Tax deduction for CFIs

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apilotb

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ApilotB
Trying to figure out what a CFI can legitimately deduct from taxes. Based on my reading, all recency experience needed to remain current can be deducted, including Flight Reviews, IPCs and such. But what about other things such as club dues? Clearly one needs to be a club member in order to instruct. But it gets dicey because instructing might not be the primary reason the CFI joined the club. What about trips to attend an FAA seminar? For that matter, can a trip to Airventure be deducted if the CFI spent most of his time making business connections, and attending seminars in the FAA building?
 
This would be a question best asked of a CPA, but from my reading, in general as long as it's reasonable and typical, you can deduct the expenses.

The "problem" we face in professional aviation when thinking about this stuff is that most of the things we spend money on, others will also do as a hobby. But whether or not non-professional pilots would have the same expenses is not the test for tax deductability. When these questions come up, I like to ask as if I'm in some other profession. So, say I'm a doctor.

Can I deduct additional surgical training, or online courses, etc., for refreshing my skills? Absolutely. (currency, FRs, etc.)
Can I deduct the cost of EKG equipment, thermometers, stethoscopes and other tools? Of course. (iPads, checklists, foggles, etc.)
Can I deduct attendance at trade shows, conventions, and conferences? Of course. (WINGS seminars, Oshkosh)

I don't know about you, but when I attend Oshkosh, my entire "work day" there is spent in one of a very few categories: networking with other aviation professionals, marketing my services to others, evaluating existing products for potential use in my business, or learning about new techniques and procedures to help improve my skills.

Yes, it's also fun, but you think a heart surgeon going to a heart surgery convention isn't go to have a good time hanging out with fellow surgeons? Of course they are.
 
JCranford said:
Not clearly. I instruct. Im not a club member.
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But to instruct in a specific club, you need to be a member in that club.

This seems similar to industry publications that are deductible. Sure, someone may buy the WSJ for fun, but if I do it because it allows me to keep up to date with news impacting my business, it’s deductible.
 
The whole idea of deduction of business expenses (not "tax write off"; semantics , I know) is simple. If it is a legitimate business expense, it is deductible.
-expenses for travel to seminars to upgrade your knowledge, skills, business acumen, etal. that you determine is necessary for your business..... deductible
- with regard to above travel, meals, accomodations, refreshments, etc...... deductible (with limits)
-FR to maintain currency as a CFI...... deductible
-Airplane expenses in furtherance of your business..... deductible
-Professional dues or subscriptions relating to your business..... deductible
-Items/materials/supplies used for training (aka your business)......deductible
-website promoting your business..... deductible

As an aside, some purchases (such as an airplane used exclusively as a trainer or for business) would likely be deductible, and possibly could be exempt from sales taxes. At this level, it would be best to invoke the services of a tax specialist
 
aggie06 said:
But to instruct in a specific club, you need to be a member in that club
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Might want to add a YMMV tag to that. @JCranford and I both belonged to a club that permitted us to train for the next rating and use an instructor that was not a member of the group.

So there isn’t a hard and fast rule that to teach members of a club, the instructor must be a member of the club.
 
AggieMike88 said:
Might want to add a YMMV tag to that. @JCranford and I both belonged to a club that permitted us to train for the next rating and use an instructor that was not a member of the group.

So there isn’t a hard and fast rule that to teach members of a club, the instructor must be a member of the club.
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Add me to the list of people who belong to a club, but are not required to use a CFI or CFII who is also a member. I typically do not use club members, primarily because the CFII I use isn't a member.
 
Ghery said:
Add me to the list of people who belong to a club, but are not required to use a CFI or CFII who is also a member. I typically do not use club members, primarily because the CFII I use isn't a member.
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Then I’d take the position that being in the club gets you more exposure and is reasonable and necessary under Section 162. I would sign that return.
 
Pretty tough to make it to the standard deduction on CFI expenses these days.
 
Salty said:
Pretty tough to make it to the standard deduction on CFI expenses these days.
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There is no standard deduction for Schedule C. If you are referring to a CFI that is an employee of a company, Employee Business expenses are no longer deductible.
 
If you are a full time CFI, making a living as such, then I’d deduct any reasonable expense.

If you are like me, however, it’s not worth it.
I had a CPA who was a pilot do my taxes for me. Took a LOT of deductions. Got a sizable refund. However, being a CFI was a part time endeavor, not primary income. Owned and used my own plane, ect.

Got audited by IRS. ALL my deductions were disallowed as they were considered “Hobby Loss”, by auditor...
It was going to cost MORE to fight them than to just settle...Even though I was legit... The game is rigged against us. As usual.
Settlement was $2400.00. Lawyer $375/hr, CPA @his costs..., court filing fees, ect. Could have cost $10,000+ to win....
 
Don’t forget to deduct the corkscrew that you use to teach how a prop governor works. :)
 
Got audited by IRS. ALL my deductions were disallowed as they were considered “Hobby Loss”, by auditor...
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Eh? The deductions shouldn't have been disallowed, however, you shouldn't have been able to deduct the "hobby loss" against non-hobby income.
 
AeroLudite said:
If you are a full time CFI, making a living as such, then I’d deduct any reasonable expense.

If you are like me, however, it’s not worth it.
I had a CPA who was a pilot do my taxes for me. Took a LOT of deductions. Got a sizable refund. However, being a CFI was a part time endeavor, not primary income. Owned and used my own plane, ect.

Got audited by IRS. ALL my deductions were disallowed as they were considered “Hobby Loss”, by auditor...
It was going to cost MORE to fight them than to just settle...Even though I was legit... The game is rigged against us. As usual.
Settlement was $2400.00. Lawyer $375/hr, CPA @his costs..., court filing fees, ect. Could have cost $10,000+ to win....
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Note - I have never been audited.

However, from my reading, it seems the main difference between something being considered a "hobby" and something being a "side job" is the likelihood and expectation of actually making a profit. If there is no real expectation of profit, then it may be classified as a "hobby" as it seems was done to you. If, however, you do expect to make money, then maybe it will be considered a valid "side job".

The best way to show that it's a valid side job, of course, is to actually make a profit.

Flight instruction and contract pilot work for me IS very much a side job. It does not support me by itself. But, even after all my valid expenses, I do show a profit from the business each year - some years more than others of course. It is my understanding that this pretty much ensures it would not be considered a "hobby".
 
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