The Left Seat
T
by Bob Worthington
© Copyright 2021 All rights reserved!
hroughout my ownership of aircraft, every airplane was a tax deduction (a business expense). I was an instrument-rated Bob Worthington private pilot, I did not possess any aviation-related business, I was not a commercial pilot… I had fulltime employment elsewhere. I will explain what I did, how I did it, and how I remained legal. Keep in mind that claiming your airplane as a tax
Is Your Airplane A Tax Deduction? Can it be? Maybe! deduction comes under the purview of the Internal Revenue Service and the Federal Aviation Administration. Additionally, both state and local regulations may also apply. Appropriate resources are listed at the end of this column. Understand that a pilot with a Commercial Pilot Certificate will have more options for using their airplane in a business than a Private Pilot. Having an airplane as a tax deduction is not a complex matter. To be safe, an aircraft owner should understand applicable IRS and FAA rules that regulate what you want to do. One must also be very adept at record keeping as that fact often separates winners from losers when justifying what you do with the federal government. To me, the biggest part of claiming your aircraft as a tax/business deduction is to be honest. Scheming to declare your airplane as a business expense when it is not, is just looking for trouble. Additionally, defending your business can be time consuming and expensive. Here are some fast IRS rules. To claim your airplane as a business expense, then obviously, one must have a business. It can be full-time or part-time. A business should be designed to earn a profit (i.e. not a hobby). A business must be created to operate in a manner to make money. Now, there is no federal law requiring any business to be profitable, but the assumption is that the owner is doing everything possible to be profitable. For many businesses, the path to making money may take years. For example, USA Today took almost five years to find income exceeding expenses. What is an acceptable expense? The IRS says ordinary and necessary. Ordinary means common to managing the business. If one makes shoes, purchasing leather is an ordinary expense. Necessary refers to the cost of something that is helpful or appropriate to run the business. If one delivers fuel to gas stations, having a tanker truck is necessary. Being necessary does not mandate it to be indispensable or requisite for the business. An example is a business that has a shaded patio outside the office. This is not directly related to what the business does. But indirectly, it can be a business expense as it provides a safe place for employees to eat lunch and keeps them out of the hot sun while taking a break outside. What constitutes a business? For tax purposes, there are several forms such as a sole proprietorship (you are the only owner), partnership, and different types of corporations. For me, I was always a sole proprietor, requiring me only to say, I am in business (although state and municipal laws may have their own regulations to follow). If protection of personal assets is a concern, consider a Limited Liability Company (LLC). The structure of an LLC is governed by state statutes. I became a pilot because my Army assignment required me to travel. Often going by commercial air would take most of a day when my destination would be only 4 hours or so by private aircraft. Pilot friends suggested flying myself would be quicker (and more fun). Thus, the Army paid me to fly my own airplane. Army reimbursements did not cover all my flying expenses, but at that time, the IRS allowed expenses beyond my compensation being tax deductible. About 70 to 80 percent of my flying was tax deductible. When I retired from the Army, my flying was no longer a tax deduction. So now I had to find another way to make, at least, part of my flying a legitimate expense for tax purposes. I needed to find a business that paid, was legitimate, required my airplane, and could be done in my spare time (I was a full-time business professor). Since I was a writer (business, firearms, and psychology), I figured being an aviation writer might work. The editor and home office of a weekly aviation newspaper I subscribed to, was
8 DECEMBER 2021/JANUARY 2022 MIDWEST FLYER MAGAZINE
