Can I deduct my B737 type rating? Or my ATP rating?

By Jason Watson (Google+)

Yes, but you need to position yourself very very carefully when you deduct this expense. Publication 529 from the IRS deals with miscellaneous expenses and specifically work-related education. Here’s the play by play-

You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least ONE of the following two tests: (a) it maintains or improves skills required in your current present work, or (b) it is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer.

Well, (b) is out. And (a) works if you believe obtaining a B737 type rating improves your current pilot skills. If you mention that a particular airline in Texas requires a B737 type rating for an interview, your deduction will be denied.

If you state that you earned a B737 type rating to help yourself be more marketable, you will also lose the argument and subsequent deduction. Additional training as a part of a job search is not deductible.

Note the IRS wording above- ‘current present work’. This means your current work which you presently do.

A B737 type rating, or any type rating, and your ATP rating must be a part of your ongoing improvement or maintenance of your pilot skills. Nothing more.

Remember, you must be established in the trade to make this claim, and the education or training cannot possibly lead to another trade. A Tax Court Opinion 2007-174 involving an aerospace engineer who took flight training lessons at Sierra Academy denied his deduction as education since it could lead to a new trade or business. Specifically the Tax Court said

An individual who, through education, improves his skills in an existing trade or business may also become qualified for a new trade or business. Educational expenses incurred to qualify for a new trade or business are nondeductible even if the individual does not engage in the new activity. See sec. 1.162-5(b)(3)(ii) Example (2), Income Tax Regs. The mere capacity to engage in a new trade or business is sufficient to disqualify the expenses for the deduction.