Key insights
- IRS scrutiny of business aircraft use is rising, with examinations focused on how flights are allocated between business and personal use.
- Personal use can affect both business deductions and the individual’s income inclusion, making structure and records critical for audit-readiness.
- Form 4562 now includes a business aircraft disclosure on Line 24c, signaling added focus on aircraft-related depreciation and substantiation.
Assess tax positions tied to complex business activity.
Why business aircraft keep showing up on the IRS radar
The IRS is stepping up reviews of private airplane use by companies and high net worth individuals, with attention aimed at identifying mismatches between how aircraft costs are deducted and how the aircraft is actually used.
If an executive uses a company aircraft for personal travel, the personal-use portion can affect eligibility for certain deductions. It can also trigger income inclusion for the individual using the aircraft and may affect the business’s ability to deduct related costs.
New disclosure in the spotlight: Form 4562, Line 24c
In addition to broader enforcement attention, the depreciation form, which many taxpayers already file, now calls out aircraft activity more directly. Form 4562 instructions include aircraft-specific content, and Line 24c requires taxpayers to affirmatively disclose certain business aircraft activity.
Why this matters
Line 24c ties the aircraft’s operating structure directly to high-risk compliance areas, including:
- Qualified Business Use (QBU) and how it’s computed and supported
- Bonus depreciation eligibility and whether the requirements are met
- Entertainment disallowance and fringe benefit valuation tied to personal use
- Related-party leasing and other structural issues that can undercut QBU and depreciation positions
With the IRS publicly signaling expanded aircraft audits and the release of IRS aircraft audit guidelines circulating, this checkbox will likely function as a screening trigger for examiners.
What the IRS looks for with business aircraft
Form 4562 instructions include a dedicated “business aircraft” section. It highlights areas the IRS commonly reviews — and where taxpayers often get tripped up.
How you classify flights and passengers
For aircraft used by officers, executives, other employees, shareholders, or partners, the IRS will focus on whether each flight leg is correctly categorized and whether passenger-level purposes are supported.
Your substantiation and flight logs
Compliance starts with strong, detailed recordkeeping supporting how flights and passengers were classified. Flight logs, passenger lists, documented business purpose, and related expenses should be retained and readily available.
Your ownership and operating structure
How an aircraft is owned, leased, or chartered — and how related parties use it — can drive outcomes for deductions and depreciation. Reviewing the structure periodically can help identify gaps or improvement areas.
Depreciation positions and QBU thresholds
Depreciation eligibility involves more than just clearing the 50% qualified business use (QBU) test alone. Form 4562 business aircraft guidance highlights QBU requirements tied to accelerated depreciation, and that QBU is calculated per passenger, per flight leg.
Additional limits can apply when flights involve owners, executives, or other related parties — particularly when use is treated as compensation.
Steps you can take to reduce risk
The new Line 24c disclosure reinforces how the IRS intends to identify and examine aircraft‑related tax positions. To help reduce audit exposure, aircraft owners and operators should:
Start with a solid plan
Learn how to structure an aircraft ownership or lease interest so the foundation supports business-use positions. Even long-time owners can benefit from a fresh look at structure and supporting records.
Maintain accurate records
Keep detailed documentation for each trip, including flight logs, travel purpose, expenses, and the business relationship of each passenger. This is one of the most common pressure points in aircraft exams.
Review personal use methodologies
Take a fresh look at how entertainment disallowance and fringe benefit amounts are calculated, particularly for flights involving owners, executives, or other related parties. Consistent application and documentation can matter just as much as the method selected.
Reassess depreciation and related positions
Periodically revisit bonus depreciation assumptions alongside qualified business use calculations. Changes in mission profile, passengers, or use by owners and executives can affect depreciation eligibility over time.
Run periodic internal checkups
Regularly review aircraft use and related expenses to spot items that may need reclassification, additional support, or correction before the IRS raises them.
Work with a tax advisor who knows aircraft issues
Aircraft rules are technical, and the right guidance can help you apply the rules consistently — especially when flights mix business and personal elements.
How CLA can help with business aircraft tax strategy
As IRS attention on aircraft activity increases, the right advisory support can help bring clarity and consistency to your tax positions. CLA’s industry professionals blend deep technical tax insight with hands‑on industry experience to help you stay ahead of regulatory changes and protect your tax positions.
Whether you need to reassess your aircraft structure, strengthen documentation, or prepare for potential IRS inquiries, we’re here to support you with our proactive, relationship‑focused approach.
Contact us
Assess tax positions tied to complex business activity and clarify tax reporting before questions arise. Complete the form below to connect with CLA.