Can I deduct the cost of obtaining my private pilots license as a business expense if i am owner of a business and can justify it is needed?

[MinhT]

If you own a business, you can deduct education expenses if the courses help improve or main the skills needed in your area of work or are required by law to keep your occupation. To deduct the cost of a private pilot license, you have to prove that it satisfy either of these tests.

Please read this IRS document for more information:

https://www.irs.gov/taxtopics/tc513

[StevenNE]

Sorry I know this is an old question but thought this would be the best place to add this.

Would the following example likely pass the test, knowing that this particular license is frequently being scrutinized?

Safety officer of a company in charge of a UAS (drone) program obtaining a private pilots license (PPL).  The Part 107 remote pilot certification is an obvious need for business but going as far as getting a PPL is not legally needed.  The justification; however, is  threefold: 1) the particular clientele this business targets would be more likely to choose the this business as their UAS provider if they can demonstrate a higher level of skill and awareness than minimum certifications as their operations are high risk/high penalty if something goes wrong; 2) in their eyes it is legitimately a safety improvement for an officer responsible for the program to better understand sharing the skies - consider a drone strike to a manned aircraft could result in loss of life or at minimum consider that many drones plus their payloads actually cost more than many of the aircraft they are likely to encounter ( a small GA planes without transponders vs. a $150,000 drone - many new drones will soon be equipped with automatic avoidance of anything with a transponder); 3) which is more of a supplement of the other 2 points than a bullet on its own, their operations with this particular clientele are frequently near airports and require special authorizations and though not expressly written you can imagine a local authority will give more weight to someone with a pilots license to operate near an airport over someone with minimum qualifications. 

[TomD8]

If you are audited by the IRS, you will have to show that the deducted expense is both ordinary and necessary in your trade or business.

https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses

[Carl]

The Part 107 remote pilot certification is an obvious need for business but going as far as getting a PPL is not legally needed

I'm just playing devil's advocate here, "as if" I was an IRS auditor. No response is really necessary. Just providing what I guess you would call "food for thought".

On your threefold justification, if at least one of the three are not a requirement of employment or continued employment, I (as an IRS auditor) would disallow the deduction.

Additionally, while training/education for maintaining or improving existing job skills can be deductible as a business expense, such training/education for new job skills is not. See IRS Topic 513 at https://www.irs.gov/taxtopics/tc513

Note that just because an education expense may not be deductible as a business expense, does not mean you can't claim it as an education expense if it meets the requirements to be claimed as such. I don't know if schooling for PPL meets the criteria as an education expenses or not. But just off the top of my head I would not expect it to.

[StevenNE]

Appreciate the response, see my continued thought process below to see if it affects your thoughts.  Also I think there is consideration for risk in this scenario too, when claiming this will someone tell you that you are claiming something fraudulently or just disallow the deduction and charge you the penalty and taxes associated with that (generally no harm no foul relatively speaking vs. the potential savings of $4000+ of taxes owed).

Here is some counter food for thought to show you where I was coming from:

"Additionally, while training/education for maintaining or improving existing job skills can be deductible as a business expense, such training/education for new job skills is not. "

See now here is where I get caught up because would one not be able to use exactly that statement as the justification if you once again play devils advocate. Getting a PPL if already having a Part 107 would be improving an existing job skill - I think this could be objectively demonstrated.  Also Topic 513 is referring to self-employed individuals, I am talking about a business taking an expense for an employee's education.  I thought a company could take an expense in order to make available business opportunities (the necessary of ordinary and necessary) as long as its not an entirely new business endeavor.  This business flies UAVs already it just opens up the door to a couple of new large contracts to do exactly what they are now.

I think its the ordinary part of that test that seems subjective - are they going to compare a company with employees(albeit still technically a small business in this case but with multiple employees and significant comparative revenues) to a free-lancer/disregarded entity? The freelancers are likely the bulk of the UAS work being done right now but a freelancer is going to have different interests to a company or even to other freelancers (some may be choosing clients based on flexibility/per diem opportunities, or stability, or proximity to home base, etc), where as engineering firms, such as this, may already have long term customers they service and/or are more customer selective (because they don't hang their hat on UAV work) for high profile customers that want a Professional Engineer and a Part 61/141 pilot to oversee the work - this is how firms like this are competing with freelancers in the first place because it obviously costs much more to operate an engineering firm than out of a home office and the back of a work truck (no offense intended to any freelancers reading this just saying they are different business models with different marketing advantages and disadvantages). I would actually think the part 107 is a bit too new to really determine industry best practice, as only a handful of years ago a minimum of a sport pilot license (part 61) would have been required.

