IRS rules require companies to disallow aircraft costs, expenses, and depreciation from non-business flights, called Cost Disallowance (reported as company deductions). A non-business use percentage is used to reduce aircraft costs, expenses and depreciation on the company’s tax return. Final Regulations state that all of the costs of the non-business flights are subject to the disallowance, including:
- Fixed costs
- Variable costs
- Costs indirectly connected to the flight
- Interest
- Depreciation
Reporting requires tracking every passenger on every flight leg to identify and classify if traveling for non-business purposes is subject to cost disallowance. Final IRS regulations allows the cost disallowance percentage to be calculated under four different methods:
- Occupied seat hours
- Occupied seat miles
- Flight-by-flight hours
- Flight-by-flight miles
The taxpayer is allowed to use the calculation method that results in the lowest disallowed amount.
FTS computes the cost disallowance using all four allowable methods and presents the results in a concise and easy to read format so that users can effortlessly compare and identify which reporting method will result in the lowest disallowance and therefore allowing them to maximize their aircraft expense deductions.
