The IRS continues to scrutinize the use of privately owned aircraft with many active audits pending.1 In 2024, the IRS launched a campaign to audit high-net-worth taxpayers – including large corporations, large partnerships and high-income taxpayers – claiming business deductions for private jet use.2 Aircraft use by tax-exempt organizations is also under scrutiny and vulnerable to IRS audits.3
Expenses related to assets used for a business purpose, including aircraft owned by an entity or individual, are generally deductible. However, if the aircraft is also used for personal or other nonbusiness purposes by owners or employees, the business and nonbusiness use must be apportioned, and deductions are generally allowed only for business use.
Aircraft audits are factually intensive and require heightened recordkeeping and supporting evidence to establish a taxpayer's entitlement to deductions. Detailed and accurate recordkeeping is the key to prevailing in an IRS aircraft audit. This article reviews general IRS recordkeeping requirements, outlines the heightened requirements for aircraft, explains how to prepare for an aircraft audit and provides helpful tips for when a taxpayer's recordkeeping is less than perfect.
General Recordkeeping Requirements
The Internal Revenue Code and Treasury Regulations require that all taxpayers keep permanent accounting books or records and make them available to the IRS upon request.4 In general, such documentation must be sufficient to establish the amount of gross income, deductions, credits and other matters required to be shown on the taxpayer's tax return.5 Although the Treasury Regulations do not require any particular format for these records, a taxpayer's records must be kept in a form or accounting system that allows the IRS to determine whether liability for tax is incurred and, if so, the amount.6
For business deductions, the taxpayer bears the burden of substantiating both the amount of the deduction and that the purpose underlying the deduction is ordinary and necessary to the operation of the taxpayer's trade or business.7 Under what is known as the Cohan rule, if a taxpayer's evidence indicates that they incurred a deductible expense, but the exact amount of that expense could not be determined or proven, the IRS may accept a close approximation and not disallow the deduction entirely.8
Taxpayers should satisfy these general business expense recordkeeping requirements by maintaining a journal and general ledger containing receipts and disbursements, as well as organized expense records. Expense records can take the form of canceled checks, bills, invoices, receipts, credit card statements or other documents reflecting proof of payment and should include the name of the payee, amount paid, date paid and a description of the item or service received.9 However, for private aircraft owners, keeping these general or approximated business records alone is not enough.
Heightened Aircraft Recordkeeping Requirements
The Internal Revenue Code subjects aircraft business expenses to additional and heightened recordkeeping and substantiation requirements.10 Under these more stringent rules, no deduction or credit is allowed with respect to aircraft unless the taxpayer proves 1) the amount of the expense, 2) the time and place of travel, 3) the business purpose of the expense and 4) the business relationship of any benefit recipient.11
To support a taxpayer's aircraft business use, such records generally must contain sufficient information about each element for every business use.12 The Cohan rule, discussed above, does not apply to aircraft.13 Thus, the IRS generally will not accept a taxpayer's approximations or unsupported testimony for aircraft-related deductions and instead requires sufficient proof of each element.14
Each item relating to an aircraft expense must be proven by adequate records or by sufficient evidence corroborating the taxpayer's own statement.15 The "adequate records" requirement is generally satisfied by maintaining an account book, diary, flight log, statement of expense, trip sheets or similar records, as well as documentary evidence prepared or maintained at or near the time of the expenditure or use.16 Aircraft expenses and use may also be supported by the taxpayer's statement, whether written or oral, containing specific and detailed information and other corroborative evidence.17 Direct corroborative evidence, like a written statement or oral testimony from a flight passenger or pilot, can support any element of an aircraft expenditure, and circumstantial evidence may also be used to support business purpose and business relationships.18
Although the level of detail required to satisfy the aircraft recordkeeping requirements may vary depending on the facts and circumstances, because recall accuracy fades with time, the IRS views a record or statement made at or near the time of an expenditure as having a higher degree of credibility than a record or statement prepared later.19
Be Prepared for an IRS Aircraft Audit
In addition to satisfying the general recordkeeping requirements
discussed above, new and existing aircraft owners should review
their aircraft recordkeeping and prepare now for a potential IRS
audit. Memories fade, and IRS audits may look back over a number of
years. Thus, it is important to document flight details
contemporaneously or as close to the time of flight as possible.
Proper and detailed documentation can speed up an audit and reduce
unnecessary follow-up questions.
In our experience, IRS auditors ask for a wide variety of documents
to substantiate aircraft expenses and use, including, but not
limited to:
- A Detailed Flight Log. The flight log should list all flight data, including date, origin, destination, miles traveled and flight time.
- A Manifest of All Passengers on Each Flight. Owners should record who flew on the plane each trip, as well as each passenger's individual itinerary and any personal or business relationship between the passenger and the owner of the aircraft.
