Taxes and tax breaks for part time instruction

buzzlatka · Post by **buzzlatka** » Fri Jan 25, 2013 6:54 pm

We are running short of friendly CFI's at our airport and a bunch of friends are asking for Flight Reviews, Instrument profficiency, multi, and tailwheel instruction. I have given a few flight reviews in the past but I am now thinking I will need some CFI insurance.

My questions are
1. Would it be worth it to try and make this a business, charge a few bucks (normally I'm free), and then deduct the cost of the insurance?
2. Could I deduct some of the cost of the 170 even though I won't be doing instruction in it?
3. Would it pay to insure the 170 for instruction in order to try and deduct operating expenses?
4. Is this something that I would need a business license for?

Right now I do my own taxes on turbotax and itemize my deductions every year, but I'm not smart at all on home or small business taxes.
I called my insurance guy to get quotes on CFI insurance and upgrading my current policy on the 170 to include instruction.

Post by **Bruce Fenstermacher** » Fri Jan 25, 2013 7:15 pm

Wait till you get your CFI quotes back before you think to hard on this. It has never been close to something to consider for me because of the cost.

I do Flight Reviews for friends and those with aircraft the local CFI is not qualified. I charge them the same rate per hour the local CFI does. I can only do it in their aircraft and there is no coverage what so ever in mine. And I'm not so delusional to think I'm covered even in their aircraft.

bagarre · Post by **bagarre** » Fri Jan 25, 2013 7:25 pm

I don't think the tax break is going to be there, considering the cost.

If you had a big airplane payment and could do enough instruction to offset the cost of the additional insurance (and 100 hour inspections), it MIGHT be worth it to get the deductions and depreciate the aircraft.. but that seems to be a big IF.

If I was to ever get into CFI work, even on a part time basis, I'd get an LLC tho. No tax brakes but personal protection so if your student crashes on someone's house they can't sue you for yours.

buzzlatka · Post by **buzzlatka** » Fri Jan 25, 2013 10:20 pm

Insurance for the 170 looks to only be 80 bucks a year more. That covers 2 students per year in the plane. Realistically that is all I would do.
CFI insurance looks to be around 900 a year. That gives me a million in liability and 30 grand in hull coverage on the other persons airplane.

Looking at the tax laws it looks like I would need to show a profit after 3 years. Now I have to look at what other requirements I might need, business license, tax id number.

I'm going to get the insurance to cover myself for the instruction. Now I just have to decide if I want to turn it into a small business to get some tax breaks, or not worry about it and avoid the hassle.

Lopez · Post by **Lopez** » Mon Jan 28, 2013 5:02 pm

I'd have to dig into how your situation applies, but I do know as a professional pilot (airline, corporate, etc) you can deduct your personal airplane. This has gone to court and you are allowed to deduct under the idea that you are "maintaining proficiency". There are limits like you can't deduct cross country fun flying, unless you are using it to "maintain proficiency". I'll see if I can dig up the case information on this. I know I use it to my advantage every year.

Post by **Bruce Fenstermacher** » Mon Jan 28, 2013 7:01 pm

buzzlatka wrote:Insurance for the 170 looks to only be 80 bucks a year more. That covers 2 students per year in the plane.

What

I've been quoted over $5000 to instruct in my 170. Who quoted $80?

buzzlatka wrote:CFI insurance looks to be around 900 a year. That gives me a million in liability and 30 grand in hull coverage on the other persons airplane.

This part sound familiar.

buzzlatka · Post by **buzzlatka** » Mon Jan 28, 2013 11:59 pm

Its actually 76 bucks. 10% of my 760 dollar insurance premium. Limits to 2 students per year. I have to be in the airplane at all times, ie no rental or solo.

Initial correspondence with the tax lady looks promising. She thought I could save some on the taxes. I am going to bring some sample numbers to her office this week and see if it actually pencils out.

marathonrunner · Post by **marathonrunner** » Tue Jan 29, 2013 2:02 am

Re: Taxes and tax breaks for part time instruction
by Aryana » Mon Jan 28, 2013 3:57 pm

That is dirt cheap!
1955 Cessna 170B

Where did that expression come from? I know dirt is not cheap where I live but compared to where you live in California it is

Robert Eilers · Post by **Robert Eilers** » Sun Feb 03, 2013 6:02 pm

Buzzlatka - I thought about doing the same thing not to long ago and decided it was not worth it. Most cities, and I am certain Sac is no different, require that you obtain a business license and the airport will most probably require you pay for aome sort of permit to operate a business at the airport, KLVK does. The Business license and business permit are annual fees. I also found that the CFI insurance was a little steep.

I still occasionally wil perform a BFR or ICC for friends, but we work it out in trade some how. Unless, you plan on doing a lot ofbusiness, the business license, airport permit and CFI insurance just seem to chew any small profit up IMHO.

Post by **Bruce Fenstermacher** » Sun Feb 03, 2013 9:32 pm

buzzlatka wrote:Its actually 76 bucks. 10% of my 760 dollar insurance premium. ......

MInd telling us what underwriter does this? And what exactly are you buying in coverage for $760?

buzzlatka · Post by **buzzlatka** » Mon Feb 04, 2013 7:45 pm

I use a broker out of Maryland, John Harden with www.air-pros.com
I have the standard 1 million liability/100k per person medical with 40k hull.
It started about 1300 bucks 8 years a ago and has been going down every year since.
I think Chartis is the underwriter.

Post by **GAHorn** » Tue Feb 05, 2013 3:25 pm

bagarre wrote:...If I was to ever get into CFI work, even on a part time basis, I'd get an LLC tho. No tax brakes but personal protection so if your student crashes on someone's house they can't sue you for yours.

Don't know about Maryland law, but in Texas (according to my lawyer friends) an LLC does not provide such protections.
The LLC only protects each partner's individual interests from liabilities incurred from the actions of other partners. In the case of a single owner operating a single airplane for flight instruction....I cannot see any "protection" advantages.

Also, you must report any income from the instruction given. Any deductions are made against that income. (Sort of like deducting gambling losses against gambling winnings. How's that for an analogy?)