Aviation Tax Ideas for 2009
Well, we're less than a month away from the 2008 tax deadline. I had the opportunity to ask Daniel Cheung, of Aviation Tax Consultants, LLC, a few questions that Pilot Advice readers might find helpful at this time of year. Daniel is a certified public accountant (CPA) who specializes in aviation taxes.
PilotAdvice.com: What kinds of tips can you give to student pilots? Are flight training expenses tax deductible?
DC: Flight training expenses can only be deductible if there is a legitimate business purpose and profit motive for incurring the expenses.
Generally, it is difficult to find a reason to deduct training expenses to acquire a private pilot license.
It is equally difficult to deduct the cost to obtain an ATP rating as this training can lead to a new profession.
PilotAdvice.com: What kinds of aircraft expenses are tax deductible? How do you take these kinds of deductions?
DC: Once you can answer the question that there is a business purpose to deduct aircraft expenses, where you deduct these expenses will be determined by the aircraft ownership structure.
PilotAdvice.com: Can you explain what "use tax" is and how it relates to aircraft owners?
DC: Use tax is very similar to a sales tax. Most states assess a use tax on aircraft that is used in a state but was not purchased in state. For example, if you order a computer online from a vendor out of state, that vendor may not collect sales tax on the purchase. However, the user of the computer has an obligation to pay “use tax” to the state. The same apply to aircraft purchase out of state. Regardless of where the LLC is set up to own the plane and where the aircraft is purchased, your home state may assess a use tax on the purchase of the plane.
PilotAdvice.com: Could you talk about some of the recent changes that President Obama has made to the tax code and how they might effect aviators? Will these changes benefit aircraft owners and pilots in 2008 or will they only make a difference in the 2009 tax year?
DC: Generally, there is not much you can do to affect your 2008 taxes. Therefore, if you buy an aircraft in 2009 for business use, you can realize tax benefits on your 2009 taxes. If you buy a new aircraft, you can benefit by the 50% bonus depreciation allowed in 2009. Section 179 Expensing allows a taxpayer to expense up to $250,000 of equipment purchased in 2009, including aircraft.
Aviation Tax Consultants is a consulting firm that brings expertise and experience to aviation related tax issues. The firm works within FAA regulations to help customers minimize their sales and use tax and to maximize their income tax savings.