BUSINESS

Fact checked by Vikki Velasquez
Reviewed by Chip Stapleton

Private Jet Charter vs. First-Class: An Overview

Private jet charters and first class are two different modes of air travel. Both require the traveler to pay a great deal of money for the privilege of boarding. While they may seem similar, these two types of air travel are distinctly different.

Chartering a private jet allows you to maximize your time at your destination and minimize the number of hours you spend traveling, while flying first-class means you are still at the mercy of taking the route of a commercial airline.

Private jets give you the luxury of flying on your own or with a group. However, going first-class means you still have to put up with crowds at airport security and other discomforts of commercial flights.

Some people may give you flak for asking the question, but if you have the disposable income to spend on air travel, it’s worth considering either option. Keep reading to learn more about the differences between taking a private jet and flying first class.

Key Takeaways

• Flying on a private jet or first class can be expensive, but both offer luxuries unavailable in the economy cabin of a commercial flight.
• Private planes offer more individualized amenities to passengers than first-class flights.
• First-class may be much more affordable than a private jet if you fly overseas.
• Flying first-class is generally less expensive than buying a seat on a charter jet if you fly alone.

Private Jet Charter

Private jets are for customers in the high-end travel industry. As the name implies, it involves hiring a private jet to travel to your destination. This allows the party making the reservation to control who boards the flight, whether that’s friends, families, or colleagues in the case of corporate travel. Chartering a jet can be costly, but certain perks go along with it.

First, chartered flights offer passengers a great deal of luxury and convenience. This allows individuals to avoid the hassles of dealing with the crowds and security at the airport that people who fly commercial airlines must go through.

It’s also a time saver because travelers who charter flights can set up their own flight timetable, which means they set the departure time. These individuals also don’t have to deal with layovers and flight changes. The onboard experience on a chartered flight is also tailored to give flyers a more personal experience. This also includes the amenities that are on board.

For instance, travelers can choose their own flight crew, may be given catered meals, and have access to technology and entertainment systems. And since there are far fewer passengers, travelers have more room to move freely throughout the flight.

Charters are fairly common for corporate and other business travelers, which allows them to conduct business while in the air or to accommodate their busy schedules. In some cases, private jets allow goods and services to be transported between companies and their customers. Other people who frequently charter private jets include celebrities and athletes.

Important

Joining a loyalty program and using a cash back or travel credit card can help lower travel costs, whether that’s on a private jet or for a first-class ticket on a commercial airline.

First-Class

Just like charter flights, flying first-class costs more money than purchasing a flight in the economy section. But unlike private jets, first-class travelers have to go by the airline’s schedule. This means they have to go through airport security and deal with crowds, layovers, delays, and long lines at the terminal.

True, first-class flying on a commercial aircraft comes with amenities. They benefit from priority boarding, which means they skip the line to get on board. They are seated in a reserved section at the front of the plane and are given certain perks, including free beverages and meals, larger seats, more legroom, and other benefits.

In many cases, airlines customize their seating to provide passengers with the most comfort, including sleeper seats. The services that come with first-class flying, though, are generally not at the level or personalization of flying privately.

Long trips require a larger, more expensive plane with a bigger range. Although it is an expensive form of travel, it is considerably cheaper than hiring your own plane unless you took a very large group with you on the charter and would have otherwise bought everyone first-class seats.

Commercial aircraft only have access to the largest airports. If the traveler is flying to attend a meeting well outside the nearest metropolitan area, they need to add significant round-trip driving time to get from the metro airport to the meeting location.

Note

When weighing fare options, consider business class as well, which can offer luxury perks and amenities while costing less than first-class.

Key Differences

While we’ve laid out some of the most obvious differences between flying on a private jet and flying first class on a commercial airline, there are very obvious distinctions between them. Here are some of the most obvious ones.

Cost

One of the main differences between these two forms of travel is the cost. Chartering a private jet can cost anywhere between $2,000 and $18,000 per hour, even up to $30,000 an hour for a VIP Airliner.

The cost can get very high, though it depends on a certain number of factors, including:

• The destination
• The amenities required
• Whether the plane and crew need to wait for the traveler
• The size of the plane, where smaller planes cost less to hire

For example, a light jet might cost $9,000 to $11,000 for a three-hour trip. However, popular destinations can sometimes cost more. A three-hour flight to Palm Beach, Florida, from New York City might cost as much as $20,000 for a light jet and up to $30,000 via a mid-size jet. The cost can vary, depending on the number of seats on the plane, the amenities, and how many staff are required.

