Tax strategies for Airline Pilots
Posted by CFIgigs@reddit | flying | View on Reddit | 39 comments
Wondering if anyone has discovered a way to get tax deductions for expenses while working as an airline pilot.
If there are none, that's cool. Just thought we might all benefit if someone figured something out.
Here's the general idea:
- Working as a paid full time employee for a 121 carrier
- Have all kinds of expenses not paid for by the company
- Is there any way to make these expenses tax deductible or otherwise covered?
Some example expenses:
- Headset
- Gas & milage to travel to/ from airport
- Meals
Anyone have any tips?
554TangoAlpha@reddit
The tax hack for west coast guys is to “live” in Vegas/Reno/Incline Village for 6 months and 1 day.
dash_trash@reddit
Ever since the standard deduction was raised in 2018 (?) it's almost impossible, and certainly impractical to play this game anymore.
Prior to that, depending on how low one's ethical standards were, it could have been argued that things like haircuts, white undershirts, phone bill, laptop, were potential deductions. The big one that also was straightforwardly legal was the difference between company per diem and the IRS per diem rate for every given city, but I'll be goddamned if I was ever going to sit down and calculate that for 180 overnights.
These days, there's no point. Take the standard deduction and be done with it.
CFIgigs@reddit (OP)
Thanks. Yeah, this is what I assume. But figured maybe someone found a way to create some entity that could house these expenses. I have an LLC and trust, and thought maybe there's a way to utilize those.
Thanks for the reply!
spacecadet2399@reddit
Doing as you're suggesting would be as possible today as it ever was, but it would be just as legal as it ever was too... which it isn't. You can't buy something for one entity for use with a different entity. ie. if you buy a headset for Joe Pilot LLC, you have to use it for Joe Pilot LLC, not for your flights as a W2 employee with American Airlines.
I used to have my own company that I partially ran out of my house while also a salaried employee at another company. I was able to take all sorts of deductions from household expenses on my business, which was great. I think you can still do that if you run a business out of your house. But that's essentially the opposite of what I think you're suggesting. I was able to (legally) deduct some of my personal expenses from my taxes because I actually used those things incidentally in the course of running a real business. But you can't have a business whose purpose is deducting things that you use exclusively for your W2 job.
And stuff you buy for a W2 job isn't deductible at all from your personal taxes. IIRC this changed during the last "tax reform" that we were all told would reduce everybody's taxes but definitely made mine shoot through the roof, along with pretty much everyone else I know. That's when they got rid of most itemized deductions, saying raising the standard deduction would make things "simpler" and would be more than most itemized deductions people came up with before. But it was nowhere close to that for me, and basically made running a side business pointless. It was no longer worth the effort.
SubarcticFarmer@reddit
I paid a service that I could upload my work schedule to and would do the per diem adjustments, it was awesome for the time I got to use it.
Now I have an accountant but for the airline side of my taxes there's no good way to recoup more like the old days.
mynamebackwardsis@reddit
Here's the best tip anyone ever gave me. Get a CPA and stop using TurboTax/H&R Block. You can ask your CPA all of these questions and set up a plan, budget, etc.
DarthStrakh@reddit
Or pay for neither of those scams and just use freetaxusa lol. Taxes are incredibly easy for 90% of cases, and mildly confusing past that. I feel like if yoy can figure out how to fly a plane you can figure out taxes. One is DRAMATICALLY easier than the other.
NoPhotograph919@reddit
Absolutely this. Between my job, rental properties, and my wife’s business, our taxes are semi-complex, yet I, a smooth-brain pilot, can knock them out in an hour.
TheWurstPirate@reddit
You may deduct the cost of three happy-ending massages every month provided your wife doesn't know and your girlfriend didn't pay.
CFIgigs@reddit (OP)
See. I knew a real airline pilot would weigh in eventually.
49Flyer@reddit
Starting in 2018 employees' work-related expenses are not deductible (for federal purposes) in most cases. Before that, certain expenses were deductible in some circumstances. Addressing your examples:
Other examples, once again only relevant pre-2018:
The reason I say that these expenses "may" have been deductible is because at the federal level you would have had to (1) itemize your deductions, and (2) these deductible expenses, in total, must exceed 2% of your adjusted gross income. This was always a somewhat high bar to cross for most people.
At the state level, on the other hand, the situation varies widely ranging from these types of expenses being fully deductible to not being deductible at all. In Pennsylvania, at least when I lived there, non-reimbursed job expenses were 100% deductible without the need to otherwise itemize.
Choconilla@reddit
You’ll never beat the standard deduction with these small write-offs.
CFIgigs@reddit (OP)
Yep. Sounds like that the general consensus. Figured it anyone figured out something creative, they'd share it.
Choconilla@reddit
Honestly, unless you actually own a real small business there is no shortcut to taxes. The people who decide to itemize do it solely to make themselves feel like they’re winning. The ones that do it dishonestly 100% get audited and fucked.
TxAggieMike@reddit
Hire a CPA.
Keep track of your income and expenses using a spreadsheet or app.
Provide this data to your CPA and 1) obtain his guidance on how to keep income tax within reason, and 2) obtain his guidance on tax strategies
CFIgigs@reddit (OP)
Thanks.
RaiseTheDed@reddit
Ok, side question, do y'all use a local CPA or use one of those CPAs that "specialize" in pilot's taxes online? I've been just using freetaxUSA, as my taxes aren't complex, but now that I'm actually investing and such they might get more complex, I don't know though.
