Commercial/CFI Training - Not Tax Deductible

labbadabba

labbadabba

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labbadabba
Tallying up my hours it would seem I'm not too far off from making a push towards getting my Commercial ticket and pursuing my CFI rating. Obviously building those hours is a significant expense towards a future career. Unfortunately since most of us work a "real" career the IRS sees our flying as a hobby even if pursuing flight as a future career.

https://www.aopa.org/training-and-s...siness-justification-flight-training-expenses

If I'm reading the linked article correctly, since I don't already meet the minimum requirements as a commercial pilot, any training-related expenses prior to obtaining my commercial ticket is not deductible. That seems really ass-backwards to me. Isn't that the whole point of being able to deduct educational expense on a Schedule C?

My quit-my-day-job dream is: Create an LLC with a business plan built towards instruction. I am a classically trained musician and a somewhat accomplished opera singer and have taught voice, piano, and trumpet over the years. Once I become a CFI, I'll roll my flight training business into that LLC as well. As a musician, I was able to deduct my expenses related to my contract work. I guess that's legal since I meet the minimum qualifications to call myself a professional musician but I wouldn't be able to do the same with my flying. Music training is typically busiest during the winter months and flight training is heavier during the summer so I one would offset the other in terms of active students.

Any thoughts?
 
Not often do I say this, but yeah, unless you're a CPL you're not a professional pilot.

I've written everything aviation related off since my CPL, never had a problem.
 
Me too, James331.

Bob Gardner
 
James331 said:
Not often do I say this, but yeah, unless you're a CPL you're not a professional pilot.

I've written everything aviation related off since my CPL, never had a problem.
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Everything? Even personal flying? Do you justify it as proficiency flying?
 
labbadabba said:
Tallying up my hours it would seem I'm not too far off from making a push towards getting my Commercial ticket and pursuing my CFI rating. Obviously building those hours is a significant expense towards a future career. Unfortunately since most of us work a "real" career the IRS sees our flying as a hobby even if pursuing flight as a future career.

https://www.aopa.org/training-and-s...siness-justification-flight-training-expenses

If I'm reading the linked article correctly, since I don't already meet the minimum requirements as a commercial pilot, any training-related expenses prior to obtaining my commercial ticket is not deductible. That seems really ass-backwards to me. Isn't that the whole point of being able to deduct educational expense on a Schedule C?
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No, it's not. Maybe it should be different, but Schedule C educational deductions are for two things:
  • Education required to keep your present salary, status or job; or
  • Education required to improve skills for your present work.
The key word is "present." So even education that meets one of those two tests doesn't qualify if it:
  • Is needed to meet the minimum educational requirements of your present trade or business, or
  • Is part of a program of study that will qualify you for a new trade or business.
So, no sorry, 7 years of college education and post-graduate medical school are not deductible for a med student. But annual continuing education requirements to maintain that medical license for a physician are.
 
midlifeflyer said:
  • Education required to keep your present salary, status or job; or
  • Education required to improve skills for your present work.
.
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So if you did get your CPC and CFI, and you're using it as such, any additional CFI ratings (CFII, CFI-ME) might be deductible.
 
Thanks guys. <<goes back to day job, saving duckets, planning escape someday>>
 
I'm not an accountant, but I wonder if you got a Commercial ticket with a Glider rating (which is relatively quick to achieve), and flew a few sightseeing missions on the weekends, would the rest of your CPL training magically become deductible? You would be improving on your skills as a Commercial Pilot.

Rich
 
labbadabba said:
Everything? Even personal flying? Do you justify it as proficiency flying?
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Some yes.

I also do photography work, and will work a few MLS listings into my flight path, do a quick orbit and shoot some photos, after I get home and log my flight, I'll send small branded samples to the realtors and see if they are interested.

midlifeflyer said:
No, it's not. Maybe it should be different, but Schedule C educational deductions are for two things:
  • Education required to keep your present salary, status or job; or
  • Education required to improve skills for your present work.
The key word is "present." So even education that meets one of those two tests doesn't qualify if it:
  • Is needed to meet the minimum educational requirements of your present trade or business, or
  • Is part of a program of study that will qualify you for a new trade or business.
So, no sorry, 7 years of college education and post-graduate medical school are not deductible for a med student. But annual continuing education requirements to maintain that medical license for a physician are.
Click to expand...
:yeahthat:
 
mscard88 said:
So if you did get your CPC and CFI, and you're using it as such, any additional CFI ratings (CFII, CFI-ME) might be deductible.
Click to expand...
It kind of depends. My understanding is that initial training (new certificate like CFII, or initial type rating) is NOT deductible.

Recurrent training, however, is generally deductible.

For example, I added a CE-500 SIC type last April so that I could work as a contract SIC. That initial training was not deductible, but my recurrent training next year should be.
 
James331 said:
I also do photography work, and will work a few MLS listings into my flight path, do a quick orbit and shoot some photos, after I get home and log my flight, I'll send small branded samples to the realtors and see if they are interested.
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Nice. Does anybody ever take you up on that?
 
midlifeflyer said:
So, no sorry, 7 years of college education and post-graduate medical school are not deductible for a med student. But annual continuing education requirements to maintain that medical license for a physician are.
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Except that you can deduct College Tuition...
Table 6-1.Tuition and Fees Deduction at a Glance



Don't rely on this table alone. Refer to the text for complete details.


Question Answer
What is the maximum benefit? You can reduce your income subject to tax by up to $4,000.
What is the limit on modified adjusted gross income (MAGI)? $160,000 if married filing a joint return;
$80,000 if single, head of household, or qualifying widow(er).
Where is the deduction taken? As an adjustment to income on
Form 1040 or Form 1040A.
For whom must the expenses be paid? A student enrolled in an eligible educational institution who is either:
•you,
•your spouse, or
•your dependent for whom you claim an exemption.
What tuition and fees are deductible? Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board.
 
