Taxes and Flying lessons.

JRSLim

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I don't think its possible, but I also want to be sure before I send in my 1040 and find I was wrong.
Does anybody have info on whether or not flying lessons can be considered 'higher education' at tax time and what the circumstances are.
My instructor says no buuut....

Thanks
Shaun
 

jaybird

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I thought flying lessons were tax free already. I'm sure I could be wrong on this one.
 

bobbysamd

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Flight training as tax deduction

Sorry, my friend, but you cannot take your flying lessons off your tax return. Let's say you learning to fly to start a new career. Training for a new career is NOT tax-deductable. However, let's say you become a working pilot and believe that a 737 type rating would advance your career. You can deduct the cost of that training, and the travel and lodging expenses you incurred.
 

bobbysamd

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I dunno about that .......

I copied the following from the AOPA site on tax breaks for pilots,
http://www.aopa.org/members/files/guides/income.html??#training

IRS regulations tell us that educational expenses may be deducted if the education (1) maintains or improves skills required in your employment, trade, or business; or (2) meets the express requirements of your employer or the requirements of applicable law or regulations imposed as a condition for your retention of salary, status, or employment (IRC Regulation ¤1.162-5(a)). However, even if educational expenses meet either of these tests, they will still be nondeductible if they are incurred to meet the minimum educational requirements for your employment or if the education qualifies you for a new trade or business (IRC Regulation ¤¤1.162-5(b)2 and 3).

(emphasis added to original)

The first thing you'll notice in these regulations is that your flight training expenses will be deductible only if they are trade or business related. Therefore, if your flying is purely personal in nature, you will not be able to take a tax deduction for flight training expenses.

If you fly professionally or use an airplane in your trade or business, you should first consider whether the flight training you received is either (1) needed to meet the minimum educational requirements of your present trade or business; or (2) part of a program of study that can qualify you for a new trade or business, whether or not you plan to enter that trade or business. If the answer to either of these questions is “yes,” your flight training expenses will not be deductible.

Before you answer either of these questions, let's take a closer look at what the questions mean. First of all, you are not going to be able to take a tax deduction if the flight training you receive allows you to meet the minimum educational requirements of your employment. Therefore, if you plan on becoming a flight instructor, the training expenses you incur in getting your initial flight instructor certificate will not be deductible, because holding that certificate is the minimum educational requirement for employment as a flight instructor.

Also, if your training qualifies you for a new trade or business, it will also be nondeductible. Quite often we hear from a member who uses an aircraft strictly for business or personal purposes. In order to improve his/her proficiency, the member gets training for a commercial pilot certificate.

(emphasis added to original).

Some people believe that adding on to an initial CFI is deductable. I don't believe that is correct.

As I always say in these posts, my degree is in Accounting and I did my taxes myself for 27 years, but I'm not giving tax advice.
 
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ShawnC

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So if I read this correctly I can't deduct the cost of getting my commerical rating. But say I have a ferry job, and a multi-engine rating, or an MEI would improve my skills (ie being able to ferry multi-engine planes), then I would be able to deducte it from my taxes? Similar to a 737 type rating to a current CRJ pilot.
 

skiddriver

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Bobby,

Actually, I sent a direct inquiry to the IRS about using the lifetime learning credit for flight training, and they said it was allowed. At the risk of boring you all, I'm pasting in their reply to me and my original inquiry. So there........ :)

Also, I have read many opinions that stated very clearly that if you are working as a CFI, add-on CFI ratings are tax deductible as business expenses. It's easy enough to check, just send the IRS an inquiry from their website as I did below.
*******************************

NOTE: Our response to your tax law question appears below. If you have a follow-up question or another general tax law question, please return to our web site at: (http://www.irs.gov/taxlaw) to submit it. Please do not use your "reply" button to respond to this message. More helpful information is provided at the end of this message.


Thank you for using the IRS website for your tax inquiry. What you have discovered is that unlike the HOPE credit, the Lifetime Learning credit is not limited to expenses incurred in the first two years of post-secondary education, may be claimed for an unlimited number of tax years, is not limited to students enrolled on at least a half-time basis, is allowed for a student taking only one course, is allowed for graduate-level and professional degree courses, is allowed for a course of instruction at an eligible educational institution to acquire or improve job skills, doesn't depend on whether the student has been convicted of a federal or state felony drug offense, amd is calculated on a per-family (i.e., per taxpayer return) basis.

The credit can be claimed for qualified tuition and expenses at an eligible educational institution. For purposes of the education credit an "eligible educational institution" means a college, university, vocational school, or other postsecondary educational institution: which is described in Sec. 481 of the Higher Education Act (HEA) of '65 (20 U.S.C. 1088), as in effect on Aug. 5, '97 --generally, all accredited public, nonprofit, and proprietary postsecondary institutions; and which is participating in a federal financial aid program under title IV of that Act (20 U.S.C. 1070 et seq.) or which is certified by the Department of Education n8 as eligible (under 20 U.S.C.; 20 U.S.C. 1094; and 34 CFR 600 and 669) to participate in such a program but chooses not to participate.
Eligible educational institutions thus include accredited post-secondary educational institutions offering credit toward a bachelor's degree, an associate's degree, or another recognized postsecondary credential, as well as certain proprietary institutions and postsecondary vocational institutions. Generally, any accredited public, nonprofit, or proprietary postsecondary institution is an eligible educational institution, if the institution participates in a federal student financial aid program under title IV of the HEA or is certified by the Department of Education as eligible to participate in such a program but chooses not to participate.
The education credit that a taxpayer may otherwise claim is phased out ratably for taxpayers with modified adjusted gross income between $ 40,000 and $ 50,000 ($ 80,000 and $ 100,000 for married individuals who file a joint return). Taxpayers with modified AGI above $ 50,000 (or $ 100,000 for joint filers) may not claim an education credit.



