Are you interested in learning to fly but find the cost associated with training to be daunting? Surprisingly, the IRS may allow you to write off the cost of obtaining your pilot’s license under certain circumstances. This article explores this topic in more detail and may help you determine if you are eligible for this unique tax deduction.
Flight training expenses fall under the education expense rules. IRS Regulations state that, in general, education expenses that (1) maintain or improve skills required in a trade or business; or (2) meet the express requirements of your employer or applicable laws and regulations required for retention of salary or employment are deductible. This criteria, by definition, precludes education expenses that qualify a taxpayer for a new trade or business or are purely personal in nature. An example of non-deductibility is a private pilot who wants to deduct the cost of obtaining a flight instructor certificate. A Certified Flight Instructor (CFI) certificate qualifies a pilot to instruct, while a standard private pilot’s license does not. In this case, the private pilot’s cost for the initial flight instructor certification is not permitted as a tax deduction.
However, if the pilot meets either of the two aforementioned requirements without triggering new employment qualifications, the cost of flight training qualifies as a business expense. Federal Aviation Regulations prohibit private pilots from operating commercially. This restriction disqualifies the private certificate and its ratings from the qualifications of a “new occupation or trade.” In short, the cost of obtaining a non-commercial pilot’s license and additional ratings is tax deductible when used in conjunction with a business or employment. For example, adding an instrument rating to a private certificate, may help a salesperson better serve clients in remote areas or in areas afflicted with inclement weather. If the pilot can reasonably justify that the cost of an instrument flight rules (IFR) rating is reasonable and necessary to their business, then it could be taken as a qualified business expense. This express situation has been upheld in multiple Tax Court cases, across several occupational fields. Since the cost of flying lessons can easily exceed $10,000, substantial savings and tax planning opportunities are available.
Learning to fly can be an exciting and liberating pursuit. Understanding the unique tax aspects of flight training expenses can help get you off the ground by reducing the cost burden commonly associated with becoming a pilot. Please feel free to contact your L&B professional at 858-558-9200 if you have any questions.