Airplane as a business expense/deduction/write off, whatever?

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moparrob66

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Moparrob
I searched the forum but couldnt find anything. Im building a kit but considering the purchase of an old 172 to fly until the kit is done and hopefully get instrument rated along the way.

We arent super rich, but we try to limit our tax liability whenever possible and clearly legal. My wife is an RN and she is often tempted to work in California as a traveling nurse or permanent employee of a higher paying hospital there. She could easily triple her pay by doing so.

Naturally, getting to and from california (from idaho) and staying there during her work week will significantly reduce the gains, but after airlines and hotels she would still be ahead.

The hamster wheel between my ears starts turning...

If airlines, taxis and hotels would be tax deductible business expenses as she works outside of her tax home, why wouldnt the airplane and its assorted expenses not be? It was suggested that I would need my CPL for her to pay me to be her pilot, but what if the plane belongs to an LLC and she pays the LLC for the expenses, not my private pilot time. Annoying her is all the reward I need.

I suspect she could then submit her payments to the LLC as her business expenses, and the LLC would be operating at a break even point and thus not have any taxable income. I wouldnt be paid for my time, so no CPL required.

I dont expect free legal advice, but I'd rather have a better understanding before I pay a tax attorney to tell me I'm crazy.
 
This is kind of 2 different questions. The IRS doesn't care what the FAA thinks and the FAA doesn't care what the IRS thinks. One non aviation example of this is the IRS expects a drug dealer to pay income tax on their ill-gotten gains, that doesn't make selling drugs legal. There a number is discussions on the FAA side of this discussion so I won't try to address that. The short answer is while it might be possible it probably is not worth it.

From an income tax perspective unless you are solely using this plane for business, you can only deduct the portion being used in business. So in your case what that would look like is you could probably deduct the gas and oil burned why you are on this business trip. The initial cost of the airplane would not be deductible. If you get audited one of the first things that auditors look at is large expenses that you deducted that could also be used for non-business purposes...such as airplanes. You better have proof that you only deducted the portion that was used in business.
 
moparrob66 said:
I searched the forum but couldnt find anything. Im building a kit but considering the purchase of an old 172 to fly until the kit is done and hopefully get instrument rated along the way.

We arent super rich, but we try to limit our tax liability whenever possible and clearly legal. My wife is an RN and she is often tempted to work in California as a traveling nurse or permanent employee of a higher paying hospital there. She could easily triple her pay by doing so.

Naturally, getting to and from california (from idaho) and staying there during her work week will significantly reduce the gains, but after airlines and hotels she would still be ahead.

The hamster wheel between my ears starts turning...

If airlines, taxis and hotels would be tax deductible business expenses as she works outside of her tax home, why wouldnt the airplane and its assorted expenses not be? It was suggested that I would need my CPL for her to pay me to be her pilot, but what if the plane belongs to an LLC and she pays the LLC for the expenses, not my private pilot time. Annoying her is all the reward I need.

I suspect she could then submit her payments to the LLC as her business expenses, and the LLC would be operating at a break even point and thus not have any taxable income. I wouldnt be paid for my time, so no CPL required.

I dont expect free legal advice, but I'd rather have a better understanding before I pay a tax attorney to tell me I'm crazy.
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I just heard this week that some CA hospitals pay for flights and hotels for travel nurses.
 
Good info thanks! The only way owning a plane could be more appealing is if it pays for itself.
 
She can't deduct anything on commute costs to her normal place of employment. If she was employed somewhere near home and had to travel as part of her job, then that travel would be deductible but a lot would depend on whether she's an employee or a contractor.
 
As I understand it, Travel Nurses are subcontractors with staffing agencies who contract with hospitals. Typically their travel and lodging is a business expense since they stay for days or weeks on end.

My wife has found 13 week assignments that are 8 days on (12 hr shifts) and 8 days off. Travel nurses usually deduct these expenses with apparent success. If its acceptable to deduct airline tickets and Uber rides, that would be better spent paying for engine overhauls, Aeroshell and 100ll, at least during VFR season.

I'd like to fly her down there and back every 8 days. My return home trip would probably not be deductable, but it will build time for me and my aspiring airline pilot teenager.

