Waterskiing as a write off

[Horton]

It should no surprise that I have get to write off a lot of my ski expenses. I know a few other skiers who that have small ski businesses so they can write off ski expenses. You guys thought about this as a way to save money? Ideas for your fellow Ballers?

[BraceMaker]

Perhaps organize a camp for person's with disability and ski in the downtime? Good cause and offset the costs?

 

 

[Horton]

@MattP but you are famous

[MattP]

@Horton Sorta. Whatever

[Horton]

@BraceMaker that is an awesome and admirable idea but not really what I mean. I mean how can the average Baller write off his gas without a massive undertaking.

 

The guys that do D3 promo have it licked. They promote D3, sell some skis and can deduct all their boat gas and ski expense.

 

I can tell you that when I write off gas it always goes in a boat and never my truck :- )

[lpskier]

I tow a pro shop in a box trailer to the tournaments I attend.

[BraceMaker]

OK, vinyl wrap your boat and use it like mobile advertising while driving to/from the lake?

 

In that way any time "on the water" is advertising costs.

 

Sponser a collegiate ski team (non-profits) and host them at your site? I think that's almost like a camp for persons with disability (depending on the team).

 

 

[Horton]

@BraceMaker

I think you have to make money for it to be a write off

[RichardDoane]

"write-off's" are expenses used to decrease income that will eventually be taxable, so as long as the expenses of waterskiing can be legitimately used as a form of entertainment of your company's customers/clients, then 50% of those entertainment dollars can be used

[MattP]

Not totally sure where my first comment went.

[Waternut]

I was joking around with friends about this. My thought was that waterskiing in tournaments would be a second business. Then all the gas, boat costs, new ski's, etc could be seen as a business expense. Might have to prove you are winning some money though but just because your business loses money doesn't mean it isn't a business. If you trained an employee, you could write that off so I don't see why you can't train yourself. I wouldn't really want to explain that to the IRS if I got an audit though...haha

 

I know people who do promote their business with boats, boat signs, lure customers with rides, etc. Can I say I'm networking by having friends out on my boat?

[aswinter05]

I'm a CPA in central Indiana. I get to prepare more than 310 tax returns each year. Mainly for farmers, partnerships, corporations, and small business owners. If any of you guys have tax questions don't hesitate to give me a shout. Free advice to fellow ballers!

[Razorskier1]

Agree with @richarddoane -- I know guys who have used it as client entertainment and turned it into a business expense. Wish I had some clients that chased buoys!

[Waternut]

Some states let you get a refund for fuel used "off road". This is because you pay a road tax on fuel at road gas stations but your boat doesn't put any wear and tear on the roads. Only some states do it and it doesn't seem to be much but maybe it'll buy you another tank of gas at the end of the year... http://www.americanboating.org/fueltax.asp

 

Well I work for the government so writing off fuel expenses for anything would likely be seen as a conflict in interest by most people. Maybe I could say I'm making a charitible contribution to improving the lives of our military personnel...there is absolutely no question about that since my boat is usually full of military people and I get reimbursed sometimes for the gas used but it's never enough to cover the expenses.

[aswinter05]

@jfw432 There's actually a credit for fuel tax on the Federal tax return. Some states may allow it, yes, but everyone who files a 1040 and is eligible for a fuel tax (reimbursement) can claim this credit. It's on form 4136. Of course, the fuel must be used for business purposes. Just because I drive a dirt-bike in the woods on weekends for fun doesn't entitle me to this credit. The credit is a "refundable credit" which means you don't have to have tax liability to use the credit (money directly back in your pocket). Currently the credit is equal to the amount of gallons for off-road use multiplied by $0.183.

 

Also, there's no such thing as a charitable contribution for improving the lives of our military personnel (unfortunately). Contributions generally only qualify if they are donated to an organization categorized as a 501©(3).

[Waternut]

@aswinter05 Thanks for the info on the federal tax credit on gas. I was honestly joking on the military thing and even if I could write it off, I seriously doubt I ever would because I wouldn't be diligent enough to document and track it. It's fun for me and completely worth the expenses. It just sound like some bogus crap that someone would try to claim is all...kind of like the people who write off a boob job as a medical expense even though the law specifically states you can't do that.

 

edit: That federal tax credit on gas specifically states it cannot be used on a motorboat unless it's used for commerical fishing.