First-class reservations on commercial flights can cost about $1,300 for domestic flights and higher for international destinations. The cost also depends on the airline itself—some charge more because they have more amenities available to those who are willing to shell out more money for air travel.

When traveling, consider travel insurance, particularly if the trip is expensive. On a commercial aircraft, you rent a seat. If you want to bring somebody with you, you rent two seats and pay double the cost. With charters, on the other hand, you rent the plane.

Accommodations

Customers who fly privately also have the luxury of bringing a lot more with them to their destination. This includes pets, sporting equipment, and other bulky items that don’t easily fit on commercial aircraft. They also avoid the risk of losing these items in checked baggage.

First-class flyers, on the other hand, are limited in how many bags they can bring on board. But they may be given a more flexible weight allowance than those in other cabins. And while other passengers may have to pay to check in their bags, first-class passengers are normally exempt from paying.

Accommodations don’t just mean the bag allowance. While commercial airlines do as much as they can to be more accessible, private planes may provide easier access for elderly, handicapped, or injured travelers. They are also usually better equipped to handle wheelchairs and other equipment.

If you prefer flying privately, you may consider investing in a private jet membership that offers guaranteed access to a private plane in exchange for an annual or monthly membership fee.

Special Considerations

To the average onlooker, it’s easy to see a private jet flying as excessive. What makes it more economical is when you factor in the value of a person’s time.

Private jets are able to fly into smaller airports, often getting their clients to their location faster. In addition, flyers don’t have to wait in long security lines at large airports, which can be time-consuming even for those with Trusted Traveler status.

Because companies don’t want to fly their jets without passengers, they are often happy to wait for passengers flying back the same day. This gives flyers more flexibility in their schedules and allows executives to conduct business meetings and work more easily, so flight time isn’t wasted. This often makes them more economical than commercial aircraft.

There’s also the reliability factor. Not making it to an important meeting because a flight was canceled is a risk some people cannot and won’t take. It’s likely that most people who charter flights do so because they just don’t want the hassle of flying commercially, and money is no object.

Is a Private Jet More Expensive than Flying First Class?

Chartering a private jet can cost between $2,000 and $18,000 per hour. The cost varies depending on the size of the plane, the number of seats, the staff needed, and the amenities. For example, a three-hour trip in a light jet might cost up to $11,000, while the cost jumps to $20,000 for a mid-size jet.

First-class reservations on commercial flights can cost about $1,300 for domestic flights, with international flights costing more. Also, first-class costs can add up, depending on the airline and the amenities.

What Are the Benefits of Chartering a Private Jet?

The onboard experience on a chartered flight is tailored and includes more amenities, such as catered meals and access to technology and entertainment systems. You may also choose your own flight crew and make your own flight timetable and departure time. Also, there are no airport crowds, layovers, or flight changes when flying via a private jet.

Do You Have to Go Through TSA Security for a Chartered Flight?

Privately chartered flights do not have to go through the Transportation Security Administration’s security checkpoints if the plane has fewer than 61 passengers.

The Bottom Line

Whether it makes sense to charter a private jet or fly commercial in first- or business class can depend on your individual needs and travel budget. While a chartered flight may cost more, it offers more benefits than typical commercial flights.

If you do decide to fly first-class or business class, take time to compare the best airline rewards credit cards that can help you earn points or miles toward future flights.

Fact checked by Suzanne Kvilhaug
Reviewed by Chip Stapleton

Money laundering is the process of illegally making a large amount of money and hiding it to make it look like it was generated from legitimate sources. Money can be laundered in numerous ways using smurfs, shells, or mules. The process can also leverage casinos, cryptocurrency, real estate, or cash businesses.

Key Takeaways

• Money laundering involves hiding large amounts of money made illegally to make it look like it was generated legitimately.
• Money laundering is a serious crime that carries heavy penalties including jail time.
• Fraudsters often use smurfs, mules, and shells to play, layer, and integrate their money into the financial system.
• The digital age helps money launderers stay under the radar and one step ahead of financial authorities.

Understanding Money Laundering

Laundered money typically comes from activities like drug and sex trafficking, terrorist activities, and other illicit means. It’s considered dirty and is laundered to make it look like it came from a legal source. Money laundering is a serious crime that carries heavy penalties, including jail time.