I cant fly as fast as an airliner, but definitely faster than TSA and my local GA strip is 15 minutes vs 60-80 minutes away from the nearest commercial terminal.

I'll definitely consult a tax attorney before I file any forms, but its always nice to rationalize these big expenses somehow.
 
moparrob66 said:
… its always nice to rationalize these big expenses somehow.
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There is no rationalizing a $60K motor + prop bill that sidelines your plane for six months.

There’s no rationalizing $450/mo for a hanger that’s empty for six months while your plane is in the shop waiting for the engine and prop.

And there sure ain’t rationalizing an iffy trip because that new motor and prop just got hung and the logbook entry is still wet.

GA as a reliable, on demand transportation method isn’t a good thing to bet on.
 
moparrob66 said:
As I understand it, Travel Nurses are subcontractors with staffing agencies who contract with hospitals. Typically their travel and lodging is a business expense since they stay for days or weeks on end.

My wife has found 13 week assignments that are 8 days on (12 hr shifts) and 8 days off. Travel nurses usually deduct these expenses with apparent success. If its acceptable to deduct airline tickets and Uber rides, that would be better spent paying for engine overhauls, Aeroshell and 100ll, at least during VFR season.

I'd like to fly her down there and back every 8 days. My return home trip would probably not be deductable, but it will build time for me and my aspiring airline pilot teenager.

I cant fly as fast as an airliner, but definitely faster than TSA and my local GA strip is 15 minutes vs 60-80 minutes away from the nearest commercial terminal.

I'll definitely consult a tax attorney before I file any forms, but its always nice to rationalize these big expenses somehow.
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Is her income reported via IRS form W2 or 1099?
 
moparrob66 said:
I searched the forum but couldnt find anything. Im building a kit but considering the purchase of an old 172 to fly until the kit is done and hopefully get instrument rated along the way.

We arent super rich, but we try to limit our tax liability whenever possible and clearly legal. My wife is an RN and she is often tempted to work in California as a traveling nurse or permanent employee of a higher paying hospital there. She could easily triple her pay by doing so.

Naturally, getting to and from california (from idaho) and staying there during her work week will significantly reduce the gains, but after airlines and hotels she would still be ahead.

The hamster wheel between my ears starts turning...

If airlines, taxis and hotels would be tax deductible business expenses as she works outside of her tax home, why wouldnt the airplane and its assorted expenses not be? It was suggested that I would need my CPL for her to pay me to be her pilot, but what if the plane belongs to an LLC and she pays the LLC for the expenses, not my private pilot time. Annoying her is all the reward I need.

I suspect she could then submit her payments to the LLC as her business expenses, and the LLC would be operating at a break even point and thus not have any taxable income. I wouldnt be paid for my time, so no CPL required.

I dont expect free legal advice, but I'd rather have a better understanding before I pay a tax attorney to tell me I'm crazy.
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Person means an individual, firm, partnership, corporation, company, association, joint-stock association, or governmental entity. It includes a trustee, receiver, assignee, or similar representative of any of them.

a) Except as provided in paragraphs (b) through (h) of this section, no person who holds a private pilot certificate may act as pilot in command of an aircraft that is carrying passengers or property for compensation or hire; nor may that person, for compensation or hire, act as pilot in command of an aircraft.


Another person is paying for the flight. Your free flight time is compensation - even if you do not receive money.

And if that doesn’t convince you, a 172, XC and trying to maintain employment commitments is nuts. Ranks up there with the stupidest things I have heard in GA lately.

Pilot in command (PIC), Aircraft, enVironment, and External pressures (PAVE),
 
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As mentioned, the IRS and FAA are the big obstacles. Read up on the FAA regs regarding covering or sharing costs as a private pilot, then being compensated to fly as a commercial pilot. Then read about their regs regarding “holding out” as a commercial operator. Even the simplest flying arrangement can easily fall into being considered a commercial operator. There are several opinion letters produced by FAA council regarding these matters.

The IRS is another animal. Their tax laws spell out what is allowed. Commuting expenses are generally not deductible, but if you justify it through a LLC or other structure make sure it will stand up to scrutiny in an audit or court case. There are interpretation letters and court cases that can be reviewed. A blanket travel reimbursement or stipend by the contracting agency or hospital (that isn’t paying you for private air travel), may make this all easier.

