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.

 

[holdon]

FLAT TAX! Send it in on a Postcard.

 

[radarlove]

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.

With me, there isn't a positive difference. I get the same, or a little more than the allowed amount in my per diem check.

Now, some guys get agressive and charge full per diem for each city they stop in, which is why I was asking. That seems to be the only way to come out ahead, to try to game the system, but even then I wonder how it works.

 

[COOPERVANE]

Is it also true that CDO's or standups don't allow you to deduct ANY per diem. Someone in another thread that it worked great for pilots who fly standups/high speeds, but the info I have says you don't get any deductions for these trips. Can you list a source that says otherwise?

Believe me, I have been looking.

 

[Purpledog]

I painstakingly went thru every layover last year and compared the standard to the city rate and the difference was negligable. From talking to CPAs that use this, it starts to pay if you do a lot of int'l flying. I fly mainly domestic so it's not worth the hassle. Incidently, the CPA I talked to said the internet deduction wouldn't fly in an audit nor would a cell phone deduction unless you sat reserve. I agree a flat tax would be nice.

 

[HalinTexas]

I painstakingly went thru every layover last year and compared the standard to the city rate and the difference was negligable. From talking to CPAs that use this, it starts to pay if you do a lot of int'l flying. I fly mainly domestic so it's not worth the hassle. Incidently, the CPA I talked to said the internet deduction wouldn't fly in an audit nor would a cell phone deduction unless you sat reserve. I agree a flat tax would be nice.

Unless your company requires it. Some companies use intranet e-mail, on-line bidding, manuals, etc. You could get away with it then. However, you can't take the full deduction if any of it is personal use. Take a percentage. Job search expenses are also deductable. If you really wanted to push it, since you have manuals and are required to study for recurrent training, you might be able to get away with deducting part of your house as a home office, but that might not fly :laugh: if it's also used for personal reasons.

If you could get the politicians to ever sign off on it, not, the flat tax would be great, but transitioning to it would kill the economy. Obviously, all those tax related occupations would be eliminated, but the real killer is the illimination of mortgage deductions. No one would be buying houses or any real estate for that matter. But we can dream.

 

[USNFDX]

1 Uniforms (Pants Jacket, Shirt, Vest, Coat, Dress, Skirts, etc) $_______
2 Uniform Alterations
3 Uniform Sweaters
4 Uniform Shoes and Boots
5 Uniform Shoe and Boot Repair
6 Uniform Socks
7 Uniform Shoe Shines
8 Uniform Cleaning
9 Cockpit Supplies (Maps, Charts, Headset, Navigational Equip)
10 Company Issued Maternity Dress
11 Company Mandated Annual Physical Exam
12 Company Mandated Wool Scarf, Hat and Gloves
13 Company Mandated Hair Expenses and Make-up
14 FAA Continuing Education
15 Dual Time Zone Watch
16 Battery for Watch
17 Company Mandated Flashlight and Batteries
18 Company Mandated Tote/Flight/Garment Bag/Luggage/Etc
19 Company Manual Replacement
20 Company Mandated Training Related Expenses
21 Pilot License and Loss of License Insurance
22 Moisturizer Goods
23 Log Book or Day Planner for Travel Expenses
24 Crew or Name Tags, ID Replacement, Business Cards, Wings
25 Portable Hair or Clothing Dryer
26 Portable Alarm Clock
27 Voltage Converter and Currency Converters
28 Airplane Cockpit and and Jet Bridge Keys
29 Telephone Calling Cards and Collect Calls
30 Second Telephone Line, Call Waiting, Business Calls
31 Telephone Answering Machine or Voice Mail
32 Telephone Beeper Service While on Reserve
33 Cellular Phone Charges While on Reserve
34 Bid Service and Trip Trading Fees
35 Reserve Emergency Cab Fares
36 Passport/Visa and Photos
37 Union Initiation Fee and Dues from Paycheck or Direct Payments
38 Travel Expenses to Union Meetings
39 Travel Expenses to Company Mandated Meetings
40 Tips for Limo Driver and Concierge on Layovers
41 Airline Related Computer Hardware, Software and Internet Costs
42 Foreign Language Education Courses and Tapes
43 Professional Travel Publications, Books, etc
44 Miscellaneous: Parking Passes, etc. Please specify__________​

 

[SkiFishFly]

Is it also true that CDO's or standups don't allow you to deduct ANY per diem. Someone in another thread that it worked great for pilots who fly standups/high speeds, but the info I have says you don't get any deductions for these trips. Can you list a source that says otherwise?

