Tax question

[AlbieF15]

Any of you CPA types or guys who have already figured this out, here are my questions...

What airline job expenses are tax deductible, and how do I claim them (ie...which form, etc)

Here are some of my first year expenses I am wondering about....

Sim prep?
Interview suits?
Crash pad?
Crash pad car? Insurance?
Unreimbursed travel expense? (airline tickets? rental car to starting city?)
Unreimbursed uniform expenses?

Any data in this area or a good web or paper reference source would be appreciated.

Fly safe...

 

[FlyingDawg]

I hope your using the long form to take advantage of the deductions. If your doing your own prep I recommend one of the software programs like TurboTax to make sure the numbers are entered into the correct forms.

Sim prep- Deductible if you are looking for a new job in your present occupation. Not Deductible if you are looking for job in new occupation, if there was a substantial break between jobs, or if looking for first job. (Pub. 529)

Uniforms- deductible if you must wear them and they are not suitable for everyday wear. (Pub 529)

Interview suits- Not deductible because they are suitable for everyday wear. (Pub 529)

Crash pad- Not deductible (unless you own and pay mortgage interest). See explaination and examples under "Tax Home" in Pub. 463. Look closely at "Factors used to determine tax home" and "Travel to family home" under the "Tax Home heading."

Crash pad car and insurance- you cannot deduct commuting expenses (Commuting expenses are defined as the cost of transportation between your home and your main or regular place of work). (Pubs. 463 & 529)

Travel expenses- Some are, see Pub. 463. Take special note of the special meal allowance given to transport workers. Most workers are subject to a 50% limit to business related meal and entertainment expense. Airline crews fall under the "DOT hour of service" limits and are allowed a 60% limit (for 2001) and these increase over the next several years (to 80% in 2008). (Pub. 463)

These publications are available at www.irs.gov


Hope this helps and good luck!

 

[bobbysamd]

Tax deductions

Excellent advice and post above. I do have a degree in Accounting and prepared my own returns for years, mostly by hand, and for all the years I was flying airplanes and/or was employed in aviation. I am not a C.P.A., though, but . . . .

You can also deduct training costs as long as you are employed. E.g., you can deduct a type rating(s). It's a big misconception that new CFIs can deduct costs of obtaining CFI-I or MEI. All that is regarded as initial training needed to obtain employment. Some believe that CFI upgrades qualify under the lifetime education deduction, but I don't think so.

You can deduct travel expenses, including meals and lodging, to and from interviews. You can deduct moving expenses to the extent that they are not reimbursed. However, don't expect to get away with deducting moving expenses if you move only across town.

Hope this helps some more.

 

[AlbieF15]

Thanks to both of you. I'll follow the IRS link and start studying!

 

[Rick1128]

Other items you can deduct are your FAA Medicals. Required for continued employment.

Uniform cleaning and maintenance. You are required to present a clean, professional image.

Professional publications. All professional pilots are expected to continue their professional growth.

Professional tools. You by need the proper tools. When you upgrade to an ANR headset, etc.

Professional Association dues.

I have heard of pilots who deduct a portion of their cable tv bill (The Weather Channel) and Internet bill (company e-mail)

On per diem, there is a government PD rate chart. It is the rate PD is paid to government employees in various citys and countries. If this rate is higher than the rate give to you by the company you can deduct the difference. In some cities the daily rate can be over $100.

 

[FlyingDawg]

Everyone in my family gets luggage for Christmas. Instant tax deduction!

 

[Lindy]

Mileage

Don't forget the mileage....

If you drove to the sim prep; the interview; to the airport for the interview....it is all allowed. Albeit, it might not be very much, but if you are itemizing, everything adds up!!

All the aforementioned pubs are available at irs.gov!! Very thorough and lists what is and is not acceptable.

Additionally, there are a few tax services available for airline employees. Every airline has at least one (or two) accountants that the pilots like to use for tax season. (There is someone in California that specializes in Transportation...)

Wow...the early bird

 

[Hugh Jorgan]

Good stuff... what about state income taxes if you are a commuter? Which state do you pay income tax? The one in which you are living? The one in which you are domiciled? Thanks...

 

[Rick1128]

State taxes

I was told by a lawyer that workers involved in direct interstate commerce pay taxes in the state they declare as their residence. It goes back to the railroaders. Could you imagine what would happen if truck drivers had to pay state taxes in every state they worked in?