Three steps are used to disguise the source of illegally earned money and make it usable:

• Placement: The money is introduced into the financial system, usually by breaking it into many deposits and investments.
• Layering: The money is shuffled around to create distance between it and the perpetrators.
• Integration: The money is then brought back to the perpetrators as legitimate income or clean money.

Common Money Laundering Methods

Money launderers typically use methods to avoid detection and hide the real sources from which their money comes. Some of the most common methods are smurfs, mules, and shells.

Smurfs

Smurf is the term used to describe a money launderer who wants to avoid government scrutiny. They do this by using the placement, layering, and integration steps to hide the money. Large sums of money are deposited in different banks using smaller transactions.

Financial institutions are required to report to financial regulators and authorities any large deposits that exceed $10,000 or those that they deem suspicious. Money launderers go under the radar and make it look like the money they deposit is legitimately sourced by depositing smaller amounts of money or smurfing.

Mules

Mules are individuals who are hired by money launderers to help carry out their laundering schemes. They’re just like drug mules who may be in on the scheme or may be recruited unknowingly. These individuals carry money rather than smuggling drugs.

People who are recruited are usually approached by money launderers and often don’t have any knowledge of the scheme. They may be enticed because they’re promised jobs that pay large sums of money in return. Criminals often target people who fall under the radar such as those who don’t have a criminal record or the financially vulnerable.

One of the mule’s responsibilities is to open up bank accounts and deposit the illegal money into them. Money launderers then begin making wire transfers and using currency exchanges to move the money around the financial system to avoid further detection.

Shells

Shells or shell corporations are companies that don’t have any business activity or operations, physical operations, assets, or employees. Many shells are legitimate business entities that are used to raise money and fund the operations of a startup company or to manage a merger or acquisition. Other cases involve the creation of shells by fraudsters who want to hide illegal activities and/or avoid paying taxes.

Many individuals do this by setting up shell companies in jurisdictions that guarantee anonymity, allowing them to make deposits and transfer money into different accounts. Shells also allow people to avoid reporting income and paying taxes to authorities like the Internal Revenue Service (IRS).

Gambling and casinos

Using casinos for money laundering leverages the high volume of cash transactions and the relative anonymity of the players to disguise the origins of illicit funds.

Criminals buy chips with dirty money and engage in minimal gambling activity, often choosing low-risk bets to avoid significant losses. They cash out their remaining chips after spending a small amount on the games. Casinos provide winnings in the form of checks or direct bank transfers so the funds appear to originate from legitimate gambling activities.

A money launderer might purchase $100,000 worth of casino chips using illicit cash. They then spend $10,000 on low-risk games. They cash out the remaining $90,000 in chips. The casino processes this cash-out by issuing a check or making a bank transfer, effectively integrating the illicit funds into the financial system.

Cryptocurrency

The use of digital currencies and cryptocurrencies for money laundering exploits the decentralized nature of financial systems. Cryptocurrencies like Bitcoin enable users to move money across borders quickly and with relatively low fees. The blockchain technology underlying these currencies records transactions transparently but it often doesn’t directly link them to personal identities. This makes it challenging for authorities to trace the origins and destinations of illicit funds.

A money launderer might purchase Bitcoin using illicit cash. They can then transfer the Bitcoin through multiple digital wallets, further obscuring the transaction trail. The launderer can convert the Bitcoin back into fiat currency in a different country with more lenient regulatory oversight after moving the funds through several intermediaries or using mixing services that pool and redistribute transactions to enhance anonymity.

Cash-intensive businesses

Money laundering through cash-intensive businesses involves using establishments that primarily deal in cash to mix illicit funds with legitimate income. These businesses are ideal for laundering because their high volume of cash transactions makes it easier to blend dirty money with clean money. This reduces the likelihood of detection.

The launderer can inflate daily revenue figures to include the dirty money which is then deposited into the business’s bank accounts as legitimate earnings. The company’s financial records simply record the illicit funds as additional revenue. This method effectively integrates illicit funds into the financial system under the guise of normal business operations, making it difficult for authorities to distinguish between legal and illegal income.

Mobile commodities

Money laundering through mobile commodities like gems and gold involves purchasing these high-value, easily transportable items with illicit funds. The launderer then moves them across borders to obscure their origins. These commodities are favored because they’re valuable, portable, and can be sold relatively easily in different jurisdictions. The proceeds from these sales can then be deposited into local banks, appearing as legitimate earnings from the sale of commodities.

