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Author Topic:   Taxes?
Steph
Member
posted March 16, 2001 03:47 PM
For tax purposes, do you classify your racing as a business, or a hobby? What is most common in the modified class?

Why? Well, we don't have a house yet, so we don't have enough to itemize. So, it looks like we're going to have to pay taxes on the few thousand dollars we won, even though we spent several times that in expenses. Prior to this year, we just used our expenses to offset our winnings. Seems they've tightened the rules up for 2000. So, we're considering calling it a business... but then we'd have to show a profit 2 out of 5 years.

How do you do your taxes?

Anyone have experience with doing it as a business? Should we stay away from that?

x13jc
Member
posted March 16, 2001 03:54 PM
We set up our racing operation as a corporation. Here are the reasons: 1) personal liability 2) if you do it right and pay into the workers comp. program, if your driver is physically hurt, he can collect his wages 3) protecting your personal assests
4) The bigger the sponsors you have, the more protection they want, ie... sponsor liability insurance

Hope this gives you another opinion.

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RACERX


Steph
Member
posted March 16, 2001 04:01 PM
Does this still apply when the driver/owner are one in the same? My husband is the driver, and he and own the "race team" - or should I say we owe due to race team.


x13jc
Member
posted March 16, 2001 05:02 PM
We have ours set up as my wife is the majority stock holder. I am an "employee".
Hope this helps.

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RACERX


BK19
Member
posted March 16, 2001 10:45 PM
if you deduct as a hobby you can only deduct up to the amount you made like if you made 2500.00 and spent 4500.00 you can only deduct 2500.00 of the money you spent


Roadhzrd
Member
posted March 17, 2001 11:59 PM
I do mine as BK19 said, but I also itemize. From what I understand you must keep excellent records to run a race team as a buisness because it raises a big flag to the IRS and they are very sceptical about racing being a buisness and not a hobby. Steve Smith has a book about racing and taxes.


Steph
Member
posted March 21, 2001 01:29 PM
Thanks guys...
I think we're going to go the business route. We do have great records.

RacerX - yes that does help. Thanks.

I think I'll check out the Smith book too.