One note though. The IRS will send your Social Security number to the state where your return is sent. Not the state you claim. Be careful there.

 

[Lindy]

Which State?

There was a recent Tax Case involving a pilot. He filed his domicile as Florida for several years, alleging that he resided in that state. However, the Tax Court was able to prove that he resided in North Carolina (or was it South??); i.e., primary residence, children attending school, etc. He was found to be owing thousands and thousands of dollars based on his actual residence versus the Florida sham.

I'll try to find the cite -- not sure if it was a published case.

 

[dispatchguy]

I'd be interested in reading that case as well - I'm a commuter dispatcher, living in Indiana (where wifey and our spoiled dog lives), and commuting to PHX

 

[bigbird]

You CANNOT deduct driving...I researched that. I am even an independent contract pilot. So there is no way any other pilot can deduct mileage.

 

[f18pugsley]

Driving can be deductible

Actually, lots of your driving is deductible. If you are meticulous about logging your miles it really adds up: 1/3 of the miles driven on my car were deductible last year. All you need to do is know a few rules and then log your miles each day.

The mileage for your primary commute is NOT deductible, however, any mileage after you get to work is. I.E. You drive to work (not deductible), then need to drive over to your sister squadron (deductible). It's only 3 miles round trip, but at $.365/mile that is one dollar off my taxes. It adds up fast! My drive to do the ATP training--all deductible (3 hour drive for me). This year I have been rushing reserve units--all those miles are deductible. Now I am going to fly for a unit that is a 3 hour drive away. It is not my primary place of work, so every time I go there, the mileage is deductible. Every time I drive out to the local airport to give somebody a glider ride for the club, the miles are deductible (though I think if I actually worked at the airport, the miles would not be deductible.)

The key thing is documenting every mile you think you can claim. When you fill out your taxes, it asks if you have a written record. I don't know how you get yourself credit for miles if you don't document it. I think it would be a lot harder to justify your claims at an audit.

Pugsley

PS I have never been audited, but after deploying in '97, I paid $0.00 income tax as a single Navy LT! (4 months tax free and a mortgage payment.)

 

[atpcliff]

Hi!

You CAN deduct driving, if it's a deductable expense-some driving is, some isn't (for example, driving to a pilot interview, providing you've been/are an pilot, IS deductable).

My wife talked to a tax attorney, who said crash pads and all associated expenses ARE deductable, but I have heard others (as above) who say no. There are a lot of pilots who deduct crashpads.

Details on Per Diem (meals, tips and misc.):
at the IRS site, you can search for Per Diem. You can find a table that gives the standard US perdiem ($30), and the perdiem for select cities.

When you are in a city travelling, you can either keep your receipts, and deduct the exact amount spent (good if you spend A LOT), or use the IRS deduction.

Now, if you get perdiem from your co./airline, you can only deduct the difference. Also, I read (not the IRS) that you can count 75% of a day when you leave arrive at a perdiem location. I often move between 2 perdiem locations, so obviously I am counting 50% at each one.

Examples of Perdiem deductability:
In El Paso for 3 days.
-Co. pays $38/day.
-IRS allows $38/day
-allowed to deduct $0

In DFW for 7 dyas
-co. pays $38/day
-IRS allows $46/day
-allowed to deduct$8/day

Left DFW for home on 8 AUg
-75% of 46 is $34.50
-co. paid 8 hrs of perdiem = $12.64
-allowed to deduct $22--

I live in GRB, and have to pay taxes in WI, even though I'm based elsewhere. Also, my company isn't required to take out my WI tax, so they don't. I can pay at the end of the year or quarterly.

Stuff to deduct:
Phone calls when you're on the road.
Watch, flashlight, etc.
Cost of FCC radio license (if needed for your airline)
Costs associated with applying for a pilot job (mail, printing, copying, etc.)
Sim prep/training
Type ratings
Phone (if required by your company)
Flight kit
If you can justify it (keep WRITTEN records) and the IRS accepts it, it is a good deduction.

My dad/mom were audited 2 years in a row. Each year the IRS gave them a lot of money back that their accountants missed-they were never audited again.

Cliff
GRB

Cliff
GRB

 

[rightrudder]

For a really comprehensive list of deductions, go to this site:

http://www.pilottax.com/pilot-tax_organizer_download.htm


download the professional deduction organizer, it's good stuff!

also, pilottax.com has some good info.

