Tax experts, one more question

[JRSLim]

I have searched for an answer to my ability to take my training off my taxes -- talked to Pilot Tax and searched the forums here, been through the IRS forms, and would like to ask one time for anybody with any input that will confirm or deny what I had been told originally.
I got my commercial Certificate in February 2003.
I completed my CFI and CFII, and started my Multi by the end of the year.
I was told by my instructor (now gone) and others that after my Commercial I could take the rest of my training off my taxes, as I would be a professional pilot at that point and could deduct that training from my taxes. Now while several people tell me this, when I ask how they say something like - 'call H& H Block' or 'I'll uh.. send you my CPA's name, he lives in Montana.... somewhere'

The rub as I've been told (by pilottax) is that I was never employed as a pilot or instructor during the year, and therefore canot deduct the additional training, but I still wasn't completely confident with their answer.

Does my old instructor, the others I've talked to (or anyone here) know something Pilottax doesn't?

The other thing is I have been using Sallie Mae Loans for all my training - any breaks here, and can you point me in the right direction.


Thanks, and I really apreceite any help.
Shaun

 

[bobbysamd]

Training tax deduction

The rub as I've been told (by pilottax) is that I was never employed as a pilot or instructor during the year, and therefore canot deduct the additional training, but I still wasn't completely confident with their answer.

Indeed, therein lies the rub. Because you were not employed as a pilot or instructor, your training is regarded as training you have obtained for a new profession. Therefore, it is not tax-deductable. Any training you obtain after you become employed as a pilot, e.g., type ratings, some additional category and class ratings, will be fully tax-deductable as long as you itemize your deductions.

Good luck. Hope that helps.

 

[A Squared]

Indeed, therein lies the rub. Because you were not employed as a pilot or instructor, your training is regarded as training you have obtained for a new profession. Therefore, it is not tax-deductable. Any training you obtain after you become employed as a pilot, e.g., type ratings, some additional category and class ratings, will be fully tax-deductable as long as you itemize your deductions.

Good luck. Hope that helps.

Uhhh, not sure that that is quite accurate, bobby. My understanding .. (and I'm the first to admit that I don't understand the tax code terribly well) is that you can deduce training expenses to *maintain* your current level of employment, but that you may not deduct expenses for training to advance to a higher position.

For example, a slip and fall attorney could write off his continuing education credits, but if he got his CPA so he could become a tax attorney, he could not write off those costs.

Something like a type rating would qualify you for a more advanced position, therefore wouldn't be eligible.

Like I said, this isn't my strong suit, but take a look at the regs, I think there's some truth in what I say.

 

[JRSLim]

Thanks Bobby and Squared for the clarification

For example, a slip and fall attorney could write off his continuing education credits, but if he got his CPA so he could become a tax attorney, he could not write off those costs.

A squared, This is the other dilema. What you're example tells me is that becoming a CFI is a different career than 'Commercial pilot' in any form.
So between the fact that I was never employed a as pilot and I was training for a different carreer (CFI) I'm SOL. From what I've heard, training for a type rating, or getting my Multi could be included.

One other twist. Is it a case of 'being employed' or 'earning money'.
I am currently Self-employed as a contractor for a Military Aero Club. This being the case, could I claim I was technically a contractor as of obtaining my CFI Certificate, even though I wasn't earning money as one, and had no contracts.

Splitting hairs? Yup. Grasping at straws? Absolutely.
I will take any loophole I can if I am entitled to it in any form.

Thanks once again

 

[BD King]

Grab a good CPA. I think that the criteria here is the intent. Take the deduction. If the IRS does not like it, they will let you know..............and if you are of the ilk, you can inform them that the 16th amendment was never ratified.

 

[JRSLim]

The main with the plan

Grab a good CPA. I think that the criteria here is the intent. Take the deduction. If the IRS does not like it, they will let you know..............and if you are of the ilk, you can inform them that the 16th amendment was never ratified.

Alright then, I'll just say BOLLOCKs and go in with guns Blarin'! 'You'll never take me alive coppah!!!'

I want to party with you cowboy... I'll bet you fly the ILS to the numbers!

So uhhh.. which forms do I use ; ) -- eh I'll ask my CPA.... Thanks.

 

[bobbysamd]

Tax deductions

[An] . . . attorney could write off his continuing education credits, but if he got his CPA so he could become a tax attorney, he could not write off those costs.

That is correct. The CPA would qualify the attorney to be an accountant, which would be a different career. Even changing specialities within the profession could be treated as a career change.

Something like a type rating would qualify you for a more advanced position, therefore wouldn't be eligible.

Incorrect. The key is if you are employed as a pilot or have been employed as one and need the rating to qualify for a job. If you are employed and the additional training allows you to qualify for another position within your profession, it is fully tax-deductable.

You have to view the training within the entirety of the situation. A CFI for a never-employed pilot would be viewed the same way as his/her Commercial. A credential designed to obtain an entry-level position. However, if said commercial pilot has been employed, he/she could deduct the CFI because its qualifies him/her for another position within the profession.

Example: I obtained my Citation type while I was employed full-time as a flight instructor. I obtained it because I thought it would help me obtain an advanced position. Because I was employed as a professional pilot, I could, and did, deduct it fully and got no flack from the IRS.

For that matter, those who buy a 737 type to qualify for the Southwest interview could deduct it fully on their taxes.

I agree with the "intent" analysis. Meaning, if you are a new Commercial pilot with a CFI-A, was just hired to instruct single-engine, and ran out to buy a MEI and try to deduct, you might not get the deduction after all.

 

[A Squared]

If all else fails, read the regs. Here's the IRS pub for this matter, pub 508

http://www.irs.gov/pub/irs-pdf/p508.pdf

I'm going to have to backpedal a little

Once you have met the minimum requirements for a trade, you can write off training. up to that point the training is not deductable. After you have met the minimum requirements, you can deduct

1) training required by law or your employer to maintain your position. example, flight review.

2) training that is not required, but serves to maintain, or improve your skills.

I would say you could make a case that a CFII, ATP, or type rating would fall under the second category. *

*Amatuer advice, heed at your own peril

 

[bobbysamd]

Training deductions

2) training that is not required, but serves to maintain, or improve your skills.

I would say you could make a case that a CFII, ATP, or type rating would fall under the second category. *

*Amatuer advice, heed at your own peril

My degree is in Accounting and I did my own taxes for many years, including the years I was a professional pilot.

I would say that the eyes of the IRS all instructor ratings through MEI would count as "minimal" training for a trade. Of course, an ATP would be fully tax-deductable.

The IRS looks at situations on a case-by-case basis. IRS Private Letter Rulings can give you an idea as to which direction the wind is blowing on a particular issue. Your accountant or tax lawyers can check Private Letter Rulings for you.

 

[de727ups]

Is "Pilot Tax" an online thing? If so, could someone post the linky? I did a goggle search and couldn't find it.