Does it make a difference (from the businesses perspective) if it were a tuition reimbursement vs. something the employer paid directly for?

Great point on a personal education deduction. I can't say I thought of it from that perspective but as a personal education expense, generally speaking, wouldn't it just need to pass the test that similar test to topic 513 that it would maintain or improve job skills, or your employer requires it to maintain position or salary? I thought the only follow up on that is that it cannot be the base education to qualify you for the job, this is not the case as the person already has their part 107 cert.  Also, it cannot qualify you for a new trade or business; this also passes because a PPL is not a commercial license and in and of itself cannot qualify you for work or income - you would have to go to the next level and get a CPL which I would then say would be completely unnecessary and would flag that second piece that now that person would qualify for a new trade or business because of this education.

Hope its clear I am not trying to argue my point here, I am in fact looking for advice and opinions, I am just trying to make sure I've turned over these areas that seem unclear to me why it would be disallowed. 

[Carl]

One thing I usually do is to look at things from the IRS perspective. On occasion I'll find that what "I" think doesn't hold water. Just be aware that when it comes down to the brass tacks, what we think or how we interpret something may not be as objective as we think, since we tend to think what is best of "us".

[tagteam]

---

@StevenNE wrote:

.........when claiming this will someone tell you that you are claiming something fraudulently or just disallow the deduction and charge you the penalty and taxes associated with that.....

---

It is difficult to imagine a scenario where there would be anything more than an accuracy-related penalty but, most likely, there would just be an adjustment involving additional tax and interest thereon.

See https://www.irs.gov/irm/part20/irm_20-001-005#idm140411598805248

[Rick19744]

There are too many hypotheticals in this question for anyone on this forum to provide an accurate response.

The only person who can answer this is the individual that prepares the company tax return.  It is that person who needs to get comfortable with the facts since they are signing the tax return.

Not sufficient understanding of the facts in a forum setting such as this.

Based on the limited facts, I think the IRS would challenge this deduction, unless of course the company included this cost in your wages.

[StevenNE]

Hi, thanks for the response.  Consider this  response rhetorical as my intentions are again not to argue just understand why this particular deduction is so likely to be rejected in an audit and have a discussion about it.  The hypotheticals aren't really hypotheticals but a pretty specific set of facts, I believe what you are interpreting as hypothetical is that I am asking if not a simple write-off of expenses then hypothetically which way is less offensive to the IRS and I believe you answered that by saying that if it were included as a fringe benefit essentially and then the employee takes the education write off as a requirement of their position to maintain the same position and salary. 

What my last post was pondering was if not this, than what justifies ordinary and necessary for continuing education expenses? Its not hypothetical that its a furtherance of knowledge in the field and its a fact that the new license does not qualify them for any new career as it is non commercial; therefore, it is, and only can be, a furtherance in their field from an economic standpoint other than that there is a recreational opportunity that exists when completed. I suspect that is the reason it is looked at so critically, the likelihood of abuse, much the same as writing off a new roof under photovoltaic panels (you are only supposed to claim what's needed to do the PV but some people then try to write off the entire roof); people too often don't deduct this specific license honestly; therefore, they are more critical of it than if a therapist took a class on Internal Family Systems or a business executive is expected to get an MBA and writes it off. 

One true hypothetical, I wonder if it makes a difference if someone only claims the classes but not the license itself (i.e. does not claim the checkrides, exam fees, etc.) as the license itself is unnecessary, just the knowledge. But again as a devil's advocate, the FAA acknowledged that the Part 107 is a minimum necessary knowledge and now allows a Part 61 pilot to simply take a supplemental knowledge course and must remain current and does not require Part 107 at all which complicates the former scenario.  However, again truly hypothetical in this case, since one could choose to operate a drone using Part 61 instead of Part 107, does the IRS require you take the cheapest path to the same result if a particular pilot to be does not already have Part 107?