OUT | $2,209,992 | $2,262,917 | $2,327,964 | $2,395,190 | $2,464,679 | $11,660,742 |
| Charter Revenue (85% of Gross) | ||||||
| Gross Charter Revenue | $1,793,750 | $1,847,563 | $1,902,990 | $1,960,079 | $2,018,882 | $9,523,264 |
| David's 85% Share | $1,524,688 | $1,570,429 | $1,617,542 | $1,666,068 | $1,716,050 | $8,094,777 |
| NET CASH COST AFTER CHARTER REVENUE | $685,304 | $692,488 | $710,422 | $729,122 | $748,629 | $3,565,965 |
| Aircraft Value & Real Depreciation | ||||||
| Aircraft Value — Start of Year | $3,500,000 | $3,377,500 | $3,276,175 | $3,177,890 | $3,098,443 | — |
| Depreciation Rate | 3.5% | 3.0% | 3.0% | 2.5% | 2.5% | — |
| Annual Value Loss | ($122,500) | ($101,325) | ($98,285) | ($79,447) | ($77,461) | ($479,018) |
| Aircraft Value — End of Year | $3,377,500 | $3,276,175 | $3,177,890 | $3,098,443 | $3,020,982 | — |
| Net Equity Position | ||||||
| Loan Balance — End of Year | ~$2,756,000 | ~$2,709,000 | ~$2,659,000 | ~$2,607,000 | ~$2,525,000 | — |
| Net Equity (Value − Loan) | $621,500 | $567,175 | $518,890 | $491,443 | $495,982 | — |
| ALL-IN ANNUAL COST (Net Cash + Value Loss) | $807,804 | $793,813 | $808,707 | $808,569 | $826,090 | $4,044,983 |
Part 91 business aircraft formula: $3,500,000 × (1−40%) × 2.0% = $42,000/yr
Annual savings: $40,561. Five-year cumulative (declining as FMV drops): approximately $193,000.
The hybrid formula argument by appraisal districts is not authorized under the Texas Property Tax Code.
At $1,793,750 gross annual charter revenue × 60% Texas departures × 8.25% = $88,791/yr that would be owed under a Part 91 dry lease structure.
Under Part 135: $0. Five-year savings at escalating revenue: approximately $443,000.
Five-Year Cumulative Tax Benefit Summary
| Tax Item | Part 91 Dry Lease | Part 135 Charter Mgmt | 5-Yr Savings |
|---|---|---|---|
| Texas Property Tax (5 years) | ~$197,000 | ~$6,749 | ~$190,251 |
| Texas Sales Tax on Lease Revenue | ~$443,000 | $0 (carrier exemption) | ~$443,000 |
| Texas Use Tax at Acquisition | $288,750 exposure | $0 (eliminated by structure) | $288,750 |
| Texas Maintenance Tax Exemption | Pay 8.25% on all maintenance | Exempt (TAC §3.280) | ~$21,000+ |
| Federal Excise Tax (owner flights) | $0 (Part 91) | $0 (owner exemption) | No change |
| Total Identifiable Tax Advantage | — | — | ~$943,001+ |
The One Big Beautiful Bill Act permanently reinstated 100% bonus for qualifying aircraft placed in service after January 20, 2025. The qualification test is identical to MACRS eligibility — no separate bonus hurdle. A pre-owned XL David has not previously used qualifies.
Part 135 MACRS: 7-year (vs. 5-year under Part 91). Under 100% OBBBA bonus, the recovery period is academic in Year 1 — the full purchase price is deducted regardless. Period matters if the QBU test fails in a future year (triggers ADS: 12-year straight-line under Part 135 vs. 6 years under Part 91).
Recapture at Year 5 exit: Near-zero book value + ~$3,021,000 projected sale proceeds = ~$3,021,000 in ordinary income under IRC §1245. At 37%: ~$1,118,000 in federal recapture tax. The net benefit over the hold period is still very substantial, but this is a known and modelable exit-year liability.
Section 280F(d)(4)(C) exception: If substantially all aircraft use is in providing transportation to unrelated persons for compensation, the aircraft may step outside the Section 280F listed property rules entirely — eliminating the 50% QBU test and recapture risk. 350 charter hours to unrelated parties is a strong fact pattern for this argument. Confirm applicability with aviation tax counsel.
LLC Ownership Structure
Single-purpose LLC before aircraft registration. Provides liability insulation, cleaner FAA ownership chain, and structural clarity for the Part 135 lease. Single-member LLC taxed as a disregarded entity is standard practice under Section 280F. Formation ~$1,500; Texas franchise tax ~$300/yr.