Believe me, I have been looking.

I don't have the reference but I believe there is a requirement somewhere in the IRS pubs to spend a minimum amount of time in the city (away from home) before you can take a deduction for that day in that city. I beleive it is 5 hours.
I'm new to the airline world and I do wonder if the amount of deduction from working out the difference from IRS allowed rates and what I get payed is going to be worth the time and effort required to figure it all out.

 

[DTW320]

The ALPA website has a great article on claiming meal expenses. Log into the members section of alpa.org and click on the "taxes" tab. Here is a clip:

Expenses for "overnight trips"
For a pilot's travel expenses either to be excluded from the pilot's taxable income or to be claimed by the pilot as an itemized deduction, the pilot's expenses must be incurred while on a business trip that requires sleep or rest (an "overnight trip"). Expenses incurred on trips that are not overnight trips do not satisfy this requirement. For pilots, the expenses at issue are usually meal and incidental expenses, because the airline invariably pays for lodging directly or reimburses the pilot for it separately.


Lot's more good info there. I would paste the article here but it is too big.

 

[skykid]

Thruthemurk,

Are you sure about the 6 month crash pad deduction. Do you have a reference? I am definitely interested in that one. Thanks.

 

[atpcliff]

Hi!

Per Diem:
U can take the IRS standard allowance per day ($41) or U can use the actual city rate, which for some is close to $60. U can use this when you're overnight. You have to look at that amount, and then deduct what the company pays you. I get about $38/day per diem, so many cities I'm ahead on what I can right off.

The gov't year ends Oct 1, so the perdiem rates are different before and after Oct 1, as are the mileage rates.

If you're at a normal airline, where you're assigned a base, and all trips begin and end at that base, you can't write off a crashpad/commuting expenses. If you are temporarily assigned another base for a period of time, you CAN deduct all the expenses associated with commuting from your assigned base to that TDY base (this happened to a friend of mine for about 6 weeks).

You can deduct a lot of stuff, and the mileage associated with that. For example, if you drive to a store specifically to buy aviation equipment, you can write off the equipment and the mileage.

Does your company require you to be in contact with them by phone? Give them your cell phone # as your contact number and write off your cell phone.

Are you searching for a job? Then you can write off those expenses. Today, many airlines require you to apply online-so you need online connectivity to apply. If you're using a computer for any work-related/job search related stuff. U can write off the % U use your computer/printer/fax, whatever, for those purposes.

If you get a WX service for your phone (pretty cool) you can write that off as a job expense.

Charity: There is a separate mileage rate for charity, so if you drive to a location to drop off your stuff or hand in a donation, or if you're volunteering for a charity U can write off all those miles.

I would recommend TurboTax. I have used them for quite a while, and this year they changed their format, which makes it even more user friendly, especially if you go back in to your return to change anything after going through it the first time.

Also, you can deduct 50% of Meals, etc. if you're eating at home or at your base if you eat out with fellow pilots. You can also deduct gifts to pilots/employees up to I think $25 ea, so those Christmas cards and mailings are deductable to all you pilot friends.

****IMPORTANT****
The supposed tax cuts for middle income returns were a sham, unless they change the tax code, because of the Alternative Minimum Tax. Congress knew that the AMT will affect more and more people and more than make up for the middle class tax cuts they signed off on.

Business Week estimated that by 2010, virtually EVERY return with income of about $100K WILL be paying the AMT. The only way to know if you are required to pay AMT is to calculate the AMT for your return (which is easy in TurboTax, and very hard if you're doing the return by hand). If you don't calculate the AMT, you won't pay it, and if you're liable and the IRS finds out you're in trouble.

The AMT is VERY complicated, and you make yourself more exposed to AMT by having kids, living in locations with higher property/income taxes, having a larger mortgage and higher 2% misc deductions, among other situations.

This year congress kept the floor of the AMT at $58K, I believe, but next year it's scheduled to move down to only $43K income (which was where it was supposed to be this year). Hardly anything except mortgage interest and charity is deductable for AMT purposes. For example, state/local income/sales/property tax, and the Misc business deductions are NOT deductable for the AMT.


Cliff
GRB

Note: I do know some tax preparers who have their airline employees write off ALL their commuting/crashpad expenses, but I don't see how that's legal at all.