Taxes

[Alaska82]

I realize that this post should be on another board but I figured you guys have been around longest and know all the tricks of the trade. So what are the best tax right offs for pilot? Food that you eat while on a trip? Crash pad? (well I'm sure you can right off crash pads) anything else? Thanks

 

[FN FAL]

So what are the best tax right offs for pilot?

Right off, I'd have to say that when it comes to taxes, that there are no rights.

I use 401K and IRA tax shelters.

You get to write off when you do overnights. From what I understand, they base the amount of write off on specific cities. So you have to keep track of that.

Home interest is deductible.

Going to college can net you some deduction.

Kids will get you deductions.

You can form an LLC or some other company and give a go at operating a successful business. But beware, they find out it's a hobby and you go directly to jail if you can't back it up.

 

[skyboy1977]

Check out CPAdaly.com, he specializes in air crew taxes. There is a check list link on his site on what you can deduct. Ive used him for the past 4 years, and has been execellent.

 

[radarlove]

Be very, very careful about taking the DOT "transportation worker" deductions. The IRS allows you as a transportation worker to not collect receipts while on the road, and a lot of (clueless) guys simply take the standard deduction (hotel and per diem) for each town they spend more than a few hours in.

Problem is, you're not paying for your hotel (so you can't deduct an expense you didn't incur) and you can only deduct the difference between what you receive in per diem and the IRS allowance and almost always, that difference is zero or close to zero.

Every year there's some clown the board that brags about the huge deductions they take using the transportation worker rules. Beware.

The good news is that the only criminal part of the tax code comes from hiding income, the only thing that can go wrong if you deduct more than you're allowed is huge civil penalties. At least you won't go to jail.

Again, if your company pays for your hotel and gives you per diem, you're pretty much even on deductions (actually ahead, unless you eat at the Ritz Carlton every night).

 

[densoo]

I realize that this post should be on another board but I figured you guys have been around longest and know all the tricks of the trade. So what are the best tax right offs for pilot? Food that you eat while on a trip? Crash pad? (well I'm sure you can right off crash pads) anything else? Thanks

I was able to deduct crash pad expenses a few years ago on the Federal return. I believe it was considered a "second household" expense and the limit was six months in any tax year. Any longer than that and it is no longer your second household, but your primary. Still six months of crash pad rent is better than nothing. There are others related to commuters that the tax expert referred to here would be best to ask.

 

[radarlove]

Not to argue with your specifics, because you might have had good advice, but crash pad expenses are specifically not deductable. You can never deduct the expenses to go to and from work, regardless of where you live.

You can deduct the expenses of travelling between two different jobs, but never from home to a job.

 

[castle bravo]

Check out CPAdaly.com, he specializes in air crew taxes. Ive used him for the past 4 years, and has been execellent.

Sky,
Approx what did he charge for your return?

 

[thruthemurk]

Not to argue with your specifics, because you might have had good advice, but crash pad expenses are specifically not deductable. You can never deduct the expenses to go to and from work, regardless of where you live.

You can deduct the expenses of travelling between two different jobs, but never from home to a job.

This is normally true, but there has been at least one specific test case before the IRS and the ruling is that you may deduct commuting expenses the first 6 months when you experience an involuntary change in domicile. Specifically a job change that has you operating out of an airport other than where you live, or a displacement to a domicile other than where you live.

You cannot deduct commuting expenses (legally) under other scenarios.
Murk

 

[Hipster Loser]

What deductions can a CFI take?

Gas
uniform
food
supplies
additonal rating
??????

 

[GoABX]

When it comes to taxes I am very aggressive, but stay just on the right side of legal.

I had a few buddies use Daly and the stuff he was claiming scared the crap out of even me. They enjoyed the big refund checks, but many dropped him because they realized that if they were audited they'd have some liability.

Just one example is deducting the city based per diem as an expense, but then not including the per diem the company paid, BECAUSE that shows up on your paycheck, when you get audited they ask for your W-2.

 

[radarlove]

Just one example is deducting the city based per diem as an expense, but then not including the per diem the company paid, BECAUSE that shows up on your paycheck, when you get audited they ask for your W-2.

That's nuts. What's the difference between that and tax fraud? I'll answer it: nothing.

 

[radarlove]

you may deduct commuting expenses the first 6 months when you experience an involuntary change in domicile. Specifically a job change that has you operating out of an airport other than where you live, or a displacement to a domicile other than where you live.

That's interesting, I didn't know that.

 

[herewego again]

....
union dues
pilot medicals
memberships to professional associations
continuing education/certification in your field (keeping that CFI current)
anything bought specifically for travel (suitcase, alarm clock)
telephone (% that is required by your employer)
bidding service
internet (are you required to do internet based home study?)

.....and regarding the perdiem, off the top of my head...... if you DO NOT use receipts, you are allowed to deduct 75% of the Federal MI&E for your overnight city, MINUS, what is already paid to you by your employer. If you are on the first day of a trip, it is only 50% of the city you first overnight in, and on the last day of a trip it is 50% of the city you just flew out of. If you have receipts, you can deduct up to 100% of the allowed rate (again, minus what you've already been paid).

Sharpen those pencils and keep good records...
herewegoagain

 

[radarlove]

Quite often itemizing those deductions (internet, etc.) don't add up to more than your standard deduction anyway, unless you have a mortgage.

That's why guys get so aggressive with their per diem deductions ("forgetting" to subtract what their company gives them). It's hard to make itemization work, unless you really have significant expenses.

If I were a CFI, I would set up a sole proprietorship (or whatever, LLC, etc.) and funnel every single one of my aviation-related expenses through the company, keeping everything seperate.

That way you get a K-1 and life is easier.

 

[Beaker]

For the itemizers...

How about a cell phone?

I also heard that you can deduct a portion of your cable for the weather info.

 

[unwashed]

www.pilot-tax.com I used them for years, great people and reasonable price.

 

[atldc9]

It is funny, every year we argue about the same deductions.

Irs publication 463 applies to Meals and Incidental expense. Check out the link:

http://www.irs.gov/publications/p463/

Also, people in the transportation industry can deduct 70% of eligible m & I expenxes for 2005 not 75%. It is scheduled to increase to 80% in 2006.

One last item, if you use the standard allowance for transportation industry workers, $41.00 per day for 2005, you msu use it all year, and would apply 3/4 of that to the 1st and last day of any trip. The days in the middle would get credit for the whole allowance.

 

[Thedude]

One last item, if you use the standard allowance for transportation industry workers, $41.00 per day for 2005, you msu use it all year, and would apply 3/4 of that to the 1st and last day of any trip. The days in the middle would get credit for the whole allowance.

Thats is not completely true. Every city has its own rate. Check IRS pub 1542 for current city rates.

 

[radarlove]

But how do you make it worthwhile to use p463 once you subtract your company per diem? I still don't understand that.

 

[atldc9]

You can use each city's individual rate, or use the average, your choice.

As for it being worthwile, only you can tell. It depends on how many overnights you had, what cities they were in, and how much per diem you recieved form the company.

Just remember, once you total up the amount, and subtract out the amunt of per diem recieved, you can then only caim 70% of what that difference is.