Texas Use Tax — Structure at Closing
$288,750 use tax exposure (8.25% × $3.5M) is eliminated when aircraft is leased to the Part 135 operator under the commercial carrier exemption (Texas Tax Code Ch. 163). Structure and documentation must be in place before aircraft enters Texas. Aviation tax counsel required.
Lender Consent
Loan covenants almost certainly require lender approval before Part 135 charter enrollment. Confirm in writing before the $10,000 conformity fee is paid and the FAA conformity inspection is scheduled. Most lenders permit with written notice; some restrict or require higher insurance minimums.
Passive Activity & Grouping Election
Leasing to a Part 135 operator is a rental activity under IRC §469, making depreciation deductions passive by default. The grouping election (if David's operating business and aircraft are in related entities) or the seven-day-or-less exception may address this. Analysis with David's specific tax situation must precede closing.
Bonus Depreciation & Recapture Planning
Year 1 deduction of $3,500,000 at 37% = ~$1,295,000 federal tax savings. Recapture at Year 5 sale (~$3.02M vs. near-zero book value) = ~$1,118,000 in ordinary income and ~$414,000 in federal recapture tax. Net benefit over the hold period is still substantial. Section 280F(d)(4)(C) may eliminate recapture risk entirely given the volume of unrelated-party charter use.
Texas Commercial Formula — Genuine Operations Required
The Part 135 commercial property tax formula produces $1,439/yr vs. $42,000 under Part 91. Texas Comptroller and county appraisal districts have stepped up scrutiny of Part 135 claims. 350 charter hours/yr is genuine commercial activity — document every revenue Texas departure. File the annual rendition by April 15. Retain aviation tax counsel who has litigated these issues in Travis County.
Scheduling Priority
At 350 charter + 50 owner hours, the aircraft operates nearly every business week. David's access priority must be explicitly defined in the management agreement with advance notice periods, blackout windows, and conflict resolution protocol. This is a contract negotiation point, not an afterthought.
Part 135 Crew Duty Time
Part 135 mandatory rest and duty limits apply. At 400 total hours, the 1.5-crew structure (2 captains rotating + 1 SIC) is designed to keep both captains within legal limits. The management agreement should specify how duty time is tracked and how scheduling conflicts are resolved.
At $5,500 occupied and $3,000 repo, this airplane generates $1,793,750 in gross annual charter revenue. David's 85% is $1,524,688. That's real money doing real work, and it's covering 69 cents of every dollar David spends on the aircraft before he boards a single time. Net cash cost in Year 1 is $685,304 — which sounds like a number until you remember that it's buying David 50 hours a year on a professionally operated midsize jet with two captains and an SIC, an asset that's building equity, and a tax structure that's shielding him from nearly $943,000 in cumulative tax exposure he'd carry under a Part 91 dry lease.
The rate sensitivity is worth understanding. Every $100/hr increase in the occupied charter rate adds approximately $25,300/yr to David's net revenue at 297.5 occupied hours × 85%. If the market runs to $5,800 occupied — which you noted is plausible — David's annual charter revenue climbs to roughly $1,620,000 and net cash cost drops below $600,000. If it runs to $6,000, he's below $525,000 annually. The floor matters more than the ceiling here: document the $5,125 blended rate as the base case, let the market upside be what it is.
The Texas tax story is the foundation that doesn't get enough credit in most ownership conversations. The property tax swing from $42,000 to $1,439 happens because this aircraft is conducting genuine commercial operations, not because of any paperwork maneuver. It accrues every January 1st regardless of whether charter demand is strong or weak. The sales tax exemption on lease payments, the use tax structural solution at acquisition, and the maintenance tax exemption stack on top. Together those four items represent $943,000 in five-year tax advantage. Charter revenue is the upside. The tax math is the foundation.
The engine program at $1,100/hr blended on 400 hours is $440,000 annually and the single largest variable cost in this analysis. At that utilization rate it's also correct and unavoidable. What it buys is predictability on a PW545A that's running hard — no $1,000,000+ overhaul surprises, lender confidence, and program-enrolled engines that command full market value at resale. The 400-hour annual cadence means the engines are cycling through scheduled maintenance at a reasonable pace rather than accumulating Low Utilization Inspection risk from sitting idle.
The $3,500,000 purchase price is the right number. It reflects what the market actually supports for a well-maintained, later-serial, program-enrolled 2003 XL — not what a seller hopes the market will pay. Buying at market means the Year 1 depreciation rate normalizes at 3.5% rather than the 6% required to absorb an above-market premium. The exit math is cleaner, the lender appraisal goes smoothly, and David doesn't spend the first two years of ownership writing down a purchase price the market never agreed with.
