Tax Question - Racing

SkyHog

SkyHog

Touchdown! Greaser!
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Here's the scenario:

On a race weekend, I have to spend $30 to get in. If I take last place, I win $30. Anything more and I win money.

Also, I spend on average, $10 in gas for the racecar.

This is a hobby, but I presume the IRS would consider this income. Do I only declare the positive difference, or do I report it all as income and then deduct?

Also, can I deduct gas since its not a road vehicle? I can't claim mileage...

We are talking pennies compared to the rest of my tax garbage, but this is new to me.
 
Net of all expenses, and I do mean all of them. That would include cost of towing to the track, all maintenance and repairs, tires, etc, and any travel expenses. Odds are you aren't actually making money at this but if the purses are much keep up with your expenses just to prove that you aren't, should the IRS come calling.
 
Good lord..... 10 bucks in gas for the race car? When I raced race fuel was outrageously priced at $2.50 a gallon. Our weekend fuel bill was around 200 bucks.

If you pay road tax for off road fuel (racing fuel) you can get a form to deduct the road tax.


I only raced for a living. It was the same as any other business so we hired a company to do taxes for us. Itemize. Keep receipts.
 
Make money hobby racing? haha report it and the IRS will think you are hiding something else...
 
$10 in gas? What are you racing, mopeds? What about tires, coolant, parts, and all that other stuff?
 
steingar said:
$10 in gas? What are you racing, mopeds? What about tires, coolant, parts, and all that other stuff?
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I buy a set of tires every 2 or 3 years at $400 a set. I have a 3 gallon tank I fill every race weekend. I change coolant every year...worst case scenario for parts is the engine at <$1000 for a full replacement.

As I said...this is very much a hobby, and hence why I don't want taxes to complicate it if I can avoid it.

My car:
 

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I should also point out that I run avgas, so no road taxes are spent. Maybe I can try to recoup the aviation taxes?
 
Unless it's a significant amount of profit/year my expectation would be that the IRS doesn't care unless someone files a form and makes them care.

You're putting wear and tear on your trailer/towing vehicle right? You had to buy the car or build it at some point right? Engine will wear, all the parts will wear. I have no idea what kind of purse we're talking about but my expectation would be if you factor in all the up-front costs and long-term ones you're probably not making anything. And that would be my story if anyone questioned it.
 
SkyHog said:
I buy a set of tires every 2 or 3 years at $400 a set. I have a 3 gallon tank I fill every race weekend. I change coolant every year...worst case scenario for parts is the engine at <$1000 for a full replacement.

As I said...this is very much a hobby, and hence why I don't want taxes to complicate it if I can avoid it.

My car:
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Congrats on finding a inexpensive venue for racing thrills....:thumbsup:...

In another life, a typical race weekend we would spend over 10 grand on the tire and fuel bill alone....:yikes:
 
Oh, ok. The motor cycle engine race car. I always liked watching those race. I hated selling fuel to those guys, too good of gas mileage.
 
Zeldman said:
Oh, ok. The motor cycle engine race car. I always liked watching those race. I hated selling fuel to those guys, too good of gas mileage.
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Since I only run 100LL, no one has to worry too much about that :) self serve pump at the airport gets it done for me.
 
I'd prefer to race motorcycle engines in motorcycles, but the guys who do it say its really expensive. Good on you for finding an inexpensive racing venue.
 
Yes, you can take your direct expenses against the winnings. If by some odd chance it's positive, you pay tax. Since this is unlikely to be treated as anything other than a hobby, you can take any loss from your racing against other income.
 
I suspect the race course is reporting your earnings to the IRS so they can claim the outlay as an expense. If you don't show a comparable income (minus expenses of course) they may come after you.
 
What you describe money wise is chicken feed. I would not rattle cage of the IRS for this small endeavor. I'd not say anything. Keep a record of each event and move on.
 
Depends how much the winnings are. If we don't pay out more than $600 (to any one person) then there's no need for a 1099. Back in the day we were a truly cash operation (we grabbed some of the gate money and stuffed it in little envelopes and some was winnings, some was paid to the staff, etc...). We always took the socials when we paid out. Later we started going by the book and some drivers were miffed when they got the 1099 at the end of the year if they got paid enough.
 
SkyHog said:
I should also point out that I run avgas, so no road taxes are spent. Maybe I can try to recoup the aviation taxes?
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That's right, you have the GSXR engine in your car? Why do you run Avgas? Aren't you worried about the lead fouling everything?
 
Most of the racing engines have pretty high octane fuels and with some amount of lead, though there are high octane unleaded fuels available. When I was at one of the WV airports (Parkersburg or Clarksburg or ELkins, can't remember). The racers were all showing up with their jugs to get fuel one Friday.

Our track required you to buy fuel from the track supplier (and we tested it for additives....you would not BELIEVE the cheating people have tried). One of my coworkers gave me the fundamental truth early on...All Racers Are Liars.
 
flyingron said:
Most of the racing engines have pretty high octane fuels and with some amount of lead, though there are high octane unleaded fuels available. When I was at one of the WV airports (Parkersburg or Clarksburg or ELkins, can't remember). The racers were all showing up with their jugs to get fuel one Friday.

