While talking to some fellow racers at work the other day about taxes, the subject of deducting racing expenses came up. I myself have no desire to see an IRS dude invading any of my body cavities if you know what I mean. But I am curious how this is done legally while claiming it is a business. What are the pros and cons of this and how many ways are you opening yourself up for trouble.
The guy who is currently claiming his expenses has a small business painting/repairing cars, where his racing funds are generated. But another one is saying you can do the same thing by saving all your receipts and claiming them as your business costs because you "intend" on winning money. Problem I see is if you do not have an income from the business to support the racing costs, you are not using the businesses money for racing you are using your personal money. Wouldn't that just be the same as claiming the costs of a hobby?
So can anyone give me FIRST HAND information? Not the, my mom's sister's husband's uncle's freinds did this in the 70's, stories. Pros and cons, because I am sure there are some strict rules around this. Also, what does this open you up to while towing? Both of these guys tow with motorhomes if that matters.
Thanks, Beep

It don't matter what you tow with.

I operated my racing as a business for 9 years. I spent way more than I won and had some terrific deductions to my personal income. You can only show a lose for 5 years and get maximun deductions.

I talking some pretty big numbers like 150-175K per year spent racing and 20-40k income, made for some great deductions.

I never heard from the IRS and had no trouble.

I had a very knowelagble business man helping me do my taxes. I kept track of all my expense, from hotel rooms, food for my help to fuel to parts to entry fees, license fees, safety SFI fees everything. It's a eye opener how much is spent racing. Each run of my car cost at least 4000-5000 bucks each, I kept track, I know.

Running it as a business has nothing to do with the DOT, that's separate and the DOT don't care if your a business or not. Well they care, I never made it apparent I was racing for money to them. You never tell them your racing, just running your car at test and tunes and not for money. I never lettered my trailers, never.

I had several nice sponsors that helped pay the bills and it was all done above the board. They even asked me to letter my trailer and I said no, they understood. I didn't want to run my truck and trailer commercial by having it lettered and then the DOT looks at you much closer.

I say do it, why not??




Spend a lot of time talking with customers and sponsors, my crew did all the work on the car at the track while I took care of sponsors, not easy.

There's nothing else like having a 10000 rpm hemi screaming 12" behind your head!!

I did it too, and as Challenger said, 5 years with no profit, and it's considered a hobby, not a business. Actually, I think it's 2 out of 5 years have to be profitable. Also, I agree, you need to have a knowledgeable tax savvy person help you to do it right and keep impeccable records, or that cavity search is always a possibility. And you will be surprised how much money you pi$$ away racing.

Chances are you are not going to have someone come on a public forum and talk about how to save on taxes.

There is a big difference between operating a racing business and using the racing to promote your business. This is much easier if you are self employed.

Sometimes that writing all over the racecar isn't what it appers to be.

It is not how much you make, it is how much you keep.

"Greedy" is a key word. Also keep in mind the old saying "it takes money to make money". So its expected that at the start of any business venture you will put in more than you take out ... "owner contribution" and "owner equity".

But keep in mind that the government doesn't cover your losses, they allow you to write losses off against income. To put this in simple terms, let's say you lose your job on December 31st. You have ten grand stashed away so you start a business on January 1st. At the end of that year you've accumulated twenty grand in debt from expenses. When you do your taxes the bottom line will be ZERO - no money owing and no refund due.

The goverment's stance is simple ... you lose your money, that's your problem. You make money, we want our cut!

Think about income/loss from racing just like gambling income/loss..
The IRS monitors the expense write-offs and will come down hard on one who just has expenses and no winnings..
Similar to the guy that claims the home office expenses for his computer hardware/software but no income.. The IRS is not stupid, without an ongoing DBA and income stream, if one claims the expenses they will get caught either now or later..

Just my $0.02..

Just because you are attempting to win money does not make it a business.

Plenty of bad info out there. Run it just like a business. You don't need a DBA, however, it may help with the appearance of a business. 2 of 5 years to be profitable was last I knew of or it will be categorized as a hobby loss.

I raced motorcycles and wrote off my stuff for about 5 years. Got audited 3 of 5 years, guess which years, profit or loss. Was successful in all audits... even got more money back for one year!