What Airline Pilots & Crew Members Should Know About Taxes
When it comes to income taxes, every profession has its own unique quirks to deal with. A standard employee with one W2 has it fairly easy, while things get more complicated once you enter the world of self-employment.
Things grow even more difficult once you start talking about professions like airline pilots and the crew members that support them. This is true for a number of different reasons, all of which you'll want to know about before April rolls around yet again.
Airline Pilot Taxes: An Overview
One of the most important things to understand about taxes for airline pilots and crew members is that they aren't necessarily taxed the same way the rest of us are.
Think of the example of an independent contractor. Obviously, you get taxed on all income you bring in, regardless of where it is located. If you live in Ohio and do the majority of your work there, but occasionally venture into Indiana and complete jobs, you'll get taxed on your income at the state level in both locations.
According to the Internal Revenue Service, airline pilots that are based out of the United States get taxed on all income that they generate all over the world. Just because you primarily fly to London, for example, doesn't mean you can get a pass on any income you earn as a result of those trips.
This brings with it a hurdle that virtually nobody else has to deal with - the fact that airline pilots and crew members need to monitor when they're flying over the United States, over foreign territories, and even over international waters.
To speak to the last point, however, know that the IRS doesn't actually consider money earned while flying over international waters to be "foreign" income. You would get taxed on that the same way you would in any traditional situation.
Thankfully, foreign-based U.S. pilots who meet a certain level of eligibility can exclude up to $108,700 per year of any foreign-earned income. This can help cut down significantly on the amount of money that they might owe at the end of the year. This is similar to how, if you were a business owner, and you wanted to claim certain business expenses as deductions, you would still need to show receipts for the sake of accuracy. It's a similar concept, albeit a different execution.
To qualify for that exclusion, officially referred to as the Foreign Earned Income Exclusion, a pilot needs to be either a United States citizen or a resident alien. They also need to have a tax home in some foreign country and must meet one of two different types of tests - the Physical Presence Test or the Bona Fide Resident Test.
The first of those tests require someone like a pilot or crew member to be physically present in a foreign country for at least 330 days over a standard 365-day period. If a pilot is entirely based in a foreign country and has absolutely no intention of returning to the United States, they likely meet the Bona Fide Residence Test already.
In the end, taxes for airline pilots and crew members can certainly be complicated - which is why you should never be afraid to enlist the help of a professional to make sure that things are completed as accurately as possible.
Want tax & accounting tips and insights?
Sign up for our newsletter.
Comprehensive Business Accounting Services
For business in Chicago and the surrounding areas, we provide an integrated set of services that work together to help you grow your business.
-
Bookkeeping and Financial Reporting
-
Reliable, organized books are the backbone of good decision-making. We maintain accurate records, prepare meaningful financial statements, and help you read the story your numbers are telling.
-
Business Tax Preparation & Tax Planning
-
As a CPA for small businesses, we prepare tax returns for sole proprietorships, partnerships, S corporations, and C corporations with accuracy. We also help you develop a tax strategy to keep more of what you earn.
-
Payroll
-
We help you pay your team accurately and on time while staying current with federal, Illinois, and local payroll tax obligations, filings, and deadlines, so payroll is one less thing to worry about.
-
Business Consulting
-
Good accounting shows where your business stands; a good consultant helps you decide where to take it next. From entity selection to expansion planning, we're a steady financial sounding board for the decisions that shape your company's future.
Why Chicago Businesses Choose Serenity
Because we operate as an integrated tax and wealth practice, our business accounting services align with the broader financial decisions that matter to you and your company. When your business tax strategy connects to your personal financial landscape, you will be able to make decisions with fewer blind spots.
Clients near Chicago and across the country turn to Serenity Tax & Accounting for support that is comprehensive, coordinated, and proactive. We believe accounting should bring you clarity. We pride ourselves on calm communication, plain-language explanations, and responsive service throughout the year, not just during tax season.
When you work with our firm, you're building a relationship with a team that understands your business, anticipates what's coming, and helps you move forward with confidence.
Frequently Asked Questions
-
Software is a tool, not a substitute for judgment. A CPA reviews your books, catches errors, prepares accurate statements, and finds tax savings the software won't flag. We work alongside the system you already use.
-
Ideally, well before tax season. The biggest savings come from year-round planning, not filing-time scrambling. We work with you throughout the year, so there are no surprises in the spring.
-
As an integrated division of Serenity Wealth Management, your accounting, tax strategy, and broader financial goals work together, keeping your business and personal decisions aligned with fewer blind spots.
-
We support Chicago-area sole proprietorships, partnerships, LLCs, S corporations, and C corporations, tailoring our bookkeeping, payroll, and tax services to the size and complexity of your business.