Posted: 2/9/2011 22:25:45
I know I've read posts about using the airplane itself as a tax
deduction, but has anybody looked into using the sales tax deduction on
large purchases, for separate portions of the RV kit? For example, I
bought the wing kit this year. I'd like to look into calling that a
large expense under the aircraft category. Of course I'd probably do it
again in subsequent years for the fuselage, etc. The sales tax deduction also applies to cars, as well as aircraft, which
is specifically mentioned. If I bought a complete RV, or any other
airplane for that matter, I wouldn't think twice about taking this
deduction. The question comes down to is the kit an aircraft or not. The
aspect of business use is mentioned nowhere in the language for this
deduction. It is simply for sales tax for a large purchase.
I'll quote a CPA friend of mine:
'That’s an interesting question. I can’t find anything authoritative
about that specific situation. I can see a rationale for why it should
qualify but I think it is likely the IRS would dispute it under audit.
This is because the instructions make a point of mentioning that sales
tax deductions for homes can include building materials – yet they don’t
make a similar statement under the section for boats and aircraft."
My one response to this is that I think you could argue that building
materials for a home are common. I would think that a kit-built airplane
is so “non-mainstream” (couldn’t think of a better word) that they may
not even have thought of it.
Not wanting to cause a tax revolution...well...
Just want to save a little money where I can .
Posted: 2/17/2011 20:06:24
You do have an interesting question. Here in Vancouver USA, we ponder such questions here too. When traffic is light, we are just a few minutes from sales tax free Oregon. I suspect the 40 minute drive from here to Van's Aircraft (Aurora, OR) would make it a moot point until the completed aircraft was registered with the State of Washington.
Unfortunately, I have not been able to find any support for deducting an aircraft kit or component. The support I did run across was in the IRS Notice 2005-31 allowing the sales tax deduction of an aircraft as a motor vehicle. It is there the materials for building a home is mentioned.
As another possibility, you can deduct the actual amount of general state and local sales taxes paid by accumulating receipts showing sales taxes. This is much more work but if you are building a plane then you are already used to working hard.
If I find a better answer for you, I will let you know.
Rustin Brewer, CPA
Posted: 2/21/2011 20:29:24
Modified: 2/21/2011 20:31:27
I don't see why it couldn't be deductible on Schedule A just like any other expensive purchase (i.e., car). After all, the state where I live (Missouri) wants a person to pay the appropriate 'use tax' and will penalize in accordance with the tax law when the entire aircraft is completed if the tax isn't paid incrementally as partial kit purchases are made. The state finds out about it 'officially' via the FAA registration DB; it may take a couple of years to get to you, but they will.
Most states are looking for any and every way to collect the additional revenue. A 'use tax' or 'sales tax' on items bought online or in another state that were shipped to the final location are lost revenue to the state. IL for example added a line on their state tax form this year.
Go for it in my opinion.