Race Team For Tax Purposes?

Started by PolishPete, January 27, 2008, 03:24:42 PM

0 Members and 1 Guest are viewing this topic.

PolishPete

While looking at all this tax stuff...I thought I might ask if it's beneficial to start a race team/business for tax purposes?  Is it possible?  Anyone do it?  Pro's/Con's?  Is it possible to do with little/no income.  Figure maybe something from sponsorship and that's it?

GSXR RACER MIKE

I read recently that the IRS has a new intense focus on this type of thing and small businesses in general, it sounded like this will be an area of taxation which will come under the microscope and have a much higher incidence of tax audits. The article said the IRS believes they are losing something like 400 BILLION dollars a year from 'grey area' income not being reported, 'grey area' deductions like this, and unreported cash income to small businesses. Since we have more and more people every year looking to be supported financially by the Government the IRS needed to find more tax revenue - they believe they found it. So be careful and make sure you have everything in order and have reciepts for everything!
Smites are a cowards way of feeling brave!   :jerkoff:
Mike Williams - 2 GSXR 750's
Former MW Region Expert #58
Racing exclusively with CCS since '96
MODERATOR

xseal

You can only deduct expense from income.  Unless you're making money racing (or have a justifiable basis to claim a marketing expense ... ie, you run a race shop or bike dealership ... on a business that is making money), you can't deduct anything.

Other than dealers or pro racers, I haven't seen anyone do this legitimately/legally.


Garywc

save all your receipts from the season
because you might need them if you got paid from CC/ASRA or any other race origination also any contingency money you made you have to claim.
i think if its over $600 from each one. thats just to do your personal taxes. ask your accountant if you should start a race team if you made enough money.
if you own a business you can use some of it as adverting expense but then you as a racer have to claim it as income.
CCS/ASRA #77
AMA #776
http://www.eastcoastsupertwins.com
Monmouth Cycles,Woodcraft, bel-ray,AXO

PolishPete


r1owner

If you decide to go this route.. all I can say is GET A GOOD TAX ATTORNEY!  I picked a bad one (not for racing) for a small software business I ran on the side.  He gave me some shitty advice....

I'm now getting a good lesson in what Al Capone felt like.... cept I don't get to kill anyone.

frskbm1

do away with the irs   no federal income taxes before 1905.   1955 and income taxes were 10% .  should still be at  10% and be satisfied with the additional income from growth.  dems and republicans stay in power pitting haves and havenots against each other. kinda like good cop/bad cop.

kl3640

xseal is exactly correct.  To be a bit more specific, see IRS Publication 59, but in short

An hobby expenses incurred in the pursuit of your hobby can only be deducted against any income gained as a direct result of that hobby - NOT against other income, such as your primary occupation. A hobby loss is categorized as a miscellaneous tax deduction and therefore is limited by the 2% of AGI threshold for the purposes of filing your federal income tax return.

So it cannot exceed your earnings from racing and needs to meet the 2% of adjusted gross income threshold.  Basically, you won't be able to be a member of Uncle Sam Racing, but neither would you be liable for any income earned from racing as a hobby so long as you have enough expenses to offset that income (obviously not a problem) and so long as it meets the 2% AGI guideline.

If you want to set up a corporation as a for-profit enterprise, invest it in, and then deduct the expenses agains the corporation's income, you could do that, but again the deductions would be limited to the team's income, and wouldn't really help you from a personal tax perspective because the dollars that you contribute to the enterprise as a principal would be after-tax dollars, from your personal financial perspective.  And since the team is unlikely of ever turning a profit, the deducations and net operating loss carryforwards would really not do you any good because as far as I know, there is no way to classify the investment as a pre-tax/tax-deductible event.

The bottom line is that there is no way to use a hobby, such as racing, to save money on your personal taxes owed from other sources of income - they are basically separate streams of income as far as the IRS is concerned.

The best you could do is buy equipment ostensibly for your own business, e.g., a trailer or deductible high GVWR rated vehicle, and use it for racing while deducting its cost from your business's income, the problem being, of course, that such practices are illegal and in violation of tax codes.

wolf44

the main thing is to show intent on making a profit or show that this is actually profitable.  If you're just planning on being mid pack club rider or you don't have a business that can profit from your racing don't do it. 
Quote from: benprobst on July 28, 2008, 11:24:05 PM
Huh, guess I was wrong,
CCS GP EX#5
2008 Sponsors
MotoVelocity www.motovelocity.net
Mills Quarter Horses www.millsquarterhorses.com
St. Louis Staffing www.stlouis-staffing.com
Ducati Omaha www.ducatiomaha.com