Page 51 - NM Spring_2021
P. 51
John Hale
Two-time Nostalgia
Funny Car race winner
INCOME TAXES
FOR DRAG RACERS
Story by Jay Chalmers, CPA
Hello fellow race car owners, of business losses, the income depends primarily on race winnings
builders, drivers and fans. This tax result would not be favorable. for revenue. Since track winnings
article is designed for those who Please read the disclaimer at the are uncertain, showing a net
GEOFF MONISE actively participate in racing end of this article. If you decide profit strictly from racing without
QUARTERPOUNDER and who wonder under what to treat your racing as a business, significate other revenue is difficult.
circumstances their racing could make sure and get individualized Therefore, this article will focus
be considered a tax-deductible professional advice from your CPA, on the first method of promoting
business in the eyes of the Internal attorney and insurance agent before an existing (or new) non-racing
Revenue Service. If you only race engaging in any transactions. business.
occasionally and have no business
to promote, no revenue or winnings Racers have a couple of different It’s fortunate that a drag race lasts
to show, only spend money and routes available with respect to only a few seconds. This allows
have racing “losses” year after year, the tax deductibility of their racing time to promote your business.
I recommend you treat your racing operation. The first involves It’s great if you own and operate a
as a hobby for income tax purposes. utilizing your race car and other business that is related to racing
If the IRS successfully recasts your racing assets for the promotion of such as a welding shop. However,
racing business as a hobby after an existing (or new) non-racing the business you are promoting
you have deducted a few years business. The second involves does not have to be related to
forming a racing business that racing. What’s important is that
SPRING 2021 Nitro Madness Magazine 51
