Posts Tagged ‘tax preparation’

Pilot taxes

Tuesday, March 18th, 2014

I got my annual CD from Turbotax the other day, and it got me thinking about, well, taxes. When you are pilot who flies for hire, there are a number of things to consider. If you are flying as an independent contractor, it’s up to you to make estimated payments. If you are an employee, your employer will deduct your taxes from your paycheck.

As a pilot, you are entitled to deduct certain expenses from your income taxes. While this is not intended to be a tax-advice article, it can point you in the general direction.

The most important point is to document everything. If you have any reason at all to believe that a purchase you are making—be it an item or a service—might be deductible, you should keep your receipt and document what you have bought, when, and where. The IRS provides a fair amount of latitude, and some if it is common sense. As an instructor, the obvious items are things like new headsets, a new kneeboard, and similar items of the sort. The more complicated items are those that also can be used for personal reasons, such as cell phones. For the best advice, talk to a CPA or the local IRS office.

As with many jobs, you will learn that doing your taxes is not going to change much from year to year as far as business expenses and deductions are concerned. If you do your own taxes, you can save some money. In my opinion, it only pays to hire an expert if you are dealing with some complicated items; if you are married to someone who has a fairly high income; or if you have other income that needs to be addressed and accounted for, such as a rental property. It might also pay to have someone talk you through dealing with depreciation if you decide to purchase an aircraft for teaching.

As a general rule, if the item you buy is required for your work, you can likely deduct it. Certain professional organization memberships or periodicals might also apply. If it isn’t required for work, think twice. Again, ask a professional for expert guidance.

Taxes are a hassle we must all deal with, but there are provisions in the tax code that professional pilots can take advantage of. Whether you are self-employed or work for Big Flying School Inc., you can reduce your tax bill legally and smartly, but it all starts with proper documentation and a paper trail….sort of like dealing with the FAA. Be diligent, be smart, and be thorough….just like dealing with the FAA!—Chip Wright