Category Archives: Aircraft Income Tax Rules

Sales and Use Tax Exemption Extended For Labor and Equipment Used in the Repair and Maintenance of Certain Aircraft

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TIP # 13A01-07 DATE ISSUED: June 10, 2013 Effective May 20, 2013, the sales and use tax exemption for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of rotary wing aircraft (i.e. helicopters) was expanded to include aircraft that exceed 2,000 pounds in maximum certified takeoff weight. Previously, the exemption for labor charges was limited to rotary wing aircraft that exceed 10,000 pounds in maximum certified takeoff weight. The exemption for replacement engines, parts, and equipment was limited to rotary wing aircraft that exceed 10,300 pounds in maximum certified takeoff weight. Dealers who make tax-exempt charges for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of aircraft over 2,000 pounds are required to document the Federal Aviation Administration registration number (“N-number”) and the maximum certified takeoff weight of the eligible aircraft on the bill of sale, invoice, or other tangible evidence of sale. Current exemptions for qualified and fixed wing aircraft are unchanged. Replacement engines, parts, equipment, and labor used in or for the maintenance or repair of fixed wing aircraft with a maximum certified takeoff weight of more than 2,000 pounds remain exempt. References:  Section 4, Chapter 2013-42, Laws of Florida; Sections 212.02(33), 212.08(7)(ee) and (rr), andRead more →

IRS Suspends Aircraft Management Tax Assessments

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The Internal Revenue Service (IRS) is suspending tax assessments applied to aircraft management companies during federal exercise tax (FET) audits while it develops additional guidance for auditing aircraft management operations. The suspension is the result of government-industry collaboration since 2008, when the agency released an audit technique guide, and began assessing FET on a wide variety of non-commercial flight operations. These assessments included FET on a “wide variety of non-commercial flight operations,” including flights under Part 91 of the Federal Aviation Regulations, according to the National Business Aviation Association (NBAA). IRS’ suspension of the audits comes following a meeting between the agency and NBAA, along with officials from the National Air Transportation Association (NATA) last week to discuss a possible suspension. “Since 2008, NBAA has been diligently working with senior officials at the IRS to address significant industry concerns about the applicability of FET to management companies,” said NBAA President Ed Bolen. “Today’s announcement that IRS will suspend any potential assessments on these audits until the work to develop formal guidance is complete.” The agency will still be completing open audits, though the aircraft management companies will not be subject to the tax assessments while the additional guidance is being developed.Read more →

SIFL Rates Rise for the Fourth Consecutive Term

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SIFL rates are important numbers used to calculate the taxable income you receive when taking a personal flight on employer provided aircraft as a fringe benefit.  The U.S. Department of Transportation recently released new SIFL rates for the 1st half of 2013 and there was an increase of 3.33% overall.  This marks the fourth consecutive term that SIFL rates have significantly increased, with a total hike of over 17% since July of 2011.  The following table shows these new numbers:     SIFL Rates for 1st Half of 2013 Time Period of Flight 01/01/2013 – 06/30/2013 Miles: 0 – 500 –> .2655 Miles: 501 – 1500 –> .2024 Miles: > 1500 –> .1946 Terminal Charge –> $48.54 Aircraft Multiplier Weight Class Control Employee Non-Control Employee < 6,000 lbs. 62.5% 15.6% 6,001 – 10,000 lbs. 125% 23.4% 10,001 – 25,000 lbs. 300% 31.3% > 25, 000 lbs. 400% 31.3% Crunching these numbers, a control employee would have a $598.59 taxable fringe benefit for a 750-mile flight, a 3.23% increase from the prior term. If you’re unfamiliar with SIFL rates and whether they may apply to you, please read my earlier blog post.   http://goo.gl/Bfmx6 -          Ari Good Ari Good, JD LL.M. isRead more →

Deduct Your Flying Lessons

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Deduct your flying lessons:  Can you take a tax deduction for your flying lessons?  The short answer:  yes, but it depends on your situation and the circumstances. To justify such a deduction, a taxpayer must show that the lessons are a reasonable and necessary business expense and not just helpful or useful.  Alternatively, a taxpayer could argue that the lessons are an educational expense necessary for a job that requires private flight.  The pilot must take due care to make these decisions up front so that he has a good defense in the event of an audit. Unlike in most other areas of US law it is the taxpayer’s burden to prove that a claimed deduction is legitimate. In early 2012, a U.S. Tax Court considered this question and ruled that an experienced commercial real estate broker’s flight lessons were non-deductible.  The broker’s job involved identifying large properties to sell and drafting detailed brochures for prospective buyers.  From 2005 to 2007 he chartered airplanes to assist in finding and evaluating such properties.  During these flights, a licensed pilot flew the airplane while the broker took photographs that were included in the brochures.  To avoid future expenses of chartering flights theRead more →

Aircraft Personal Use: SIFL Rates For The 2nd Half Of 2012

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Aircraft Personal Use:  SIFL Rates 2012 This article provides the “ingredients” used in calculating Standard Industry Fare Level (SIFL) charges for personal non-entertainment (PNE) use of aircraft.  For the uninitiated, the SIFL calculation is used to impute income (compensation) to the executive using the plane for a narrow class of non-business, but non-leisure related activities.  PNE use can include, for example, the use of the plane to attend a family funeral.  The expenses attributable to these flights are generally deductible so long as the executive recognizes the SIFL phantom income. The most updated SIFL rates for flights taken between 7/1/12 -12/31/12 are: 0 to 500 miles = $.2569 per mile 501-1,500 miles = $.1959 per mile Over 1,500 miles = $.1884 per mile These charges are calculated “marginally” like income tax rates, that is, you calculate the SIFL mileage charge for each stratum and then add them together. Example:  1,000-mile flight will require calculating 500 miles x $0.2569, plus 500 miles x $0.1959. This figure is then multiplied by an “aircraft multiple” that depends on two additional factors, first, the Gross Takeoff Weight (GTOW) of the plane, and second, whether the individual generating the SIFL charge is a “control” versusRead more →