$4000 isn't going to make a dent in medschool tuition.
 
deonb said:
Nice. Does anybody ever take you up on that?
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Meh, so so, maybe 20%

Once I get this drone ironed out, I'm going to be hitting the photo market a bit harder and with a little more precision.
 
One of my DPEs actually argues that the entire thing is tax deductible. Even though the AOPA article and the tax code disagree. Any training. CPL, CFI all of it.

I didn't bring it up, he did. And I shut my pie hole after he asked if all my training was tax deductible and I said "no" and was smart enough to stop there, and he launched into a description of why he thinks it is.

Seemed a bad time to argue the whole thing overall. Definitely not on the PTS and he wanted to "share" his knowledge so I shut up and listened and tried to keep a straight poker face.

I'm even a little leery of posting this here, but what the hell -- he's not correct and that isn't really going to change.

I don't know if his opinion would change either if I sent him a copy of the article. Maybe something to discuss later.

I could have been a dick and told him to back it up with documentation, while I pulled up the AOPA article or similar on my iPad. Didn't seem wise to get into an argument over it really.

Probably stupid to post this too, but in the end, there's value in pointing out that there's a lot of bad tax advice out there.

I think I even said, "MY ACCOUNTANT says no." Didn't matter.

Some would argue the CFI is deductible after the CPL as stated above, but I'm sure some tax auditor weenie somewhere could argue the opposite. Bring a lawyer and a lunch and roll the dice, is about the best advice anyone can give. I have a friend who was audited over something different and he and his attorney knew the auditor was wrong in his favor and even told the auditor so, that he owed the tax, but the auditor had convinced themselves otherwise and had a refund check already printed to hand him.

Same sort of feeling on his part. Once they were outside he asked the attorney, "Now what? The auditor just broke the law. Do I put this money in an account and keep it handy for when someone audits the auditor?"

Attorney said, "You now have it in writing that you did it wrong and they owed you money. I wouldn't worry about it. They're not going to figure that out and start a battle with that letter in your file."

And they got in their cars and went home.
 
What if it's in the same year, is that any different? I expect to pursue my Sport Pilot CFI rating next year. If I then earn income as a CFI in that same year, it would seem the expenses that year leading to the rating should be deductible (but only to up to what I earn (as a CFI)?
 
Training to enter a new career is not deductible. Training required to keep your position or to enhance your existing one is. Whether you can justify adding a CFI to a commercial depends just what job you have as a commercial pilot.
 
Dana said:
What if it's in the same year, is that any different? I expect to pursue my Sport Pilot CFI rating next year. If I then earn income as a CFI in that same year, it would seem the expenses that year leading to the rating should be deductible (but only to up to what I earn (as a CFI)?
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Nope you're earning AFTER you obtained the CFI certificate. Can't deduct if it qualifies you for a new job or position.
 
That's why I intend to do my CPL before my IR. That would make the IR tax deductible.
Then again in any case, my IR already will be deductible, because my work requires constant travel (I had it written to my contract ;) ), there's a previous case where the IRS has accepted this.
 
I wonder if becoming a CGI first would work to make CFI expenses deductible. The FAA's position is that a CFI is being paid to teach, not to fly; so a CGI who is clearly a teacher would simply be enhancing his or her ability to teach by obtaining a CFI. Same job, different classroom.

Rich
 
I really hope the OP will seek the advice of a tax adviser willing to back the advice with a signature on his tax return, and not just some advice from SGOTI.
 
Brad Z said:
I really hope the OP will seek the advice of a tax adviser willing to back the advice with a signature on his tax return, and not just some advice from SGOTI.
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Yep. At least if he goes to jail, he'll have a cellmate.

Rich
 
And cookies and stuff...hey POA cookies, hmmmm.
 
RJM62 said:
I wonder if becoming a CGI first would work to make CFI expenses deductible. The FAA's position is that a CFI is being paid to teach, not to fly; so a CGI who is clearly a teacher would simply be enhancing his or her ability to teach by obtaining a CFI. Same job, different classroom.

Rich
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That might work if you had a job actually teaching ground school. Again, it's got SQUAT to do with what certifications you have. It has to do with what the training is with respect to the job you are CURRENTLY EMPLOYED AT.
 
flyingron said:
That might work if you had a job actually teaching ground school. Again, it's got SQUAT to do with what certifications you have. It has to do with what the training is with respect to the job you are CURRENTLY EMPLOYED AT.
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This. All those "low level staffers in Cincinnati" need is someone saying they need to look harder at nearly anything and the pain begins anew...

All sorts of stories from folks who started "businesses" to take write offs who's businesses never made revenue and couldn't show any or much of an attempt to, who got slapped for doing that.

I've said it before, but there's a reason why the Tax Attorney (listed in the top five in the country in every place I've looked) at my home 'drome, owns and can afford to operate not one, but two WWII warbirds.

I try to keep my tax stuff just as conservative as possible, because I really don't need the hassle. And last year we had to file some paperwork that said essentially, "We made a mistake and already corrected it and paid you the money already..." and it was still a multi-month nail biter.

It was complete with IRS sending letters out of chronological order of their own procedures that nearly gave me a heart attack when the letter that said, "You owe big bucks!" arrived a few weeks after the, "We reviewed this and we officially forgive you, you dumb peasant..."

You see, they have to officially chastise you first before they pat you on the head for handing over your earnings to them to pay the interest on massive loans taken out against your earning potential to pay for stuff you didn't tell them to buy.

:)
 
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