Our track required you to buy fuel from the track supplier (and we tested it for additives....you would not BELIEVE the cheating people have tried). One of my coworkers gave me the fundamental truth early on...All Racers Are Liars.
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Yeah but a stock GSXR 1000 or 750 engine only requires 89 octane pump gas. A 600 only requires 87.
 
SkyHog said:
... This is a hobby, but I presume the IRS would consider this income. Do I only declare the positive difference ...
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Google is your friend. Here is the IRS's position:http://www.irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor?

and summarized in this sentence: "If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity." In other words, hobby losses are deductible only to the extent of hobby income.

The issue is "business intent." If you have a history, then the business is "presumed for profit [rather than being a hobby] if it makes a profit in at least three of the last five tax years, including the current year." If it's a new activity and you get audited, then you get to haggle with them about your intent.

I had a racing parts business in my garage for which, had I been audited, I would have argued business intent. Never got audited, so my losses remained deductible. Had I been audited I could have shown my customer list, my catalog, my printing and mailing costs, my inventory, etc. Whether that would have worked I have no idea.

This was quite a while ago, but in current year dollars my racing was costing about $4-5K per weekend, so I was quite motivated to get some income and to deduct my losses.
 
flyingron said:
Our track required you to buy fuel from the track supplier (and we tested it for additives....you would not BELIEVE the cheating people have tried). One of my coworkers gave me the fundamental truth early on...All Racers Are Liars.
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:rofl::rofl: Why sir I have never lied about what fuel was in the car.....:rolleyes: Ok, maybe once, but thats all, maybe. Thats my story and I'm sticking with it.:yesnod:

Once at a small dirt track we were racing in a class the required gas for fuel. We were running methanol, but had the smell covered up. The tech director never could figure out how we did it until I showed him.
 
Let's see things I've personally seen over a dozen or so years working at Old Dominion Speedway:

Doctor'd carburators
Doped gas
Soaked tires
Traction control systems embedded in electronic ignition boxes

This is all over and above the usual: cars too light, people switching tires between racing, and qualifying, etc...

I wasn't even one of the tech guys, i just had to wait until all the tear downs were done so I could certify the results and pay people.

Right after the Dale Earnhardt death, one of our track regulars got some national op-ed press explaining how rampant cheating was in NASCAR. Dickie Gore turned to me and said "Well he should know, he's one of the biggest cheats out there."
 
airdale said:
Google is your friend. Here is the IRS's position:http://www.irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor?

and summarized in this sentence: "If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity." In other words, hobby losses are deductible only to the extent of hobby income.

The issue is "business intent." If you have a history, then the business is "presumed for profit [rather than being a hobby] if it makes a profit in at least three of the last five tax years, including the current year." If it's a new activity and you get audited, then you get to haggle with them about your intent.

I had a racing parts business in my garage for which, had I been audited, I would have argued business intent. Never got audited, so my losses remained deductible. Had I been audited I could have shown my customer list, my catalog, my printing and mailing costs, my inventory, etc. Whether that would have worked I have no idea.

This was quite a while ago, but in current year dollars my racing was costing about $4-5K per weekend, so I was quite motivated to get some income and to deduct my losses.
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That confuses me. So if I consider it a hobby and make a little bit of money, its not income?
 
SkyHog said:
What would it foul? I have no emissions control system or catalytic converter...
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Plugs, valve guides, plus you're losing power unless you're running higher than stock compression in order to beneficially use the higher octane.
 
Sac Arrow said:
Plugs, valve guides, plus you're losing power unless you're running higher than stock compression in order to beneficially use the higher octane.
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Losing power as in wasting the extra octane, or losing power as in having less power than I would running a lower octane?

In other words, will my car perform poorly by running higher octane?
 
SkyHog said:
Losing power as in wasting the extra octane, or losing power as in having less power than I would running a lower octane?

In other words, will my car perform poorly by running higher octane?
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Losing power as in having less power than you would running lower octane.

The ideal octane for the most power is the lowest octane the engine can use without knocking. You won't notice any difference two points off either way, but over ten points high, certainly. I use 87 pump gas in the GSXR even on the track.
 
This from the guy who didn't file his taxes because the IRS owed him $5...
 
Sac Arrow said:
Losing power as in having less power than you would running lower octane.

The ideal octane for the most power is the lowest octane the engine can use without knocking. You won't notice any difference two points off either way, but over ten points high, certainly. I use 87 pump gas in the GSXR even on the track.
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:yeahthat:

Oh my old Bandit 1200, it was noticeably torquier on 87 than 93.

You're not doing yourself any favors. Stop putting 100LL in and go back to whatever the manual calls for.
 
SkyHog said:
Losing power as in wasting the extra octane, or losing power as in having less power than I would running a lower octane?

In other words, will my car perform poorly by running higher octane?
Click to expand...

It is possible to over octane an engine. You would not build the horse power that the engine is capable of building.
 
SkyHog said:
That confuses me. So if I consider it a hobby and make a little bit of money, its not income?
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It's taxable income ONLY if it exceeds your hobby expenses. The other side of that coin is that hobby expenses are not deductible against anything but hobby income. So if the hobby is a loser the IRS won't help.
 
Agree with the above, stop using Avgas, it's full of lead and you don't need that lead. It provides no benefits to you and a lot of negatives with the lead being in something that wasn't designed to have lead.

You're losing Losing power and quite likely damaging the engine.

Use whatever fuel the manual calls for.
 
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