Can building an RV be a tax write off?

[danielhv]

Just curious if there is a way I can work this build to benefit me... To my knowledge, you cannot have an experimental aircraft "for hire"... so lets say I wanted to do some amature aerial photography in the future... Nothing I plan on making a living at, but just for fun... Could I claim my build as a tax write off? Just curious if anyone has done anything like that... I do not have a business of any kind, but would like to someday do something on the side aviation related... and Im spending a LOT of money here so far. This was all brought up by the guy who does my taxes... he asked if I could write off the plane.... So here I am.

Another point... I do plan on offering transition training when Im done... (I'll be a CFII by then)... and somehow someway someday want to follow in Mel's footsteps and become a DAR in the DFW area.

[L.Adamson]

Van's can write off their aircraft, but you can't just as easily. You would have to prove to the IRS, that your business is capable of making a profit, and that the plane just isn't a hobby.
That's the tough part, and they are sticklers on the subject. If it's deducted, and they prove otherwise, you'll be repaying with interest & penalty.

And BTW, my insurance policy has some limitations on aerial photography, but I don't have it front of me at the moment, to be specific. My policy also allows some incindental business use, should I use it to travel somewhere for business. However, I just can't legally justify the plane as a business deduction. Only some fuel and related costs.

L.Adamson --- RV6A

[odens_14]

In short No. As L.Adamson said the IRS would likely classify that as a hobby business and they have pretty strict rules. Basically, you are only allowed to deduct your expenses to the extent of your income from that business. At least thats how I remeber my tax professor explaining it.

[Geico266]

Originally Posted by danielhv

Another point... I do plan on offering transition training when Im done... (I'll be a CFII by then)... and somehow someway someday want to follow in Mel's footsteps and become a DAR in the DFW area.

IMHO this is a better / legitimate way to write the plane off. When you are a CFII and or a DAR you can depreciate it as a business asset. Simply transfer the plane into the business. All expenses would be deductible from the business income. Personally, I would not try the photography route. It has "red flag" written all over it.

I'm not a tax guy, but I did drive by a Holiday Inn Express last night. Consult a good tax person before doing it. You want the deduction to be at least "defensible". The IRS is not fond of aggressive legal tax strategies, but they will live with them. They do not like fraudulent ones and will prosecute. Just to be clear, neither situation you describe is fraudulent, but one is more "defensible" than the other.

[Ironflight]

....from a good friend who is a fairly high-income tax accountant. My theory went like this:

1) The Federal Government (FAA) licenses experimental aircraft if they are built for EDUCATIONAL (and recreational) purposes. Therefore, building an experimental MUST be an educational exercise (the government says so!)....

2) The Federal Government (IRS) allows us to write off EDUCATIONAL expenses that make us better at our jobs, in our field, so long as it isn't trying to qualify us for a better job (I won't even pretend to understand that last part...). So Educational expenses in your field are a deduction.....

3) I am an Aeronautical Engineer - building an airplane is undoubtedly going to make me better at my job (just listen to any mechanic at he swears at engineers who don't know how to turn a wrench.....

THEREFORE.....get this....I should be able to write off the cost of my build as a professional, educational expense!

The laugh was long as hard before she said "OK, if you want to try it, I sure am not going to sign your taxes! If it smells of private airplane anywhere on the form, it is an instant audit flag. And no, they won't believe your theory...."

Ah well, it was a nice dream while it lasted!

What's that old saying - you can write off anything you want - as long as they don't catch you!

Paul

[Geico266]

Originally Posted by Ironflight

THEREFORE.....get this....I should be able to write off the cost of my build as a professional, educational expense!

The laugh was long as hard before she said "OK, if you want to try it, I sure am not going to sign your taxes! If it smells of private airplane anywhere on the form, it is an instant audit flag. And no, they won't believe your theory...."

Paul, In your case a partial deduction would have been more appropriate, say 20% of the total cost of the project went towards education, 80% is for hobby / pleasure.

There is no rules about experimental aircraft not being deductible that I know of, in fact I know several people that write off experimental as a business asset if they use it for travel. Perfectly legal and defensible if set up right. Understand, if you claim it as an asset of a company you'll need to depreciate it. All of that depreciation goes back as income when the plane is sold. Expenses (fuel, oil, maintenance, condition inspections) are deductible.

The difference between your example and my example may be a profitable (tax paying) company owns the plane, and it is not being used as "educational purposes".

[flyinmonque]

Paul, An engineer with common sense is a machinist. A builder with a tax write off is a futuer prisoner.

[CNEJR]

Airplanes are written off every year with a more substantial cost than the RV series. The key is to set it up in a profitable business. The IRS says you must turn a profit in a business within 5 years or it may be considered a "hobby". Although this has been disputed with positive result.

I could clearly see Doug Reeves writing his RV's off as these are central to his website. I could see anyone who is developing parts for RV's writing it off as their airplane becomes their "test bed" for development. Anyone using it for business travel could at least write off a portion of the cost & related expenses as you would a car.

I have owned a large RC Hobby shop in Houston for over twenty years as one of my businesses and when I finish mine you can be sure that it will have a Big Company Logo on it, so when I fly over RC flyin's it will be advertising for my store. After all isn't it just a "Big Model Airplane"?

I didn't stay at a "Holiday Inn" last night, but I am a CPA in the State of Texas. It can be done in many cases, but you do have to make a case for it.
Doesn't have to make great business sense. Press the envelope, but follow the law.

[wil]

According to my accountant/ tax man, YES, building an RV and operating it under some very specific conditions will allow the cost of building it and all business use operating expenses to be fully tax deductable.

You must be self employed
You must have an office in one location and do your work in another location
You make your RV a company asset,(company owned) then you can:

Once the airplane completed and is put into service, (can not deduct anything during construction) and listed as a company asset, the cost of building it can be depreciated over a specific number of years, and the operating expenses, gas, oil, insurance and maintainence, to the extent used for business, will become yearly deductions.

My wife and I are self employed photographers (38 years). Our business is our only source of income. Our office is located at home in the Sierra foothills near Yosemite and all of our shooting is done between San Francisco and San Jose,CA, a distance of 150 to 170 miles one way. Travel between the office and shooting location is NOT a commute, it is business travel and is fully deductable for gas, oil, maintainence, insurance, etc. The airplane will be a company asset, owned by our two person company.

All use, directy for business is fully deductable. As a photographer I always carry a camera and am always scouting new photo locations, etc. Our airplane once built, with careful documentation of business use should be 100% tax deductable.

We now spend 3 to 4 hours each way, about 150 days a year and write off about 50,000 miles a year. Our RV-7 when completed will make the trip in 45 minutes. We will have a van at an airport and will then drive 5 to 25 miles to get to our shooting location. My wife is 100% behind the RV-7 after having taken a demo ride at Van's last year. We had a Cessna 170 for 19 years and the RV-7 blew her socks off. She knows she will shoot a lot of rivets and can't wait to get started.

Wil Heslin

[John Clark]

Originally Posted by wil

The criteria that must be met to have the government allow a full write off are:

Are what?

John Clark
RV8 N18U "Sunshine"
KSBA