 

[Lindy]

Still looking...

I haven't forgot about that case....

4 states in 12 months/furloughed/storage units/new apartment

Where oh where did I read the article? Which Aviation Law forum? Or was it a Tax Law Forum?

Still looking....


And the aforementioned site is great for information AND it is also good advertising for the company involved.

 

[CoopDog]

I remember reading an article last year about several Northwest pilots that owed the state of Minnesota thousands in back taxes. It seems the state claimed they were residents, even though they listed FLA (I believe) as their home.

I used to know a guy in NC who flew for UAL and owned a boat in FLA, which he visited on occasion. He had a kid in college in a state school in NC, paying instate tuition. He also had both cars in NC with FLA tags. Meanwhile, he paid no NC state income tax because he claimed he was a resident of FLA (even though his house floated). He used the extra $12,000+ a year to pay for the FLA boat (excuse me, house) and his kid's college tuition.

 

[CoopDog]

Tax tips for furloughees

Speaking of tax tips, he's one I saw on my ALPA web board the other day, posted by a soon to be furloughed pilot in tax class.

In the State of NC, as well as some others I'm sure, one who has been furloughed or severed from his/her job through no fault of their own can deduct up to $35,000 of severance pay directly off the wages for state tax purposes.

For example, if you reside in North Carolina, and if you received say $10,000 in furlough pay from your airline, that will save you $700 in state taxes (works out to about 7%). This is a little known deduction that the state allows.

Happy deductions!

 

[StarrBuck]

Last year I found a tax guy (someone told me about him) in Cleveland.. Anyway, Great guy I called him about 200 times with 200 questions, and he was always very helpful.. He only does taxes for crewmembers, so he knows what he is talking about. The best part was he only charges $65.00 for your main return. If you have extra forms he charges $10 per form.. He had them done and returned to me 2 days after I sent them.. Excellent service, great price..

www.tax4crews.com

 

[Checks]

F18,

I also deduct for trips to my guard unit but have a question about per diem. I stay a family members house when I attend guard duty so I dont have any reciepts for lodging but was wondering what the rules are for deducting the standard per diem while I am away from home doing drill. I have not kept any receipts for food thinking I was going to just use the standard deduction. Is this correct?

Thanks

 

[AOPAPILOT]

A great point to remember, pilots need to pick a state that has no income tax, and make that the home base. The NWA pilots were smart to list Florida as their home, but dumb to have the wife and kiddies in school in Minnesota. Cover your tracks and you will be OK. No need to stretch the law. It is there to take advantage of. Read the IRS.gov site. If you can read the approach plates, you can understand the information from the IRS.

 

[f18pugsley]

Checks,

I don't save dining receipts either (since I don't drink, I almost never spend more for food than the standard meal allowance). All you need is a means to prove which days you were at your unit (flight schedule or something like that), then duduct the standard meal allowance for each day you were there.

Where you stay has no bearing on the meal allowance. Just don't try to be tricky and try to claim you were paying your relatives rent while you were staying there (unless you really were and have receipts to prove it). When I go to drill weekend, I get a free room at the BOQ since I live more than 50 miles away. This doesn't reduce the amount of food I will eat over the weekend. The IRS doesn't know if you are getting your free room from the unit or your family.

Also, make sure you don't claim the days you were on det and got per diem. The only exception to that is if you get stuck with the Navy's 'Smart Per Diem' where you only get some amount less than the standard per diem rate. If that is the case, then you can deduct the difference.

 

[Bad-Andy]

Remember, as a crew member, if the amount of the bill is less than $75, you don't need a receipt. All you need is a "written documentation" somewhere of it. I jot stuff down in my crew book, and transfer it to a homemade spreadsheet on the laptop. I got audited once as a first year regional F/O. The guy called me a liar when I told him I made less than 15k. After showing him the W2's and the crew book along with an organized spreadsheet, he ended up oweing me about $20. Haven't been audited since...

 

[AAflyer]

I have been filing my own taxes for 3 years now via Turbo Taxand the internet. I have not been audited yet (Knock on wood). How many of you filed electronically have ever been audited?

Second, How many of you that used a pilot tax service ever been audited. Just curious. Thanks

AAflyer