Important

The maximum penalty for money laundering is the greater of $500,000 or twice the property value involved in the transaction, a maximum 20-year prison sentence, or both.

Money Laundering in the Digital Age

These methods are common but money launderers often find modern ways to operate, putting a new spin on an old crime by making use of the internet to avoid detection.

A key element of money laundering is flying under the radar. The use of the internet allows money launderers to easily avoid detection. The rise of online banking institutions, anonymous online payment services, and peer-to-peer transfers using mobile phones makes detecting the illegal transfer of money even more difficult.

Technology is helping further money laundering activities in a few other ways:

• Proxy servers and anonymizing software: These tools make integration almost impossible to detect because money can be transferred or withdrawn with little or no trace of an IP address.
• Online auctions and virtual gaming sites: Ill-gotten money is converted into the currency that’s used on these sites and then transferred back into real, usable, and untraceable clean money.
• A victim’s bank account: This is a spin on phishing scams. Fraudsters scam victims under the pretense of depositing a fictitious lottery winning or international inheritance. They instead make multiple deposits into the account with the stipulation that a portion of the money must then be transferred to another account.

Note

Some of the world’s largest banks have been implicated in money laundering schemes including HSBC, Wachovia, and Standard Chartered.

Detecting Digital Money Laundering

Financial regulators have anti-money laundering (AML) policies in place. Banks and other financial institutions are required to comply with these procedures to ensure a safe system where criminal activities are detected and reported to authorities.

Banks must report large deposits over $10,000 and any suspicious activity that takes place within an individual or corporation’s account whether that’s multiple deposits, frequent wire transfers, or currency exchanges. Some of these laws are proving to be slower to catch up to these digital crimes.

Cybercrime has become one of the top priorities for the Treasury’s Financial Crimes Enforcement Network (FinCEN). The agency outlined the growing threat of money laundering via cryptocurrencies and cyberattacks in a June 2021 memo, including ransomware that can illegally funnel digital funds overseas. FinCEN is still fighting cybercrime through anti-money laundering legislation with proposed rules that were submitted in 2024.

Some countries have gone even further by banning practices such as the use of cryptocurrencies. Investors and advisors firmly insist that using digital currencies is very complex but some financial regulators say that they can dismantle the global financial system. Changes have been made to increase the level of transparency related to cryptocurrencies, however, many of which provide anonymity to users because of the way they’re treated and traded.

How Will I Use This in Real Life?

You can take a stand to protect yourself against tactics like phishing scams as well as to assist the authorities in preventing them. Financial institutions, corporations, their employees, and other individuals can help fight money laundering by adhering to anti-money laundering policies and other policies such as strict identification protocols.

Some of the steps that financial institutions, their employees, and others can take to detect digital laundering include:

• Assembling details of possible and known networks of mules
• Monitoring high-volume and suspicious transactions
• Ensuring that the Know Your Client (KYC) protocols are adhered to regularly
• Verifying funds, including their sources and beneficiaries
• Putting tight identification procedures in place before allowing (certain) transactions to go through online

Your role in many of these precautions can be as simple as living with any inconvenience they might present to you as a law-abiding citizen.

What Are the Stages of Money Laundering?

There are three common stages of money laundering. The first is referred to as placement when fraudsters first introduce money obtained from illegal activities into the financial system. They do this by breaking up large amounts into smaller deposits in multiple bank accounts.

The second stage is layering which involves moving the money around to distance it from the fraudsters.

The final stage is called integration. The money is brought back to the perpetrators as clean money.

What Are Common Ways to Launder Money?

The traditional forms of laundering money are smurfing, using mules, and opening shell corporations. Other methods include buying and selling commodities, investing in various assets like real estate, gambling, and counterfeiting. The rise of digital technology also makes it easier to launder money electronically.

What Is the Wash Wash Scam?

The wash wash scam is commonly used by scammers who fleece victims by promising them large sums of money in exchange for literally cleaning dirty money. Victims are given fake banknotes that are passed off as being real by being dyed. The fraudster promises their victims a big cut if they pay a certain fee and purchase a special cleanser.

Scammers commonly seek out financially vulnerable individuals. This scheme is also known as the black money or black dollar scam.

The Bottom Line

The act of hiding money is thousands of years old and it’s the nature of money launderers to attempt to remain undetected by changing their approach, keeping one step ahead of law enforcement just as international governmental organizations work together to find new ways to detect them.

