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Business Travel RUNWAY TO SUCCESS
A Primer To Business Aircraft Ownership
If you fly a lot for business, you’ve probably realized that owning an aircraft will save a biit of money. In fact, owning an aircraft for business use also creates a new set of problems,  problems that may require you to hire an expert to help you sort out.
Most pilots are familiar with FAA regulations concerning business use of an aircraft. And if you’ve previously rented an aircraft, you already have an idea of what kind of insurance you need to make sure your business, family and house are protected against some unforeseen mishap.
But one area that is often overlooked and not well understood is the federal tax code and how it relates to aircraft ownership and use. In a nutshell, if you plan to own an airplane and fly it solely for personal use, never expensing business travel and simply paying as you go, then you don’t need help.
But if you’re like thousands of pilots who use their airplanes for business travel and you want to take advantage of the substantial tax savings available to you as an aircraft owner, you’ll need an expert like Lou Meiners to help you wade through the rules and regulations.
Lou runs a company called Advocate Consulting, a 50-person firm teaming with lawyers and accountants who will, for a flat annual fee, make sure your aircraft operates as efficiently and cost effectively as the tax laws will allow. Advocate Consulting is recommended by numerous aircraft manufacturers to help their customers own and operate aircraft as fiscally efficiently as possible, and Lou has developed guidelines that will help just about any owner operator.
Business use of an aircraft can provide substantial benefits to aircraft owners. Many aircraft were sold last year based on bonus depreciation schedules that allowed about 60 percent of the purchase price of a new airplane to be deducted from the owner’s taxes.
Beyond that, Meiners says you can often defer the sales tax you might otherwise pay when purchasing an aircraft, and many of the costs of owning and maintaining the airplane can be written-off as deductible business expenses if handled properly.
Even recurrent training and flights to maintain IFR currency can be treated as legitimate business expenses, so long as the training is required to further your use of the airplane for business purposes, Meiners says.
The over-riding principal in being able to deduct your aircraft and related expenses as a business expense is that the aircraft must be owned and maintained in the furtherance of your business, and that any personal use be incidental to the business use.
There are three guidelines Meiners recommends for aircraft owners.
First, put the aircraft in a specialized leasing company, whose sole purpose is to operate and rent the aircraft to you and your business. You need an aircraft ownership insurance policy with the pilots who will fly the airplane as named insureds, but you do not need a renters policy to cover you while you are flying the airplane. Unless you want to see your insurance rates skyrocket, don’t rent the aircraft commercially or to flight schools or other outside users.
Second, make sure that the clear majority of the usage of the aircraft is legitimate business travel, and keep records—expense reports noting the who, what, where and when for business travel—in addition to your personal log book, so you can document the business travel to the IRS.
Last October, the IRS changed a rule that used to allow aircraft owners to deduct the costs of operating the airplane when the use of the aircraft was incidental to the owner’s core business. Doctors and lawyers who at one time could write off aircraft ownership simply by flying to a conference or two a year now face having to prove that the majority of the hours flown are flown for business purposes, which may not be easy.
Lou says that in order to justify business use, you don’t have to necessarily prove that flying your airplane is the fastest or cheapest mode of travel. Rather, you need only prove that it is the best means of travel to accomplish your business goals.
A business owner who stops to visit multiple clients in multiple cities could justify flying his or her airplane for the trip. So could a business owner who needed to scout materials or visit numerous branch offices or even commute to a remote job site. But a business owner who flies a 172 from New York to Los Angeles for a business probably could not. “That’s probably not a good business use, that’s probably personal,” he says.
Third, both personal and business use of the aircraft should be paid for—in payment to the leasing company you have set up—at “fair market value” for renting a comparable airplane in your area. Not sure what the hourly would be for a Lancair Columbia 400? Lou says you can use your actual operating costs as a guide, or his firm maintains a list of rental aircraft prices that they use to calculate the costs for aircraft they maintain.
These rules don’t preclude you from purchasing an airplane for purely recreational use. Anyone can do that at any time. But if you’re hoping to see a significant tax advantage from aircraft ownership, being able to write off operating costs as business expenses and potentially saving on state sales tax, then you’ll need to make sure you keep careful records and view your use of aircraft as the IRS would.
And it wouldn’t hurt to get a little specialized advice from the experts. 
—Sean Fulton
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