Over the past year, we’ve seen increased attention from the IRS, along with state and local tax authorities, regarding aircraft ownership, use and reporting. While this isn’t entirely new, recent developments point to a broader shift to more coordinated and data-driven enforcement.From new questions on IRS tax forms to more sophisticated tracking at the state and local level, the trend is clear: Tax authorities are stepping up how they identify and evaluate aircraft activity. For aircraft owners and advisors, this is a good time to ensure an efficient ownership structure is in place and proper records are being maintained.
IRS Adds Aircraft Question to Tax Form
Beginning with the 2025 tax year, the IRS added a new question to Form 4562 (Depreciation and Amortization) asking whether the taxpayer owns, leases or charters an aircraft.
At first glance, it seems like a simple question. But it helps the IRS spot returns that include aircraft depreciation and allows them to take a closer look at how those assets are reported. It’s another sign the IRS is paying more attention to taxpayers who operate and depreciate business aircraft.
In addition to collecting more data, the IRS is also developing tools to better analyze it. The agency has partnered with Palantir to develop an AI-driven system known as the Selection and Analytic Platform (SNAP).The platform is designed to help the IRS identify the “highest-value” audit cases, according to recent reporting by Wired, improving how data is analyzed across its many legacy systems.
Historically, the IRS has relied on more than 100 separate systems and hundreds of different methods to select returns for review, which has made it difficult to be consistent and optimize audits. SNAP is designed to address this fragmentation by integrating those data sources and applying more advanced analytics.
While the initial pilot is focused on specific areas such as clean energy credits, gift tax filings and disaster-related claims, the broader objective is to improve how the IRS uses data to select audits.
California Property Tax Assessments on Visiting Aircraft
At the local level, counties in California are paying closer attention to how much time planes spend at their airports, even if those planes aren’t primarily based there.
Counties such as Los Angeles, Ventura and San Diego have issued property tax assessments to aircraft that visited for short periods, in some cases triggered by as few as 20 overnight stays during the year.
They are also issuing escape assessments for prior years. These assessments include a penalty and are being sent to aircraft owners who “escaped” paying property taxes in prior years. Realistically, most of these aircraft owners spent little time in California, and the counties are using data to aggressively change their posture.
A recent announcement from Los Angeles County provides additional context. It has invested in an advanced aircraft discovery software that analyzes multiple data sources and, according to the county, it has already identified over 1,000 previously unassessed aircraft.
While proration may be available based on the time an aircraft spent in California, the key takeaway is that local authorities now have improved visibility into aircraft activity and are becoming more aggressive. For owners who frequently travel to California for business and leisure, you should be aware of this exposure and maintain records that support the extent and purpose of the visits.
Increased Scrutiny of Out-of-State LLC Structures
States are also continuing to scrutinize the use of out-of-state entities, especially in places like Montana and Oregon, for registering high-value assets.
A recent crackdown of Montana plates on California-based cars and recreational vehicles has highlighted a long-standing principle: Tax obligations are determined by where an asset is used, not where it is registered or where the ownership entity is formed.
Aircraft have long been subject to this same framework. Sales and use tax exposure are based on where the aircraft is based and hangared.
What has evolved is the availability of data. With tools such as ADS-B flight tracking and improved data matching, authorities have a greater ability to understand how and where aircraft are being used. In practice, this places greater importance on ensuring that state sales tax exemptions align with actual operational patterns.
Acquisition Planning: A Proactive Approach
Against this backdrop, careful ownership planning continues to be the key to achieving efficient tax outcomes.
Aircraft ownership involves coordination across multiple areas, including federal income tax, state and local tax regimes, and FAA considerations. Because of this, small differences in structure and usage can have meaningful tax implications.
A well-planned approach generally includes a clear ownership structure, contemporaneous flight records, and documentation supporting the business purpose of travel. Periodic reviews can also be helpful, particularly as usage patterns evolve or when aircraft operate in multiple jurisdictions.
Final Thoughts
Overall, these developments show a clear shift in how tax authorities are approaching aircraft compliance. The underlying laws have not changed, but the tools used to administer and enforce them are becoming more refined.
For aircraft owners and prospective buyers, this environment highlights the importance of talking with an expert. Strategies that worked in the past may no longer be as effective. Proactive planning and a well-thought-out structure can go a long way in helping you stay compliant and avoid issues down the road.
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