The IRS considers goods and services exchanged through bartering to be taxable income to both parties

Reviewed by Lea D. Uradu
Fact checked by Vikki Velasquez

Not all transactions involve money. Sometimes, individuals or companies exchange goods or services instead. This activity is commonly known as a barter transaction.

If you’re involved in barter transactions, here is what you need to know about how and where to account for them for tax purposes.

Key Takeaways

• Bartering is the exchange of goods and services between individuals and businesses rather than an exchange of money.
• Bartering has become particularly popular online and is often conducted through barter exchanges or clubs.
• The Internal Revenue Service considers goods and services exchanged through bartering to be taxable income to both parties.
• It has rules on how parties to these barter transactions must account for them.

Reporting Barter Revenue

Businesses

Under Internal Revenue Service (IRS) rules, business owners and companies engaged in bartering are supposed to account for the fair market value of all the goods and services they receive or provide through it.

In its annual “Tax Guide for Small Business” publication, the IRS demonstrates where bartering rules may come into play. For instance:

“You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. You must include the fair rental value of the apartment in your gross receipts. Your landlord must include the fair market value of the work of art in their rental income.”

In addition, the IRS notes, “Just like payments made with money, if a business makes payments of bartered services to another business (except a corporation) of $600 or more in the course of the year, these payments are to be reported on Form 1099-MISC.”

For bookkeeping purposes, in a standard journal entry, a barter exchange account is treated as an asset account, and the bartering revenues are treated as income items. For example, if the fair market value of a good or service is $100, the barter exchange account would be debited $100, and barter revenues would be credited $100.

Individuals

In the case of individuals engaged in barter transactions, barter revenue must be accounted for, in dollars, on their IRS Form 1040, Schedule C: Profit or Loss From Business. In some cases, it could also be reported on Schedule E: Supplemental Income and Loss.

Note

Bartering is an ancient practice, but gained new popularity (and greater IRS scrutiny) with the advent of the Internet, which made it much easier for individuals and businesses to conduct barter transactions.

Example of a Barter Transaction

A common example of a barter transaction today involves two Internet companies that exchange ad space on each other’s websites. If company A trades $100 worth of ad space in exchange for ad space of like value on company B’s website, both would have to count that as income on their books.

Bartering vs. Trading Services

The IRS differentiates between a trade of similar services between two similar parties on a non-commercial basis and the act of trading saleable business goods or services as described in the example above.

For example, two neighbors who trade off the task of babysitting their children aren’t going to have to report that as income on their tax returns. However, when a plumber provides plumbing services to a dentist in return for dental work, that is considered bartering for tax purposes, and both parties could owe income tax on the value of the services they received.

What Is a Barter Exchange?

A barter exchange is sometimes referred to as a barter club. According to the IRS, it’s an organization whose members exchange property or services with each other. A small business owner might, for example, trade goods or services directly with another member or in exchange for credits that they can use at a future date with a different member. Such credits are considered income for the year they are received, even if the recipient doesn’t use them until later.

The barter exchange must supply each member with an annual Form 1099-B: Proceeds From Broker and Barter Transactions showing what they received during the past year. It also must give this information to the IRS.

Are Bartering Transactions Subject to Tax Withholding?

In general, barter transactions are not subject to income tax withholding. However, if you participate in a barter exchange or club and fail to provide it with your tax identification number (TIN) (or provide an incorrect one), you may be subject to backup withholding of 24%.

Do States Also Tax Barter Transactions as Income?

Yes, many U.S. states tax barter transactions as income and may also impose sales taxes on them. According to the accounting firm Wolter Kluwer, the increasing need for revenue for states is narrowing their focus on bartering and unreported transactions.

What Is Fair Market Value for Bartering Purposes?

The fair market value (FMV) of a good or service isn’t always easy to determine, but it is typically based on what that good or service would normally sell for or has historically sold for. The IRS offers a number of similar definitions in its various publications, including this one in its rules for valuing donated property: “It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.”

In the specific case of bartering, the IRS adds that, “If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise.”

The Bottom Line

While no money may change hands in barter transactions, value does. The IRS views the exchange of bartered goods and services as a form of income and expects it to be reported as such.

For that reason, it’s important for individuals and businesses engaged in bartering to keep good records and to pay particular attention to the fair market value of whatever product or service they provide or receive.