There are at least a couple of tax advisors that know this stuff inside and out. The NBAA can provide their names.

After you determine your wife is OK flying in “an old 172” then you’ll be dealing with weather issues occasionally challenging the trip. And, having the pressure to get your wife to work takes the fun out of it.

Maybe you can find a reason for both of you to be in the same place at the same time (a job for you?? It might be an easier path to justify the cost even if you didn’t get tax breaks.
 
Read this thread
pilotsofamerica.com

Interesting new Wings Course

"The FAA and Aircraft Owners and Pilots Association (AOPA) discuss protecting your pilot certificate in the new WINGS-credit course ALC-1093, Cost Sharing, Time Building, and Posting on Social Media. The first chapter of the course covers important information that pilots and aircraft...
pilotsofamerica.com pilotsofamerica.com
and take this course
https://bit.ly/alc-1093

This is pretty dodgy from the FAA's standpoint, and if they want to bust you they can find a way to do it.
 
Half Fast said:
Read this thread
pilotsofamerica.com

Interesting new Wings Course

"The FAA and Aircraft Owners and Pilots Association (AOPA) discuss protecting your pilot certificate in the new WINGS-credit course ALC-1093, Cost Sharing, Time Building, and Posting on Social Media. The first chapter of the course covers important information that pilots and aircraft...
pilotsofamerica.com pilotsofamerica.com
and take this course
https://bit.ly/alc-1093

This is pretty dodgy from the FAA's standpoint, and if they want to bust you they can find a way to do it.
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Man, if flying your spouse around requires a commercial and a class II or a 135 cert because you are compensated (goodwill is compensation remember) alot of us are hosed.
 
EdFred said:
Man, if flying your spouse around requires a commercial and a class II or a 135 cert because you are compensated (goodwill is compensation remember) alot of us are hosed.
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Heck, they consider flight hours to be compensation. Pretty tough to fly without accumulating flight hours.

The FAA sucks regarding this topic, and the course they provided is awful. They didn't even bother to have someone from legal on the panel, and the panel's responses were full of stuff like, "You should be careful about this" or "It depends." No solid answers at all, just a lot of imparting dread.
 
EdFred said:
Man, if flying your spouse around requires a commercial and a class II or a 135 cert because you are compensated (goodwill is compensation remember) alot of us are hosed.
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I am 100% in agreement with Ed here. The lengths to which we torture ourselves in these discussions is amazing.

Guess what? A WHOLE LOT of flying breaks the rules if "goodwill" and "flight time" are considered compensation.

1. You get your Private Pilot certificate. You take your mom up as your first passenger. She covers the cost of the rental. You are in violation, as you received free flight time and did not pay your pro-rata share.

2. The next day, you fly your daughter to Grandma and Papa's house for the weekend. You drop her off and fly home to spend a quiet weekend with your wife. You received "goodwill" from your daughter, your parents, and your wife. You did not have a common purpose for the trip, as the kid's purpose was to get spoiled by Grandma and Papa, and your purpose was to get rid of her for a couple of days. You're in violation.

3. Then you fly your wife to go shopping. You get "goodwill" for this. You hate shopping and plan to sit around the airport. You have no common purpose - hers is to go shopping, yours is to go flying. You're in violation.

The rules exist for a good reason, to try to keep unsuspecting and uninformed members of the public safe. They don't exist to provide endless worry and debate about normal family interactions, nor require complicated and torturous semantic workarounds.
 
RussR said:
The rules exist for a good reason, to try to keep unsuspecting and uninformed members of the public safe.
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Yep, that was the intent. In application, the same rules cover flying cargo, so I guess we have to keep those boxes safe, too.

RussR said:
They don't exist to provide endless worry and debate about normal family interactions, nor require complicated and torturous semantic workarounds.
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Agreed, but there's no family & friends exemption.

Best to keep a low profile, a closed mouth, and minimal records.
 
I appreciate everyone's input. What FAR or case law says that by building time in my logbook I'm being compensated?

Im choosing an OLD 172 because... i can afford it. Pretty much. I bought a pile of aluminum (50% completed Zenith 801) and fully intend to complete it, but now I have a kid (4, actually) who needs a career, a wife who has a career but wants to get more out of it, a PPL ASEL and 160 hours.

