There have been many recent changes in IRS rules and regulations which strongly favor aircraft owners. In recent years, “aircraft depreciation” has been back in tax codes and that’s expected to continue in coming years. In other words, many private pilots are watching as their planes and helicopters depreciate over the years, but you can catch a break on that unavoidable issue each year when filing your taxes. Tax season might be a few months away, but the best time to start planning your aviation tax maneuvers is right now.
First, consider that there are two big factors when it comes to sales tax: Where you buy a plane and where it will be stored. For example, there’s no sales tax in Oregon, which you can take advantage of if you plan to store your aircraft there or in any other state or country with lower sales taxes. However, there are many other ways to legally lower your overall costs of being a private pilot.
Writing it Off
In addition to depreciation, you might also be able to write off the operating costs of the aircraft. Only in very specific situations can you write off the entire purchase of the aircraft (such as if you opened a business offering aerial tours). Such a large write-off would throw up red flags to the IRS and the vast majority of the time private pilots don’t qualify—and if they do, they often need a commercial license or other type of certification.
However, there are many caveats to be explored with your CPA and/or tax attorney. If you use the aircraft to attend to business and can prove that no other mode of transportation is suitable, the cost of that flight (fuel, maintenance, any crew members, etc.) might plausibly be tax deductible. This is something that requires crafting by a tax expert, but also requires you to keep close tallies and receipts for each potential tax deductible flight.
Placed in Service
It’s not enough to just purchase an aircraft—you also have to have it “placed in service” before the end of the year. Simply putting down your deposit or signing the papers isn’t going to cut it. The title has to be in your name and the aircraft needs to be readily available for your use.
Before making any major purchase, it’s always wise to check with your CPA. Having a tax pro “on retainer” is one of the best investments you can make. Tax questions will pop up year-round, so make sure you’re covered.