[RichardDoane]

@jfw432 - you just perfectly described the INT's beginnings in your first comment

[BraceMaker]

Get yourself a laptop and a 4g hot spot and you've got yourself a mobile office - complete with video conferencing, and a conference table (engine box)

[aswinter05]

@jfw432 Thanks for the info about disallowed credits on motorboat fuel. I had never looked that deep into the credit. We typically take the credit for farmers using their non-diesel tractors strictly on the farm. I've still yet to prepare taxes for a client that uses a boat in their business, but now I know it's only allowed for commercial fishing :) interesting.

[ScaredOfCorbets]

Just curious on how much write offs are we talking here. Are we talking about cost of boat, skis, bindings, tow vehicle, etc. Are we talking about thousands or hundreds?

[klindy]

Since USAWS is a 501(3)© is it possible to write off some expenses for attending tournaments as an official/driver/etc. Same for clinics, board meetings, etc. There are some rules that apply so consult a tax professional.

[6balls]

If I teach at a camp, isn't all my skiing a necessary business expense to keep my skills up and thus my credibility as a coach? Those tourney scores and averages are important too? Yeah...and while I'm at it if I didn't get some pro coaching in Acapulco I wouldn't be able to teach these kids as well either...yeah, that's the ticket!

[RichardDoane]

@6balls - I like how you think

[ScaredOfCorbets]

Sounds like it's a worth the effort to grab the deductions, if we're talking thousands.

[aswinter05]

Hobby Losses are HUGE targets for IRS audits by the way. Being able to justify that you are " actively seeking a profit" is crucial when taking deductions against your self-employment income. Also, as a rule of thumb, the IRS typically won't raise any questions as long as a business shows profits 2 out of 5 years (some recent court cases suggest 3 of 5 years). If you were ever questioned about a deduction against your "ski business income", you would need to prove that the expenses were necessary for the operations of the business.

[klindy]

And what about the "donation" of time/money/expenses to USAWS (a 501(3)©) in the form of working at tournaments and attending meetings and clinics, etc.? Costs incurred would be gas/mileage, hotel, meals and other travel related expenses. Of course I suspect any direct monetary contributions would be deductible.

[PBD]

I had a neighbor where I ski that had all of his guests sign his "guestbook/client list" for the supposed ski school he was running. His reasoning was he could take deductions for the costs he incurred "running" this school when in fact all he had done was invite friends and family out to ski with him. He did give tips on how to improve and did teach some folks to ski but this was in no way a business. I don't believe he ever put the deductions on his return but he had the paper trail in place.

[aswinter05]

@klindy even though USAWS is non-profit, it specifically states in IRS Pub. 526 that donations to "social and sports clubs" are disallowed as charitable donations. Non-Profit (i.e., 501©(3)) is just the first requirement for donations to qualify as charitable donations. The next requirement is that the organization is a charitable organization.

[Kelvin]

USA Water Ski Inc. is a Section 501©(3) public charity and contributions can be deducted as a charitable contribution. The types of qualified organizations in Publication 526 include certain organizations that foster national or international amateur sports competition. Additionally, USA Water Ski Inc is included in the list of qualified charitable organizations on the www.irs.gov/charities website.

[aswinter05]

@Kelvin solid find as I stand corrected. Thank you for the research. It looks like several other waterski clubs can be found as well through that link.

 

In that case, @klindy most of the expenses you mentioned related to USAWS would be allowable on your Schedule A. Mileage is taken at a standard rate. It includes gas and basically any other necessary expenses for operating a vehicle. The charitable mileage rate is currently $0.14 per mile (not much but still something).

 

There's not really such thing as a donation for "time". Meals and entertainment and travel costs are allowable if it is "necessary" for you to be away from home overnight in order to provide services to the organization.

 

The only thing you need to really be careful with is whether or not you are receiving a benefit in return for your donated money. You are supposed to back out any "benefits" you receive in return for donations, etc. Also if you donate property, but the property is returned to you at the end of the event, no donation has technically been given.

[The_MS]

I am reporting all of you to Obama

[Ed_Obermeier]

"Being able to justify that you are " actively seeking a profit" is crucial when taking deductions against your self-employment income. Also, as a rule of thumb, the IRS typically won't raise any questions as long as a business shows profits 2 out of 5 years (some recent court cases suggest 3 of 5 years)".

 

My tax person has told me that you don't ever have to show a profit period, you only have to be able to prove that you're making a reasonable effort to turn a profit. Is she totally incorrect? I was in business a LONG time before I ever turned anything even resembling profit, never an issue.

