Something EVERY racer should check out-SAVE MONEY ON TAXES!

t.nie

t.nie

Patience Tester
This is something I came across a while ago, don't remember when, but it outlines that your racing operation, if converted to a business, can actually end up with a huge reduction in your overall tax bill.

http://articles.moneycentral.msn.com/Taxes/TaxShelters/TheUltimateTaxShelterYourOwnBusiness.aspx

Make sure to read the entire section devoted to a client who raced stock cars and earned $40,000 a year from his "day job" and paid $100 in taxes over three years, and would have paid NOTHING had he had receipts from his first year after converting his hobby into a business.

If I were a racer, I would be talking to an accountant for advice about this before the next season gets underway. It could save you a lot of money.
 
Been doin this for the last 4 years, "PROFIT MOTIVE" is the key.

Great Post T-NIE


hey, where were those large checks printed up from that race I won at Belle-clair. I've got all my other ones but that one and I want it for my collection
 
Sent you a pm. Oh yeah, by the way, I still remember that night and that finish. What a great race.
 
i think you get 5 or 7 years of declairing a "loss" from a busines venture such as racing,not sure if you can then sit back for a year or two and start the cycle again,,best to call a tax expert although some time i have gotten bad info right from irs
 
Yea.i wouldnt go by what the IRS says.lol. I know of 1 guy who called the IRS on a matter.followed their instructions........even turned his return via tax preparer and almost had to pay some heavy penalties. From what i was told......as long as you dont get greedy....you can deduct 75 percent of what you spend each and every night of racing. Could be wrong though......just what i was told. I just dont like going long form myself. Costs more.more headaches.......and my tax guy told me they will audit long form people way before short. To each his own
 
Tax and racers

If you declare the income and pay taxes on it you deserve to declare the expenses too. It will mean keeping GOOD records, both income and expense; setting up depreciation schedules; keeping road expense records and using a good tax man that isn't afraid of it. IF you don't report racing income, God bless you and keep your fingers crossed.
 
The "gotcha" is that the IRS requires you to have a "reasonable expectation" of turning a profit if you follow this route. Otherwise, they deem it a "hobby" and no deductions are allowed. Try this: for a past year of racing, figure out where you would have had to finish, on average, in EVERY race you entered during the season in order to make a profit. The results will be very discouraging; 21st century expenses vs 1950's purses make 99.5% of most racing operations a hobby. You'll have better luck with the IRS if you open a racing-related business, then deduct a portion of your racing expenses as "advertising". Even then, you will have to show some results at some point in time; 20% or more of your gross devoted to advertising with no customers (income) to show from your target demographic will raise the red flag in a hurry, also.
 
Most of our parts are purchased in the off season. So how would it work with the bulk of our receipts having the 2007 date on it even tho it's going toward the 2008 season?
 
I dont think you can think of it that way, per season say. You'll use 07 reciepts in 07 and 08's for the 08 season, I think?
 
racing and taxes

You are correct there, GrooveGrabber. The date drives the claim year. But after a year it evens out at the end of the year because you are showing receipts for the following season. And you are right again on making some money at some point. In the past it was about a 3 year loss limit then a year of showing a profit and paying taxes then go back to losses (that is if you had losses). Just remember that sponsor money shows on the income side. And if you sell a piece of equipment that you depreciated out it comes back and counts as new income. If you get a 1099 from a track or sponsor it means that they reported they paid you money so you better report it as income. It really isn't hard to lose money in racing is it?
But one thing struck me after going thru the drill after a couple of years, you start being more careful on your road expenses (meals and motels) and you start watching your pit pass costs a little closer.You make sure your pit help is worth the expense.
 
Its Been 15+ Years Or So, But A Friend Of Mine Raced And He Set It Up Like A Business. If I Remember Right, He Told Me He Would Claim A Loss 2 Years And A Minor Profit The 3rd. He Also Said The Profit Had To Be Over A Certain Amount Before It Would Be Taxed. So Natuarally He Claim A Profit Under That Amount. That Seemed To Keep The IRS Happy.

Not Sure If He Was Right????????
 
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