Fuel: PW545A combined 217 GPH × $6.50/gal, Austin-area Jet A, Q2 2026. Escalated 3%/yr. Applied to all 400 annual hours.
Engine Program (PA+ / ESP): $550/hr/engine × 2 = $1,100/hr blended × 400 hrs = $440,000/yr. Covers scheduled inspections, HSI (2,500 hrs), overhaul (5,000 hrs), unscheduled shop visits, LRU replacements, rental engines. Escalated 4%/yr.
ProParts: Textron Aviation ProParts ~$175/hr × 400 hours. Escalated 4%/yr.
Hangar: 51.83 ft × 55.67 ft = 2,885 sq ft × $1.85/sq ft/month × 12. Escalated 2.5%/yr.
Texas Property Tax (Part 135 formula): Commercial aircraft formula: FMV × (1.5 × 120 TX departures) ÷ 8,760 = 2.055%. Applied to beginning-of-year market value. Travis County effective rate 2.0%. Annual protest rights available. Texas appraisal districts may not apply a hybrid formula — the commercial formula applies in full if the aircraft qualifies as a commercial aircraft.
Texas Sales Tax: Texas Tax Code Ch. 163 exempts lease/rental to a certificated carrier from sales and use tax. Under Part 91 dry lease to non-carrier: 8.25% sales tax on Texas-departure revenue payments required. At $1,793,750 gross × 60% Texas departures × 8.25% = $88,791/yr avoided. Five-year savings ~$443,000.
Texas Use Tax: $288,750 exposure (8.25% × $3,500,000) eliminated by commercial carrier exemption when aircraft leased to Part 135 operator. Structure and documentation must be in place before aircraft enters Texas.
Texas Maintenance Tax Exemption: TAC §3.280 exempts all maintenance, repair, and restoration for a certificated carrier from Texas sales and use tax. Non-program maintenance $55,000/yr × 8.25% = $4,538/yr avoided.
FET: Owner flights under Part 135 exempt from 7.5% FET under IRS final regulations. Charter flights: FET collected and remitted by Part 135 operator from charter customers.
Insurance: $48,000/yr estimated, Part 135 commercial operations, $3.5M hull, $100M+ liability. Escalated 2.5%/yr.
Crew: 2 captains + 1 SIC, W-2. CAP 1 $150K, CAP 2 $130K, SIC $88K. Benefits burden 22% ($80,960). Total $448,960/yr. Escalated 3%/yr. Covers all 400 hours.
Charter Revenue: 85% to David / 15% to Part 135 operator. Occupied: 297.5 hrs × $5,500 = $1,636,250; Repo: 52.5 hrs × $3,000 = $157,500; Gross $1,793,750; David's 85% = $1,524,688/yr. Blended rate $5,125/hr. Escalated 3%/yr. Note: every $100/hr increase in occupied rate adds ~$25,300/yr to David's net revenue.
Depreciation: Market-based economic depreciation only. Rates: 3.5%, 3.0%, 3.0%, 2.5%, 2.5%. $3,500,000 purchase price reflects current market — no above-market premium to absorb. Exit value ~$3,021,000 at Year 5.
100% Bonus Depreciation (OBBBA): Signed July 4, 2025. Permanent 100% bonus, qualifying aircraft placed in service after January 20, 2025. Year 1 deduction: $3,500,000. Estimated federal savings at 37%: ~$1,295,000. Recapture at exit: ~$3.02M ordinary income (~$1,118,000 federal tax at 37%). Third-party charter hours do not count toward owner's QBU. Section 280F(d)(4)(C) exception may apply given volume of unrelated-party charter use.
Financing: 6.5% fixed, $2,800,000 loan, 20-year amortization, $20,877/mo, $250,524/yr. Lender consent required for Part 135 enrollment.
Management Fee: $5,000/month = $60,000/yr. One-time $10,000 conformity fee, Year 1 only.
APU: AuxAdvantage at ~$30/hr × 40 APU hrs (10% of flight time). Annual cost $1,200.
Texas Tax White Paper: Texas tax analysis informed by Scissortail Aviation Advisors white paper "The Tax Case for Placing Your Texas Aircraft on a Part 135 Charter Certificate" (2026), authored by Clayton Corn.
All figures in USD. Prepared by Scissortail Aviation Advisors for David Martineau, Q2 2026. All costs are estimates; actual costs will vary. This analysis does not constitute legal, tax, or financial advice. Engage qualified aviation tax counsel and aviation attorney before making any acquisition or certificate placement decisions.