Tax deductions for corporate jet travel are abused, IRS says

Business executives have been using corporate planes for personal vacation travel and illegally writing off the flights as business expenses, the IRS alleged Wednesday as agency leaders vowed to crack down on the deductions.

IRS Commissioner Danny Werfel said that U.S. companies own more than 10,000 private planes. The IRS will start auditing a few dozen of their corporate owners, selected with the help of technology that combs businesses’ deductions for suspicious patterns. The audit campaign, the IRS said, may expand eventually to more companies or to individuals who took the free vacation travel.

Companies can write off the upfront cost of purchasing planes, but when it comes to flights on those aircraft, the law limits write-offs to business trips. When executives use a plane for personal purposes, the company can’t deduct that — and the executives are supposed to report the trips on their own tax returns as income received.

“If a personal vacation trip was taken on that corporate jet, the company should avoid taking the business deduction,” Werfel said in a news conference Wednesday. “What we believe is happening is there’s not enough robust record-keeping going on, and there is systemic overstating of these business deductions, and that’s what we’re looking to tackle.”

The new audit campaign focused on airplanes is just one of many steps Werfel has taken as commissioner to increase scrutiny on high-wealth taxpayers and large corporations. Agency officials have said that they can collect hundreds of billions from tax cheats as long as lawmakers don’t strip the IRS of previously approved funds.

ProPublica highlighted billionaires’ use of private planes to obtain large tax deductions last year in a series of articles about how wealthy people avoid taxes.

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