Your Question Was:
This question concerns the lifetime learning credit: I am a military pilot leaving the service and looking to get a commercial pilot job. I hold several commercial pilot ratings. In order to improve my job skills, I was interested in taking several commercial flight courses, and wanted to know if the expenditures for these commercial flight course would be eligible for the Lifetime Learning Credit (assuming I meet the general eligibility requirements, of course). The courses I am interested in lead to FAA certification as an Certified Instrument Flight Instructor (CFII), Certified Multi-engine Flight Instructor (MEI), and Advanced Ground Instructor (AGI). I already hold the basic Certified Flight Instructor (CFI) rating, as well as the FAA commercial and airline transport pilot (ATP)ratings. I scoured your website and the only applicable reference I could find one way or another was on the following webpage - http: www.irs.gov prod forms_pubs pubs p9700204.htm I !
clipped and pasted the applicable part below: However, if the course of instruction or other education is part of the student s degree program or, in the case of the lifetime learning credit, is taken by the student to acquire or improve job skills, these expenses can qualify. So does this mean that expenses for these advanced instructor ratings qualify for the Lifetime Learning Credit? Thanks.


IRS forms and publications may be accessed on our web site at the following address: http://www.irs.gov/forms_pubs/index.html or ordered through our toll-free forms line at 1(800) 829-3676 which is available 24 hours a day, 7 days a week, with 7-10 days delivery time.

We are interested in your opinion and providing the best possible service to you. Please take a moment to answer our survey at: http://www.irs.gov/help/newmail/email-survey.html

This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer given.

Here's a tip for navigating the IRS web site. Use the "search" button at the bottom of the home page. Enter key words or phrases for your topic in the entry box. It could help you find your answer immediately.


EMPLOYEE ID: 43-13231 Ms. Marquard Tel.:(800)829-1040 msg#: 1036608
 

bobbysamd

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Hmm, interesting...........

But, I think what distinguishes your situation from JRSLim is he apparently is low-time and is starting ab initio to become a professional pilot and you are already a trained, rated pilot. I use the military term intentionally.

You said in your query to the IRS the following:

I am a military pilot leaving the service and looking to get a commercial pilot job. I hold several commercial pilot ratings. In order to improve my job skills, I was interested in taking several commercial flight courses, and wanted to know if the expenditures for these commercial flight course would be eligible for the Lifetime Learning Credit (assuming I meet the general eligibility requirements, of course). The courses I am interested in lead to FAA certification as an Certified Instrument Flight Instructor (CFII), Certified Multi-engine Flight Instructor (MEI), and Advanced Ground Instructor (AGI). I already hold the basic Certified Flight Instructor (CFI) rating, as well as the FAA commercial and airline transport pilot (ATP)ratings. (emphasis added to original)

The fact that you are a military pilot is evidence that you have received your training " . . . . to meet the minimum educational requirements for your employment." You went on to state that you held your ATP and CFI, which are recognized civilian quals. So, there again, you are not training ". . . . . to meet the minimum educational requirements for your employment or if the education qualifies you for a new trade or business." Therefore, yes, in my .02 opinion that you could use the Lifetime Learning Credit as grounds to deduct your training. You can use it, e.g., to buy your 737 type for the Southwest interview or adding Rotorcraft Helicopter to your CFI. I deducted my Citation type on that basis. But, if you are a zero timer you cannot use the Lifetime Learning Credit to deduct your initial flight training leading to your commercial. You can use it to buy your ATP from Sheble's or wherever.

Maybe we need to define "Flight Training" for this discussion. From JRSLim's post I took it to mean zero time to Commercial.

Hey, thanks for doing the research. Maybe we have some pilot-accountants or pilot-tax lawyers lurking who can access Private Letter Rulings from the IRS and provide further clarification.

PS-for ShawnC. I don't think that you can deduct the multi or the MEI. I believe the IRS would view both as meeting minimum educational requirements for employment. You can't go far in this business without the multi.
 
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skiddriver

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Bobby,

Excellent point and one I should have emphasized. The lifetime credit does NOT require that the education in question improve your job skills or employment prospects. You can take a guitar playing or basket weaving course and write off tutition and some expenses with the lifetime learning credit. The requirement is that the learning be done at an institution accredited by the DOE or a similar organization (State DOE, etc.). If you can find one, flying courses taken at a college should definitely qualify.

Here's a better IRS link for education tax stuff:

http://www.irs.gov/formspubs/display/0,,i1=50&genericId=12989,00.html

To deduct the training as an itemized business expense, it DOES need to meet the requirement for improving one's job skills.

Once again, I've only researched this. I'm not a tax lawyer or accountant. Anyone who is trying to deduct any flight training needs to get an opinion from someone who does taxes for a living. I'm only passing on what I've picked up over time, as a starting off point. Also, the E-mail inquiry system at the IRS website is a great source.
 
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