Deducting a Part 61 Private Pilot License (PPL) Costs

[damienstanton]

I've seen a few people ask about Private Pilot Licensing, and I think in those cases the questions or answers were misunderstood or misguided.

Here is the IRS requirement, sourced here:

To be deductible, your expenses must be for education that (1) maintains or improves skills needed in your present work or (2) a law requires to keep your present salary, status or job. However, even if the education meets either of these tests, the education can't be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your present trade or business.

Here is a hypothetical scenario I am interested in:

• Bob works for an LLC, employed as an engineer who works on a piece of avionics hardware
• Bob can do his work using a simulator (a PPL is not a requirement for the job)
• Bob could greatly improve his work skillset by earning a PPL and then collecting real data in his aircraft instead of using a simulator, allowing him to improve his product, or correct false assumptions made by the simulator designers
• Bob cannot obtain new employment after earning my PPL, since PPL holders are not authorized for paid flights. This requires commercial or ATP endorsements, which are a different rating and a different process.

Going by these metrics, it is my understanding that acquiring the PPL training falls under the metric of education expenses that improve one's existing job skillset, and one would report these as itemized on their 1040 Schedule C, reported Profits and Losses for Business.

IRS Topic 513 doesn't say anything about flight school accreditation which some other users mentioned.I believe that relates to a special type of PPL program called Part 141, which does put someone on a pipeline for commercial rating and a new career. I am speaking here  specifically about Part 61 licenses, which only allow for a pilot to rent a plane and fly for non-commercial operations that are incidental to their existing line of work.

There is an entire FAA literature on what qualifies as flight time incident to a business vs commercial, but that is outside the scope of this question.

Can anyone help me see what I might be missing for deducting a Part 61 PPL cost against the Profit/Loss of an LLC that builds avionics, considering the expense as skills improvement training?

[Opus 17]

Are you Bob, or the business?  Is Bob a W-2 employee?

If you are the business,

you can deduct qualified education assistance you provide to your employees, up to $5250 per year, and the employee does not have to include it in their taxable income. See publication 15-B.

https://www.irs.gov/forms-pubs/about-publication-15-b

You must have an educational assistance program that is available to all employees (does not favor certain people) and meet certain other qualifications.  But, there is not a requirement that the education be work-related.  I don't see a requirement that the assistance be provided by an accredited college, although the publication only summarizes the regulations and may leave things out.

Or, if you are the business, you can reimburse your employees for work-related training under the Fringe benefit rules for "Working condition benefit" -- refer again to publication 15-B.  "This exclusion applies to property and services you provide to an employee so that the employee can perform his or her job. It applies to the extent the cost of the property or services would be allowable as a business expense or depreciation expense deduction to the employee if he or she had paid for it."  This is a tricky problem that may require you to seek professional advice.  If you determine that a PPL meets the conditions for the employee to deduct the expense, then you can deduct the cost if you provide the training to the employee as a fringe benefit.  However, W-2 employees are not allowed to deduct any work-related costs because the miscellaneous itemized deduction was eliminated by the tax reform act for 2018-2025, and the IRS has not yet issued guidance or regulations to cover this situation -- where the business wants to pay for a training expense that would have been deductible by the employee except for the elimination of the miscellaneous itemized deduction.  You may want to obtain expert review.

Or, you as the business can simply pay for the training and include the cost in the employee's W-2 wages.  Wages are certainly a deductible business expense to the business.  You can over-pay to cover the employee's taxes, if you like.  For example, if the training costs $10,000, you could pay the employee $14,000, to cover the training and the taxes.  This is no different than giving your employee a raise or bonus that the employee uses to pay for training.  There is no tax requirement that the raise or bonus be used for any particular purpose, you are allowed to pay your employees whatever you like. 

If you are the employee

You can't deduct job-related expenses because that deduction was eliminated for 2018-2025 in the tax cut and job act of 2018.  So we don't have to consider if the training is really work-related.

Your employer might be able to provide you with up to $5250 of educational assistance tax-free, if they have a qualified plan.  Your employer also might be able to pay for the training as a working condition benefit, although the employer should have this reviewed by a qualified expert due to changes in the tax law.

And finally, your employer can give you a bonus or raise that you use to pay for the training, and the amount of the bonus would be included in your taxable income.

Only the working condition benefit option requires an analysis of whether the training is work-related or is disqualified by another factor, as you analyzed.  Your review is pretty comprehensive.  To go farther, you would have to research to see if there has ever been a Federal Court or Tax Court ruling on this issue.  If not, then you make your best case to the auditor, if you are audited, and see what happens. Maybe you get to be the Tax Court test case.