Tim, as you mentioned, education deductions (even if they lead to a degree) are deductible if the education (1) maintains or improves a skill required in the taxpayer's employement or other trade or business, or (2) meets the express requirements of the taxpayer's employer, laws or regulations, imposed as a condition to the employement.
However, the costs are not deductible if (1) they are required of the taxpayer in order to meet the minimum educational requirements for qualification in the taxpayer's present employment, trade, or business, or (2) qualify the taxpayer for a new trade or business. It doesn't matter whether you in fact enter that new trade or business; just whether or not it qualifies you for a new trade or business.
There is an example in the Treasury Regulations regarding the minimum educational requirements that might be close to being on point to your situation:
Treas. Reg. Sec. 1.162-5(b)(2) example 2:
D, who holds a bachelor's degree, obtains temporary employment as an instructor at University Y and undertakes graduate courses as a candidate for a graduate degree. D may become a faculty member only if he obtains a graduate degree and may continue to hold a position as instructor only so long as he shows satisfactory progress towards obtaining this graduate degree. The graduate courses taken by D constitute education required to meet the minimum educational requirements for qualification in D's trade or business, and, thus, the expenditures for such courses are not deductible.
Regarding the qualification for a new trade or business, consider the following:
Treas. Reg. Sec. 1.162-5(b)(3) examples 1 and 2:
Example (1). A, a self-employed individual practicing a profession other than law, for example, engineering, accounting, etc., attends law school at night and after completing his law school studies receives a bachelor of law degree. The expenditures made by A in attending law school are nondeductible because this course of study qualifies him for a new trade or business.
Example (2). Assume the same facts as in example (1) except that A has the status of an employee rather than a self-employed individual, and that his employer requires him to obtain a bachelor of laws degree. A intends to continue practicing his nonlegal profession as an employee of such employer. Nevertheless, the expenditures made by A in attending law school are not deductible since this course of study qualifies him for a new trade or business.
So I would suspect that these two provisions would be tough to overcome in order to deduct the costs of obtaining your CFI. On the other hand, I would think a type rating may be deductible - but you should check with your tax advisor for a definitive opinion. For example, the regulations say that the change in duties of, say, a classroom teacher in one subject (i.e. mathematics) to classroom teacher in another subject (i.e. science) does not constitute a new trade or business.
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