 

Ed

[aswinter05]

@Ed Obermeier Great question that I can't even answer with 100% certainty. As I mentioned in my post "the IRS typically won't raise any questions" is the general rule which most tax professionals will hear at a seminar. They may raise questions, however, that doesn't mean that they will disallow a loss if you can prove you are actively seeking a profit. Your tax person could be correct but there are some things the IRS tends to keep to themselves when it comes to "drawing a line". I know for a fact that I have farm clients who haven't shown a profit 2 out of the last 5 years. They've shown losses most of the time. I also know for a fact that they have yet to be audited within the same time window. I've always taken the rule of thumb to mean that your tax return has a better chance of being subject to an audit if you show losses in "too many" consecutive years.

[Kelvin]

The profit in 3 of the last 5 years is a safe harbor presumption which generally gets you over the hurdle with little additional scrutiny. If you fail that test, it depends on the business you are in. Manufacturing slalom courses for a profit isn't in the same category as leasing your personal airplane or being a gentleman farmer/rancher. The rules are targeted more at hobbies.

 

[aswinter05]

Also, it's not necessarily that they will "disallow" a loss. It's that they could reclassify your business activity as a hobby. Here is a link that explains it. It also looks like they've changed their profit window to "3 of 5 years" except for certain business activites.

 

irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor%3F

[MattP]

For the non profit sports team I coach at. I could do this when I was a private contractor. Not so much they made us employees now for legal reasons.

[Ed_Obermeier]

Good info guys, thank you for the input.

[rayn]

So tell me this. If USAWS is a charitable organization and I volunteer at say regionals/nationals any sanctioned event as a judge, driver etc with no compensation. Can I write off my expenses for driving, eating and lodging for each day I am doing volunteer work. If that is the case I like where this is going. In addition I would think that I would no be able to write off the entry fee to ski.

[Waternut]

Profit or loss, I would think you would have to show some kind of monetary gain at some point to justify it's a business. If all you do is spend money, that's not a business and I don't see how you can claim any expenses.

[Horton]

Yea guys - it can't be that you just don't want to pay taxes. I don't want to pay them and that is why I have found legal ways to write off stuff I do for fun.

 

I always show at least a small profit every year but still come out way ahead. I figure that if I claim a loss very often eventually it will catch up with me.

 

The trick it to find a legit hobby business. (I do not recommend a web site.)

[MattP]

The trick it to find a legit hobby business. (I do not recommend a web site.)

or iPhone apps....

[SkiJay]

I've been through this mill with car racing. You don't have to be profitable, but you do have to prove that you have a profit motive during the inevitable audit. Apparently there are LOTS of ways to trigger an audit, including no profit for three years, claiming substantial losses, making foolish statements in social media, being reported by a disgruntled competitor, and many more.

 

When the audit comes, and it will, you have to show that you are running your affairs in a businesslike manner, and that you have a believable plan. You have to convince them that a steady profit or big payback is just around the corner. Realistic profitability is nearly impossible to substantiate in waterskiing unless you are Horton who may land that massive ad account any day now. You don't have to actually make the profit, but you have to convince them that you have a good shot at it.

[Horton]

@SkiJay I totally agree. My approach is to show a small profit even if I could have written off more and showed a loss.

 

[BraceMaker]

What would the tax incentive be behind "sponsoring" ones self as a skier.

 

Lets say a person works as... let us just pick something mundaine, like a car salesmen. And he owns a little dealership. And that dealership chooses to purchase each year an offlease late model ski boat, and provide a certain party with a "contract" that they will use said boat to waterski on a local lake, it is of course festooned with advertisments. As is the truck that is provided semi-yearly (with wrapped advertisements), and the party that was contracted was then also the owner of the business?

 

In this case there is a legitimate business with income, that could choose to sponsor a skier. Is there any way that a person could reasonably claim that sponsorship as a business expense?

[liquid d]

ya'll quit trying to cheat on your taxes! America needs your money now...we got lots of useless crap to pay for! I'm reporting everybody...hahaha

[Horton]

http://media.tumblr.com/fe497dd337d9af8479bb6398b9565d16/tumblr_inline_mg6n5ltl6X1rxe4lt.gif

[ScaredOfCorbets]

Maybe one chance of hope is to create an entity for tournaments. BOS Watersports Events, LLC. Create, sponsor, and run tournaments etc. Than you can write off a lot, such as travel expenses.

[Waternut]

When people say "don't cheat your taxes", this is what always comes to mind for me.