class racing as a business?

Julie,

Thank you for taking the time to post the information from the IRS as well as add your comments. That was very informative. Being that my wife and I are both full-time educators it doesn't appear as if it would be worth the time, effort, and possible risks to pursue this. Of course we would keep good records and keep everything on the up and up as we do our personal finances and taxes but the potential of us ever having a year where we actually make money would be very slim (especially if you've seen the way I drive ... ). We only do this for the fun, travel, and to meet new friends and don't want to risk an unneccesary audit or aggrevation if there isn't anything to be gained from it.

Also, thanks to those of you that have posted about having a CDL. I coach varsity softball and coaches in Texas (non-union state for teachers) drive their own buses and have to have a CDL. One nice thing about that is we get a discount on our RV insurance for having one.

Thanks again Julie for the help as well as everyone else for some great and informative comments!

Scott

[DavidDupuy]

I wanted to add to what Julie posted and point out a few things about the importance of keeping records even if a racer continues to race as a hobby.

I have been in the private sector and out of the tax preparation part of things for about 7 years so Julie or John please correct me if things have changed.

First, keep records of all expenses related to your racing activities. Entry fees, fuel costs - both for travel and race car, hotels, parts, etc. the easiest way to do this is to do as Julie suggested and maintain a separate checking account for all racing related expenses. Deposit any winnings into that account too. If funds are needed to cover expenses deposit personal funds into this account rather than pay them from your personal account.

Secondly, the last portion of the IRS explanation is important too. You can deduct hobby expenses up to the amount of hobby income reported on your individual tax return. So, if you have a period where you do win some money and report that on your return, then you have a potential deduction of expenses equal to that amount. Hence the recommendation above to keep good records. I say potential deduction as there are several other factors of your tax return that will determine the amount of the actual deduction, if any, since the deduction is part of itemized deductions.

Lastly, as Julie stated, the auditor assigned to your case - and as she stated, many racers report their racing as a business and never have issues - or audits - and others have been audited - is just as important as the detail records you keep. Orderly records help show the auditor you are informed and have the intent of " following the rules". Again, you never know until you are dealing with an agent what will be important to substantiate your position.

Lastly - part 2.....consulting with a CPA - whether or not you use them at tax time - is probably a good idea to discuss how this topic fits into your overall tax situation.

[Harry 6674]

I have several friends that own logging companys. A lot of enclosed trailers seem to be offices, powerglides in log splitters, panella engines in generators etc. Where theres a will theres a way.

[HR9121]

You forgot stocker motors in crew vehicles. Got to get them boys to the woods as quick as we can.

[GUMP]

There is also a liability advantage when running your racing as a business.