Taxes related to aircraft ownership and operations can be complicated and are enforced by many different jurisdictions. I have written a number of articles outlining the various compliance requirements including federal income tax, state sales and use tax, local taxes (including property tax), and federal excise tax. It can all feel overwhelming at times, but it is important to address all tax compliance matters to avoid a surprise bill down the road.
A question I receive regularly is how often we see enforcement action. This depends greatly on the type of tax and the jurisdiction. This article (and the forthcoming Part II) will outline some of the most common audit scenarios and how to prepare for them.
Federal Audits
Federal audits tend to be the biggest concern among aircraft owners, especially those looking to take advantage of the 100% bonus depreciation (see the One Big Beautiful Bill Act and One Big Beautiful Bill Act II articles, May and July 2025). A few years ago, the IRS announced that it would increase audits of businesses that owned aircraft. Shortly after, we saw a wave of aircraft audits in 2024, followed by a slow period after the change in administration and IRS budget cuts in 2025. As of late, we are seeing some action again from the IRS, with a new round of audits coming through.
Over the past few years, the IRS has streamlined the aircraft audit process and we are seeing consistent documentation requests to substantiate business aircraft use. In my experience, there are two items that tend to be the focus of recent audits.
First, the initial request consistently asks for the IRC Sec. 280F calculation for aircraft that took bonus depreciation or other MACRS depreciation. This refers to the Qualified Business Use requirements for accelerated depreciation (see the Bonus Depreciation article, Oct. 2024).
Second, auditors are focused on “written and contemporaneous” documentation. The backup documentation to support the business usage must be written and created on or around the time of the original flights (see the Flight Documentation article, March 2025).
What's Coming in Part II
Although federal audits are the focus of many aircraft owners, enforcement actions by state and local jurisdictions can also have a substantial financial impact. Stay tuned for Part II as we dive into the various state and local enforcement practices.
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