Brady

iTrader: (3)

I'd like to maximize my tax return, but without setting myself up for an audit. I spent probably $20k last year on the car and trailer. I'd like to call it an attempt at making profit (albeit futile) for tax purposes. How "official" does a company have to be, to claim it on taxes? I won a few hundred bucks last year, and I can claim that as income, but it will be seriously outweighed by my expenses. <img border="0" title="" alt="[Smile]" src="gr_stretch.gif" />

Anyone try it? Anyone know where I could read up on some applicable tax laws?

thanks!

verbs

Yeah, it'll be tough. You need to prove that it isn't just a hobby. Hobbies have separate tax laws from businesses (obviously). There are pre-requisites for how much $$$ you have to make, how much time you spend on it, % of total income, etc....

Best bet would be to go to irs.gov and search for the publication that discusses hobbies.

There is a pub for every possible matter.

Good luck!! I'm basically a CPA and I haven't found a way to do it!!

If you did start a business selling performance parts, you could probably get away with making your car a "business car" and therefore what you spend on it would be a business expense, hense tax deductible.

squinn

First off you must have an intent for a profit , second you can not be penalized for not making a profit.

We did an S incorporation, it was very much worth it.

DriveATransAm

while i havent spent 20K this year, i seem to have spent a lot <img border="0" title="" alt="[Big Grin]" src="gr_grin.gif" /> what if i spent 50% of my wages on racing, surely i gotta get something in return for being so crazy, right? first they take money out of our paychecks, then they tax everything we buy, wtf is that. 30% of our money goes to the gov. those dirty bastards!

DERTY

I still owe you money for the switch you provided me at the Thunder Shootout. I hope that damn thing doesn't cost 20k! <img border="0" title="" alt="[Big Grin]" src="gr_grin.gif" />

Guido

Some organizations will actually send out tax forms to you for your winnings. Im sure anything that any of us go to isnt going to do that, but if you were racing IHRA or NHRA you would have to deal with it.

Guy who built my cage, had to set up a business name for his racing because he was winning alot. Dont know the specifics behind it though.

Sorry.

Red Dragoness

If you already had a business and wrote a check to the mechanic from your business account I would assume that you could claim it as a vehicle expense. Cough cough not that I would ever do that.

-Red

GeorgeC

</font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif">Originally posted by Guido:
<strong> Some organizations will actually send out tax forms to you for your winnings. Im sure anything that any of us go to isnt going to do that, but if you were racing IHRA or NHRA you would have to deal with it. </strong></font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">IIRC, you'll get a W2 for any winnings over $600 (as far as a racetrack payout). I don't know about a private event when the facility is rented.

I have a friend you usually brings in a pretty decent bit of money from bracket race winnings, and writes off a lot of his expenses so they pretty much cancel out come tax time.

Bracket Boy

iTrader: (2)

Back a few years ago I won a little over 4000.00 bracket racing. I did receive w2's from most tracks I won money from. The best I could do then was offset the money spent with money won. There is a certain amount of your income the Feds will allow you to spend on hobbies without it falling into being thought of as a business. I was gathering parts for a new 522 BBC and parts for a back half project so it was easy. There are ways to get around the system, but it is difficult when you still have another full time job. I do know a guy who has won 40,000 in one year of bracket racing spending 6,000 just in entry fees alone. Not sure what he does though.
Hope this helps.
Jay

Villain281H

iTrader: (5)

I do mine as a small business to offset the taxes since if you are ever lucky, you might break even in bracket racing. I made 2400 in 2001, and although I probably spent 5 grand, I listed a $300 profit and the taxes were MUCH lower than if i would have filed with all 2400 as profit. I used a 1040 C form to file it.

Derek

felton316

If you lost some money while street racing can you claim it as a 'loss'?

Terry Burger

iTrader: (4)

You can only write off your losses to the extent that you profited. I.E. no profit, no write off. The trick is to start a corporation and have the corporation own the car and do all the mods. Then if you can make the corporation profitable (by rolling your 1099 income in to it), you can write off some of your "losses" against that income.

Brady

iTrader: (3)

I don't think that's entirely true, Terry. I think you can claim a loss on a business for 3 consecutive years, then you have to show a profit. I could be wrong, that's kinda why I asked, I don't know for sure.

FWIW, I said screw it this year. I already filed; turbotax rules. <img border="0" title="" alt="[Smile]" src="gr_stretch.gif" />

Tom the roofer

iTrader: (9)

I asked my accountent this question a few months ago. He advised me to claim everything as a hobby so I would not need to pay taxes on winnings. Just keep a log and reciepts of everything you spend on the sport. I mean everything.

I do not wish to maximize my losses for taxes, I asked the question because I didn't want to pay taxes on winnings.

Good luck,
Tom <img border="0" alt="[cheers]" title="" src="graemlins/gr_cheers.gif" />

Raughammer

I'm VERRRRYY interested in this...

To the top!!!!!!!!!

John

JimmyKash

well i wanna add my 2 cents in here....

i just finished up taking acc 101/102 in college and did pretty well and we didn't go into how a corporation does its taxes but my dad is an independant contractor limo driver. He is incorportated and when you claim a "loss" on something, you can only take $3000 a year and then the rest has to roll over to the following year. So lets say you spent 10,000 and only won 3000 in winnings...you could only claim 3,000 out of the 7,000 lost and then the following year you could still only claim another 3,000 and then the following year after that would be the last 1000. Thats to say you dont have anymore losses the following years.

Now i'm no CPA but i do have a good grasp on the subject and i *think* i'm right. Best thing to do is to talk to you CPA about it. I think the best thing to do is to just keep all the receipts of what you buy and claim the maximum amount of hobby expenses you can

jim

Brady

iTrader: (3)

</font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif">I think the best thing to do is to just keep all the receipts of what you buy and claim the maximum amount of hobby expenses you can.</font><hr /></blockquote><font size="2" face="Verdana, Helvetica, sans-serif">The way I read understood the laws in the turbotax tutorial was that you can only claim hobby expenses equal to the amount that you won.

That's fine and dandy, you won't have to pay any more taxes because of racing. But, I was looking to claim these expenses over and above what little I won while racing.

Back to what you were saying about spending $10,000.

I spent $10,000, won $500, so I could claim $3,000 loss this year. Next year I spend $3000, win nothing, but I can still claim $3,000 loss. In '04 I spend $3,000 but win $1,000, can I claim a loss? How long before I have to claim winnings that exceed my expenses?

Again, I already filed my 2002 taxes, I'm just trying to get my game plan for '03 <img border="0" title="" alt="[Smile]" src="gr_stretch.gif" />

Terry Burger

iTrader: (4)

Guys it's like I said, unless you have outside income (or won a lot of money), you can't do much with it.

ALLBORENOSTROKE

I have claimed it for the last two years.You must spend at least 2% of your income towards your hobby,and make sure you keep all your receipts in order.As long as you aren't trying to get over on Uncle Sam he doesn't mind you having a hobby.

Skelton

Terry is right. I've claimed winnings and expenses on my taxes since 94. It helps to have big other income just like he stated. You have to get and EIN and start up a business. I ran Fearless Fords as a side business for years selling as much as 40k profit in parts back in 95. I haven't stopped using it since and my car expenses and race expenses are part of my taxes every year. You just cant be gross about it and keep accurate records. It definately helps offset tax debt