New York Advisory Opinion TSB-A-81(10)I: Can a professional pilot deduct the cost of a flight-school course that qualified him to fly a new type of aircraft, as a New York itemized deduction?

Plain-English summary

Frank O'Donnell, a professional airplane pilot licensed by the FAA since 1967, attended a course at a flight school in early 1978 that qualified him to operate a Boeing 727, a two-engine aircraft he hadn't previously been licensed to fly. He and his wife Susan asked whether the cost of that course could be deducted as a New York itemized deduction on their 1978 return, the year in which they filed as New York residents.

The Department explained that a resident's New York itemized deduction under section 615(a) starts from the taxpayer's federal itemized deductions, and federal law allows a deduction for education expenses under IRC section 162 and its regulations (26 CFR 1.162-5) when the education maintains or improves skills required in the taxpayer's existing employment - as opposed to education that merely meets the minimum requirements to enter a trade or business, or that qualifies the taxpayer for an entirely new trade or business (neither of which is deductible).

Applying that standard, the Department found the B727 course improved O'Donnell's skills in his existing career as a commercial pilot; qualifying to fly one additional aircraft type didn't amount to qualifying for a "new trade or business" - he remained a commercial pilot before and after the course. The fact that he took the course during a brief hiatus in his employment (between his charter-airline job and his subsequent job with Evergreen International Airlines) didn't change the analysis. Because the expense qualified as a deductible federal business expense, it flowed through to the couple's New York itemized deduction for 1978.

What this means for you

Pilots and other licensed professionals taking additional certification courses

Training that qualifies you to do more within your existing profession - like a pilot adding a new aircraft type rating - is generally treated as maintaining or improving your existing job skills, not as training for a "new trade or business," even if it technically expands what you're licensed to do.

Taxpayers who take job-related courses during a gap between jobs

A brief hiatus in employment when you take the course doesn't disqualify the expense, as long as the course relates to your existing trade or profession rather than launching you into a new one.

Accountants reviewing education-expense deductions

Distinguish between education that (a) meets minimum entry requirements for a trade or business, (b) qualifies the taxpayer for a new trade or business, and (c) maintains or improves skills in an existing trade or business - only the third category is deductible, and New York itemized deductions follow the federal outcome here since section 615(a) starts from federal itemized deductions.

Common questions

Q: I'm a pilot who took a course to get certified on a new aircraft type - can I deduct the tuition?
A: Generally yes, if the course maintains or improves skills in your existing career rather than qualifying you for a new trade or business - being certified to fly an additional aircraft type, while still working as a pilot, was treated as the former.

Q: Does it matter that I took the course between two jobs, not while actively employed?
A: No - the Department found a brief employment hiatus didn't change the deductibility analysis, since the course still related to the taxpayer's existing profession.

Q: Why does a New York itemized deduction depend on federal tax rules?
A: Because Tax Law section 615(a) defines a resident's New York itemized deduction as the taxpayer's federal itemized deductions (with specified New York modifications) - so a federally deductible business education expense generally carries through to the New York return.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a81_10i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81 (10) I
Income Tax
December 31, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. I810820A

On August 20, 1981, a Petition for Advisory Opinion was received from Frank and Susan
O'Donnell, 411 Kings Court, West Babylon, New York 11704.
The issue raised is whether Petitioners are entitled to a deduction, under Article 22 of the Tax
Law (Personal Income Tax), for certain educational expenses incurred in 1978, with respect to which
year they filed a tax return as residents of New York.
Petitioner Frank O'Donnell (hereinafter referred to as "Petitioner") states that he is a
professional airplane pilot, licensed as such by the Federal Aviation Administration since 1967, and
that prior to 1978 he was employed as a pilot by a charter airline. From January 9, 1978 through
March 16, 1978 Petitioner attended a course at the Braniff Education System Inc. flight school which
qualified him to operate a B727 aircraft, a two engine plane. Subsequent to March, 1978 Petitioner
was employed as a professional pilot with Evergreen International Airlines.
Section 615(a) of the Tax Law provides that the New York itemized deduction of a resident
individual means the total amount of his Federal itemized deductions, with certain modifications.
Section 162 of the Internal Revenue Code provides for a deduction for trade or business expenses.
Federal Income Tax Regulations, 26CFR§ 1.162-5 provides that certain expenditures made by an
individual for education may constitute deductible trade or business expenses. It is there provided,
in relevant part, that expenditures "made by an individual for education . . . which are not
expenditures of a type described in paragraph (b)(2) or (3) of this section are deductible as ordinary
and necessary business expenses if the education -- (1) Maintains or improves skills required by the
individual in his employment or other trade or business, " 26 CFR § 1.162-5(a).Paragraph (b)(2)
and(3) refer, respectively, to "education which is required of . . . [the taxpayer] in order to meet the
minimum educational requirements for qualification in his employment or other trade or business,"
and "expenditures made by an individual for education which is part of a program of study being
pursued by him which will lead to qualifying him in a new trade or business."
In the present case the education in question was designed to improve Petitioner's skills in
his career as a commercial pilot, and constituted education beyond that necessary to meet the
minimum educational requirements pre-requisite to entering upon such a career. Further, although
Petitioner by virtue of the course in question became qualified to operate a type of aircraft which he
was not formerly qualified to fly, such does not constitute qualification for a new trade or business.
See in this regard Matter of Carl J. Richter, State Tax Commission decision, March 13, 1981, TSB­
H-81(121)i; Rev. Rul. 74-78, 1974-1CB 44; 26 CFR § 1.162-5(b)(3). Finally, the fact that
Petitioner's educational expenses were incurred during a brief hiatus in his employment warrants no
different conclusion.

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

TSB-A-81 (10) I
Income Tax
December 31, 1981

See Rev. Rul. 68-591, 1968-2 CB 73. Accordingly, the educational expenses described by Petitioner
herein are includible in the Petitioners' New York itemized deduction on their personal income tax
return for 1978.

DATED: November 4, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau