As an operating business, an FGO gets to deduct the costs. As a private owner, you don't. Everything they spend costs roughly 36% less than what you spend, due to the tax deductibility of expenses for businesses.
As others have pointed out, they rent planes primarily to be able to operate a flight school. They get to write off the cost of the instructor (You pay $30/hour, they pay the instructor $20/hour. After their write off, $7.40/hour profit). There are other expenses to add to the above, but those are also deductible. So they net some profit on the instructor, and some profit on the plane. Not a lot, but in volume, it can make a going business.
And no. Your next questions relate to "Can I set my plane up to be tax deductible?" Uncle Sam has seen every scheme out there, and killed them all other than Lease-Back (buy a plane from a dealer, lease it back to him/her to have on the line to rent.) You as the real owner do get to deduct the plane as a legitimate business, but the charges from the FBO to do the required maintenance always seem to equal or exceed your profit. Strange how that works. Now the FBO is making some money from the instructor, some from renting the plane, and a nice return from the maintenance.
Don't feel bad. A lot of smart people have gone through the same things you are going through and tried to figure out ways to reduce the ultimate cost of having an airplane available to fly. Every guy or gal currently in the Club or who has been in the club in the past has done the same. It all boils down to either rent a plane, or buy (with no deductions)and pay all the costs, expected and unexpected, out of their own pocket.
I am obviously a fan of flying, and also of owning if you can afford to do so without worrying about the costs/repairs.
Mike
Last edited by Michael_Dann; 02/29/08 05:20 PM.
