The IRS announced on February 21 that it will start an audit campaign investigating potential personal use of business aircraft. The campaign will begin with a few dozen audits, but the IRS has indicated that number may increase following initial results and additional resources. This campaign is part of the agency’s use of Inflation Reduction Act (IRA) funding to focus on high-income taxpayers and corporate enforcement.

Business aircraft expenses may be deducted if the aircraft is used for business purposes. These deductions can include both the cost of the aircraft and maintenance expenses. However, personal use of a business aircraft must be allocated separately from its business use. The 2017 Tax Cuts and Jobs Act allowed for up to a 100% deduction of the business expense of a private aircraft acquired and placed in service between September 28, 2017, and December 31, 2022.^[1]

An April 5, 2023, ProPublica investigation examined the tax records of wealthy private aircraft owners and the often blurred lines between business and pleasure travel. The use of private aircraft captures the public’s attention for other reasons as well – notably, Taylor Swift recently sent a cease-and-desist letter to college student Jack Sweeney for sharing her private jet usage on Instagram.

Of course, there’s no indication from the IRS on whether it intends to include the pop star in its dozens of business aircraft audits. However, the IRS has announced that it plans to use “advanced analytics” to evaluate whether jet owners properly report aircraft expenses. The agency has used IRA funding to increase its use of staff and technology to address what IRS Commissioner Danny Werfel described as “anemic” audit rates.^[2] The IRS announced in January that it had collected $482 million in owed taxes from millionaires since October 2023.^[3]

The IRS is unlikely to change course from its focus on high-income taxpayers and large corporations. “With expanded resources, IRS work in this area will take off,” Werfel said. “These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

Authored by Ethan Vernon. 

^[1] See I.R.C. §168(k)(6) (bonus depreciation percentage) and I.R.C. §168(k)(2)(A)(ii) (application to new and certain used property), as amended by the Tax Cuts and Jobs Act of 2017 (TCJA), Pub. L. No. 115-97, §13201.

^[2] CBS News. “IRS Says it has a New Focus for its Audits: Private Jet Use.” CBS News, February 21, 2024.

^[3] Internal Revenue Service. “IRS Ramps Up New Initiatives Using Inflation Reduction Act Funding to Ensure Complex Partnerships, Large Corporations Pay Taxes Owned, Continues to Close Millionaire Tax Debt Cases.” Internal Revenue Service press release, January 12, 2024. https://www.irs.gov/newsroom/irs-ramps-up-new-initiatives-using-inflation-reduction-act-funding-to-ensure-complex-partnerships-large-corporations-pay-taxes-owed-continues-to-close-millionaire-tax-debt-cases, accessed February 26, 2024.