- Documentation of Business Purpose. Agents ask for robust descriptions of each passenger's business purpose for each flight taken. Documents that substantiate business purpose may include email correspondence scheduling business meetings, calendar entries and meeting agendas that detail matters discussed and attendees.
- Agreements and Policies. Agents will ask for any agreements or policies in place regarding use of an aircraft by related businesses. Relationships and lease arrangements among related businesses for aircraft use should be formalized and documented with the help of an aviation attorney. Additionally, any dry lease documents or service agreements with third-party companies should be kept.
- Depreciation Documentation. If claiming bonus or other depreciation on the aircraft, the owner should maintain detailed schedules of how depreciation is calculated and applied in each tax year.
Responding to IRS requests for the documentation can be overwhelming and challenging for owners and their accountants. Therefore, it is important to involve a tax professional with experience in aviation tax audits early in the audit to provide the IRS team what it needs and to push back on requests that are overly burdensome or irrelevant to the scope of the audit.
What If My Aircraft Recordkeeping Is Not Perfect?
If an aircraft owner is not currently in compliance with IRS guidance on recordkeeping or is unsure whether they are in compliance, they should consider the following steps to mitigate any negative effects of a future IRS audit:
- review documentation and deductions from prior tax years to help ensure compliance with current tax law
- identify and gather documentation and records relevant to aircraft ownership and the calculation of past deductions
- partner with aviation law counsel or an aircraft management company to create a documentation system
- seek advice and guidance from professionals with experience in aviation tax audits
As noted above, in many circumstances, non-contemporaneous expense and use records may provide sufficient substantiation. Thus, even if you have already been contacted by the IRS for an audit, involving a tax professional with experience in aviation tax audits early in the process to help you respond to IRS requests and advocate on your behalf will put you in the best position to timely and favorably resolve the audit.
Footnotes
1. See IRS, Large Business & International active campaigns; see also Treas. Inspector Gen. for Tax Admin., Rep. No. 2025-1S0-012 Internal Revenue Service Oversight of Tax-Exempt Organization Private Aircraft Usage 2-3 (Feb. 26, 2025), (TIGTA Report) (discussing LB&I's aircraft audit activities). Despite the change in administration, the IRS's campaign is still active to date, with no clear signs of slowing.
2. See Abbey Garber, Lee S. Meyercord and Kate Minnich: IRS Announces New Campaign to Audit Personal Use of Business Jets, Holland & Knight Alert (March 15, 2024).
3. See TIGTA Report, supra note 1 (The IRS began developing its Corporate Jet Personal Usage Compliance Strategy for tax-exempt organizations in April 2024.); Rebecca Chen, IRS Oversight of Nonprofits' Jet Use Deemed Weak by Watchdog, Bloomberg Law (March 3, 2025).
4. See I.R.C. § 6001; Treas. Reg. §§ 1.6001-1(a), 1.6001-1(e), 1.446-1(a)(4), 31.6001-1(a).
5. See Treas. Reg. § 1.6001-1(a).
6. See Treas. Reg. § 31.6001-1(a).
7. See I.R.C. § 162(a) (allowing a deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business).
8. See Cohan v. Comm'r, 39 F.2d 540 (2d Cir. 1930).
9. See these IRS resources on general recordkeeping for additional guidance: Recordkeeping; What kinds of records should I keep; Rev. Proc. 98-25, 1998-1 CB 689 (prescribing specific rules on how to retain accounting and financial data used to support an amount of income, deduction, credit, or other item on a return that is not available in hard copy but in a computerized format for later review or audit); Rev. Proc. 97-22, 1997-1 CB 652 (providing guidance on using electronic storage systems to satisfy recordkeeping requirements).
10. See I.R.C. § 274(d). Under section 274(d), all "listed property" is subject to these heightened requirements. "Listed property" is broadly defined and generally includes "passenger automobiles" and other property used for transportation, including airplanes or jets, helicopters, boats, motorcycles and other vehicles. I.R.C. § 280F(d)(4); Treas. Reg. § 1.280F-6(b).
11. I.R.C. § 274(d); see also Temp. Treas. Reg. § 1.274-5T(b)(6) (stating the elements to be proved as 1) the amount (including each separate expense and the amount of use), 2) time (date of expense), and 3) business purpose for the expense)).
12. Temp. Treas. Reg. § 1.274-5T(c)(2)(ii)(c)(1).
14. Id. § 1.274-5T(a) ("This limitation supersedes the doctrine founded in Cohan v. Commissioner.").
14. Id. But see id. § 1.274-5T(c)(2)(v) (indicating that the IRS may accept substantial compliance with the "adequate records" requirement).
15. I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-5T(c)(1).
16. Temp. Treas. Reg. § 1.274-5T(a), (c)(2).
17. Id. § 1.274-5T(a), (c)(3).
18. Id. § 1.274-5T(c)(3)(i).
19. See id. § 1.274-5T(c)(1), (2).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