I understand that there will be times when I cant take my plane and need to go airlines or car and we're crystal clear on that. But it seems likely that more often than not, her commute could pay for and justify the expense. The more hours my son gets, the sooner he has a good paying career. The more hours I get, the less I pay for insurance. At some point, the plane will have paid for itself and my youngest (11 now, wants to be a pilot) can learn at cost vs paying someone else's bills.
 
What about if your parents pay for an aviation school?

Is your kid now being compensated as a student pilot??

I think good judgement is the key.
 
moparrob66 said:
What FAR or case law says that by building time in my logbook I'm being compensated?
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In addition, the building up of flight time may be compensatory in nature if the pilot does not have to pay the costs of operating the aircraft. While it could be argued that the accumulation of flight time is not always of value to the pilot involved, the FAA does not consider it appropriate to enter into a case-by-case analysis to determine whether the logging of time is of value to a particular pilot, or what the pilot's motives or intentions are on each flight.
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Harrington 1997 Legal Interpretation
 
StraightnLevel said:
So, if I read that correctly, the only way the flights considered in this letter are legal from the FAA perspective is if they are not logged as PIC time.
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Yep. “To avoid compensation, these pilots could either not log the flight time,...”

This whole thing is tailored to let the FAA find a way to bust you if they want to, but remember that there is NO requirement to log anything other than what is needed to show currency or to satisfy requirements to move to a higher rating. There is also no requirement for you to retain logs beyond those needs. And AFAIK, there’s no prohibition on maintaining two logbooks if you desire, one for currency needs and one for your own personal diary, but beware of harm that the second one might bring.

There is also no requirement whatsoever to keep records of expenses or passengers.

Verily I say, keep thy profile low and record little to parchment.
 
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Good find! I think this interpretation (if it hasnt been superceded by something worse) would possibly exclude my intentions. I was thinking I could consider the expenses incurred getting my wife to and fro as incidental. We currently work at the same hospital, at the same time and I always drive. If I were flying her there, I would drop her off and fly home without her, then fly back to pick her up. So, its arguably incidental as I could accomplish the same thing with a car. She wouldnt pay for my lodging, nor hats or t-shirts (i could go for a Cessna hat?) and my only compensation would be time logged and an offset Direct-operating cost for the time I'm schlepping my sleeping wife there and back. I wouldnt try to deduct the return leg without her, nor any non-work trips.
 
BTW, I believe the FAA will also consider a tax deduction to be compensation.
 
Just for fun, to consider, and Im betting its not legal, but hey, why not throw out bad ideas and see what sticks.

LLC buys an airplane. You rent airplane from LLC on a per hour, full wet rate. Your son rents the plane from the LLC on a per hour, full wet rate. At some point, you let some other non-family rent it as well.

Boom, you have a company that rents planes. Your rental cost for when you fly it for a 1099 business trip is now tax deductible.

Maybe. Or maybe not. Hard to say, but I don't see how this would differ much from people that do this with airbnb's. Long as you actively spend more than half the year maintaining/running the business or whatever the percent IRS requires it to be.

FAA fun police will probably frown on it, but you're never being compensated for hire in this scenario, so??

Beats me. Be sure to report back whatever you decide to do. I'll bring the popcorn.
 
StraightnLevel said:
I was under the impression that tax records are off-limits other than DOJ and Congress, but I could be wrong.
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Sorta.

IRC Section 6103(i)(1) provides that, pursuant to court order, return information may be shared with law enforcement agencies for investigation and prosecution of non-tax criminal laws.​

Disclosure laws | Internal Revenue Service

Constraints on the IRS with regard to disclosure of tax information of a government entity to third parties. Providing consent for disclosure to the IRS, including power of attorney provisions, third party contact procedures, etc.
www.irs.gov www.irs.gov

If the FAA is investigating you, I doubt they'd have any problem getting a courst order to obtain your records from the IRS. The FAA also has subpoena power of its own, so they would likely first simply try to get them from you.
 
BTW, this all came up years ago when a pilot was busted for taking a tax deduction for expenses incurred doing a charity flight. The NTSB ultimately voided the penalty, but upheld the FAA policy treating tax deductions as compensation. The FAA subsequently stated that they would not enforce that policy against charitable operations, but otherwise the policy remains in effect.