Khantahr@reddit
Don't waste your money on a "specialized" CPA. Our taxes aren't that special, especially since you can't deduct the per diem difference anymore.
The main thing to look out for is where you live vs where you're based, that can affect where you pay state taxes. Just make sure they're aware of it and any competent CPA can handle that.
RaiseTheDed@reddit
Yeah, I'm based in another state than where I live. That's where I feel like a CPA will help, but then again, at my airline I'm not in my base for more than 50% of the time for it to be considered my tax home.
Khantahr@reddit
Yeah just find a regular CPA and you should be fine.
mkosmo@reddit
There's really nothing special about pilot's taxes. You're just another employee of another employer. Your taxes are no more complicated or different than anybody else making the same money in an office job.
Your investments (assuming stocks/bonds/etc) will be taxed and you'll get 1099-DIV/1099-INTs that you'll plug in to the forms just like any other 1099 to go alongside your W2.
Administrative-End27@reddit
I thought the wierd one was state based income tax. What does the tax look like for a pilot that lives in texas, based in newyork, but routinely flies trips that originate and end in florida?
mkosmo@reddit
Your employer should be working that out for you. In some states, you may owe income tax if you "work" in that state for enough days.
RaiseTheDed@reddit
That's what I was thinking, but didn't mention it. The only thing that I can think of that might get complicated for me is that my base is in another state than where I live. But seems like my company taxes me correctly, but then again, my state doesn't have income taxes. But I did fly with someone where my company screwed up and didn't deduct local income taxes, and he was stuck with a chunk that he had to pay.
yourlocalFSDO@reddit
Fraud
Confident-Curve4672@reddit
captains that are making 400k a year could care less about writing off a 15 dollar meal
snoopyscoob@reddit
lmao, boy are you wrong. I personally couldn't bother but the guys from the lost generation can be seriously petty with this stuff given the opportunity
Confident-Curve4672@reddit
yeah that was my attempt at sarcasm but also like, you make so much money. the time you spending “saving” some money by keeping track of it all and paying a CPA for their time, it would have been more advantageous for you to just pick up a few extra trips a year to cover the cost, seriously.
snoopyscoob@reddit
The only real tax breaks you can find are by maxing out your 401(K), using a HSA, and when you eventually make enough looking into something like a LIRP
Plenty of guys also create a business and have a CPA to help them minimize their tax liabilities
Cal_45@reddit
Standard deduction for 2024 in the US is $14,600 for a single taxpayer. Even if you could deduct these expenses, you would have to spend over that amount to make itemizing expenses have any benefit. What “all kinds of expenses not paid for by the company” are you talking about here?
Second, as others have said, if you’re an airline pilot, it’s time to get a CPA, not ask the internet.
KCPilot17@reddit
No. None of that is deductible.
ltcterry@reddit
Per diem is taxable income on day trips. Only non-taxable overnight. Sad.
KCPilot17@reddit
Don't be senior enough to hold day trips then. Duh! /s
ComprehensiveEar7218@reddit
That's not how taxes work as a W2 employee. If you were 1099? Sure.
Provided by the company
Again, clearly showing your poor knowledge of tax law.
Reimbursed to you in non-taxable per diem.
ltcterry@reddit
I like how you think!
I mentioned above most people have no clue how the American tax system works. Sad.
ltcterry@reddit
Work-related expenses used to be deductible once they exceeded some percentage of your income. Many of these sorts of things have disappeared with the substantially increased standard deduction since 2017.
"Your contribution is tax deductible" is an accurate yet meaningless statement for most cases. I barely exceeded the standard deduction with mortgage interest and charitable stuff in the old days. When the standard deduction doubled I simply paid off my mortgage. The last year on the old standard deduction in December I made all the charitable contributions I would have done the following year. I had exceeded the SD, so they were all deductible rather than just the part above the SD I would have had anyway.
As a W-2 employee there's pretty much nothing available other than 401K, and even on that you'll hit the limit fairly soon.
Break.
I don't disagree that most CFIs should be paid as employees rather than on a 1099. But those who are have the ability to significantly reduce their tax burden via lots of genuine Schedule C-acceptable business expenses such as a headset, training, ForeFlight, interest (if you have a brutal loan this is a big help), maybe mileage if you instruct at multiple locations, employer social security, office supplies, part of phone service/internet, medical, etc.
Break.
Opinion - most people have little/no understanding of how the US tax system works. And they don't care.
flyingron@reddit
The answer unfortunately is no.
Headsets would be a miscellaneous deduction which ends up not being deductible in nearly all circumstances. You can put it on your Sched A but it will end up not making a difference because there are limits even if you are not taking the standard deduction.
Commuting expenses to work are NOT deductible.
There's no way for you as an employee to deduct meals either. Meals away from home may be reimbursable tax free from your employer, but there's no way for you to take them if they aren't.
mgg1683@reddit
As a W-2 employee, you have very few deductions available to you. Max out your 401k, start a small side business with friendly tax deductions. But even then, it's hard to deduct things when the majority of your income comes from someone else.
rFlyingTower@reddit
This is a copy of the original post body for posterity:
Wondering if anyone has discovered a way to get tax deductions for expenses while working as an airline pilot.
If there are none, that's cool. Just thought we might all benefit if someone figured something out.
Here's the general idea:
Some example expenses:
Anyone have any tips?
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