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eaacraig
Level 1

Can the settlement and legal fees be included as part of a charitable deduction?

I have been using my aircraft for a 501c(3) organization and have deducted the expense based on an hourly cost to operate the aircraft. Part of the hourly cost was the expense of a hangar. As the result of a legal settlement with the landlord, the cost of my hangar increased.

1 Best answer

Accepted Solutions
Opus 17
Level 15

Can the settlement and legal fees be included as part of a charitable deduction?

You can deduct your actual out of pocket costs incurred to provide service to a charity, presuming you have the necessary documentation (such as a letter acknowledging the service).  If your airplane costs $X per hour to operate that you have to pay, then that is your deduction.

However, I suspect that a $ per hour fee could be challenged by the IRS.  You can't deduct a partial interest in property, and you can't deduct for the use of your property.  You can only deduct for out of pocket costs you pay.  For example, suppose fuel costs $100 per hour but you are deducting $300 per hour based on industry rates.  You can't do that.  Your industry rate probably includes allowances for depreciation, wear and tear, and a markup for profit.  You can only deduct your actual out of pocket expense, which is fuel, landing fees, maybe other fees.  Insurance would only be deductible as an out of pocket expense if you pay per trip.  If you pay a flat rate insurance policy that is the same whether you make 1 charity trip or 100 charity trips or zero charity trips, then the insurance is probably not an out of pocket cost you can allocate to the charity. You may want to consult a professional tax advisor.

I don't believe you can deduct any hanger fees regardless of a recent price increase.  Your hanger fees are the same whether or not you provide flights to the charity.  The cost is not allocable to the charity if you would have paid the same anyway.  Going back to the rule that you can't take a donation for the use of your property or for a partial interest in property -- suppose you owned a school bus and allowed a church group to use it.  Your out of pocket costs are gas and tolls.  You can't deduct for the garage you keep it or for wear and tear.

But you should probably consult a professional tax advisor for a personalized opinion.


(Note that if you are in the business of providing private air service, you can't deduct income that you don't receive.  Your "deduction" is the fact that you have less taxable income.  You can only deduct for the use of your plane if you are paying for it out of pocket.)

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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1 Reply
Opus 17
Level 15

Can the settlement and legal fees be included as part of a charitable deduction?

You can deduct your actual out of pocket costs incurred to provide service to a charity, presuming you have the necessary documentation (such as a letter acknowledging the service).  If your airplane costs $X per hour to operate that you have to pay, then that is your deduction.

However, I suspect that a $ per hour fee could be challenged by the IRS.  You can't deduct a partial interest in property, and you can't deduct for the use of your property.  You can only deduct for out of pocket costs you pay.  For example, suppose fuel costs $100 per hour but you are deducting $300 per hour based on industry rates.  You can't do that.  Your industry rate probably includes allowances for depreciation, wear and tear, and a markup for profit.  You can only deduct your actual out of pocket expense, which is fuel, landing fees, maybe other fees.  Insurance would only be deductible as an out of pocket expense if you pay per trip.  If you pay a flat rate insurance policy that is the same whether you make 1 charity trip or 100 charity trips or zero charity trips, then the insurance is probably not an out of pocket cost you can allocate to the charity. You may want to consult a professional tax advisor.

I don't believe you can deduct any hanger fees regardless of a recent price increase.  Your hanger fees are the same whether or not you provide flights to the charity.  The cost is not allocable to the charity if you would have paid the same anyway.  Going back to the rule that you can't take a donation for the use of your property or for a partial interest in property -- suppose you owned a school bus and allowed a church group to use it.  Your out of pocket costs are gas and tolls.  You can't deduct for the garage you keep it or for wear and tear.

But you should probably consult a professional tax advisor for a personalized opinion.


(Note that if you are in the business of providing private air service, you can't deduct income that you don't receive.  Your "deduction" is the fact that you have less taxable income.  You can only deduct for the use of your plane if you are paying for it out of pocket.)

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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