I really wish Congress would fix this one. The FAA has gone way overboard on their definition of compensation. Best to just stay off their radar.
 
Half Fast said:
Sorta.

IRC Section 6103(i)(1) provides that, pursuant to court order, return information may be shared with law enforcement agencies for investigation and prosecution of non-tax criminal laws.​

Disclosure laws | Internal Revenue Service

Constraints on the IRS with regard to disclosure of tax information of a government entity to third parties. Providing consent for disclosure to the IRS, including power of attorney provisions, third party contact procedures, etc.
www.irs.gov www.irs.gov

If the FAA is investigating you, I doubt they'd have any problem getting a courst order to obtain your records from the IRS. The FAA also has subpoena power of its own, so they would likely first simply try to get them from you.
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FAA can only pursue CIVIL matters, all criminal matters go to the DOJ.

The answer seems to be clear: don't log the flight.
 
Half Fast said:
BTW, this all came up years ago when a pilot was busted for taking a tax deduction for expenses incurred doing a charity flight. The NTSB ultimately voided the penalty, but upheld the FAA policy treating tax deductions as compensation. The FAA subsequently stated that they would not enforce that policy against charitable operations, but otherwise the policy remains in effect.

I really wish Congress would fix this one. The FAA has gone way overboard on their definition of compensation. Best to just stay off their radar.
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I believe the FAA relented on this, AirCareAlliance has a whole page on the subject. https://www.aircarealliance.org/resources-for-groups/tax-deductions/
 
flyingron said:
I believe the FAA relented on this, AirCareAlliance has a whole page on the subject. https://www.aircarealliance.org/resources-for-groups/tax-deductions/
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They haven't changed their policy, they've just decided not to enforce it for charitable activities.

Yes. FAA still considers it to be compensation, but has stated that it supports “truly humanitarian efforts” and will generally not treat charitable deductions related to public benefit flights as compensation or hire for the purposes of enforcing FAR 61.113 or Part 135.​

It still seems like a twisted definition to call a tax deduction on money I've expended to be compensation. It's not like the IRS pays me. They just don't tax the expenditure. It's still an expenditure, not income.

Personally, I'd like to see some consistency between USG agencies. If the IRS doesn't tax something as income (like flight hours, for example), then the FAA should not be able to treat it as compensation for flying.
 
Half Fast said:
It still seems like a twisted definition to call a tax deduction on money I've expended to be compensation. It's not like the IRS pays me. They just don't tax the expenditure. It's still an expenditure, not income.
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What about a discount?
 
Lindberg said:
What about a discount?
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Interesting.

If I’m renting a plane and the owner gives me a discount because of my stunningly handsome looks, is that compensation? And should the owner’s medical be revoked for poor eyesight?
 
I was under the impression that with a traveling nurse much of the expense you outlined above are covered with their tax free stipend for working outside of their home state and that includes mileage for a personal car...

See where this is going?
 
Yeah, some agencies pay a stipend, others dont. Obviously anything covered by the stipend wouldnt be a deduction.
 
moparrob66 said:
Yeah, some agencies pay a stipend, others dont. Obviously anything covered by the stipend wouldnt be a deduction.
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Won't matter anyway. It's obviously not charity, so the FAA will consider the deduction to be compensation.
 
Half Fast said:
Interesting.

If I’m renting a plane and the owner gives me a discount because of my stunningly handsome looks, is that compensation? And should the owner’s medical be revoked for poor eyesight?
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The safe bet would be the latter....:):p:D
 
Half Fast said:
Interesting.

If I’m renting a plane and the owner gives me a discount because of my stunningly handsome looks, is that compensation? And should the owner’s medical be revoked for poor eyesight?
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Good question. But irrelevant. The FARs don't prohibit compensation for being good looking. More relevant question: What if the owner gives you a discount on your rental if you'll drop off his daughter at KXYZ?
 
Okay...so private pilots who enjoy an IRS tax deduction are in violation with the FAA, but once I get a Commercial ticket I'm okay with both agencies? What a mess!

I guess I need another 90 hours before we try any of this...
 
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