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Specialty Services - Professional Athletes - Tool & Resources - Articles and Publications |
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The Three “Musts” to Tax Savings |
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Education - Know what to track
Organization - Don't forget any deductions!
Communication - Talk often with your agent and tax advisor
Education - Know what to track
Let's get one thing straight- taxes are very complicated! And when things are complicated, they can become overwhelming in a hurry. But three simple steps can help you along the way: know what to keep track of, get organized, and communicate with your advisor(s) throughout the year. The focus of this article is the first step, knowing what to keep track of.
Sad but true, if you don't know what to keep track of during the year, you will pay too much in tax. Why is this? Simple. Even though the Internal Revenue Service (IRS) allows a standard deduction for you to take off of your earnings when calculating your income tax, professional athletes have many unique expenses that they can write off which when totaled up in most cases, exceeds this standard deduction that the IRS allows. This means that even more of the dollars that you earn are written off of your income and you don't pay tax on them, normally generating an even bigger tax refund!
The IRS realizes that you are required to pay for expenses that are directly related to you playing sports and being in good physical condition to perform at a professional level. To the extent your team does not reimburse you for these expenses, you can write them off on your tax return. If you don't have a lot of expenses to write off, the IRS will still allow you to write off the standard deduction, which for 2005 is $4,850 for single taxpayers, and $9,700 for married taxpayers. Start adding up the expenses you pay as an athlete and you can quickly see the advantage to keeping track of them. Below are examples of expenses professional athletes generally can write off:
Agent fees
PHPA or other union dues
Trainers' fees
League/Team assessments
Business calls to agent/team/advisors
Publicity costs
Postage to agent/team/advisors
Conditioning fees (gym)
Ice rental
Sticks/Skates/Tape/etc
Professional publications
Internet Service Fees for researching/tracking hockey
Tax preparation fees
Other training equipment
Work out apparel
Fan mail costs
* For a list of other items, please see the Tax Write Off Sheet page
In addition to these expenses, you can also deduct expenses related to your vehicle as well. One method allows you to write off a standard amount per mile (currently 48.5 cents) for business related miles, which does not include commuting miles. Basically, commuting miles are defined as the mileage to travel from your residence during the season to your practice facility. Miles driven to your game facility, as well as other road trip related miles, are considered business miles. In this method, you do not worry about actual expenses related to your vehicle. The other method of writing off your car requires you to keep track of several things. First, you must keep track of the ratio of business miles to total miles put on your vehicle. Then you multiply this business percentage, let's assume 55%, times the total dollars related to the cost of operating and maintaining the car. These costs include gas, oil, repairs, maintenance, insurance, and depreciation. The general rule is that if you put a lot of business miles on your vehicle, then use the mileage method. If you don't use your vehicle a lot, but its business percentage is high, then use the actual cost method. Either way, do not ignore your vehicle at tax time- there are tax dollars to be saved under that hood! |
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