Bowling And The IRS
9/28/2000 - By Pat Douglas
I get asked a lot, "Can I write off my new ball?," and the answer is usually "It depends." In the view of the IRS, your bowling may be classified as a "business" or as a "hobby." Taxwise, there is a huge difference between the two.
A taxpayer who has a bowling "hobby" which generates reportable gross income, such as
that 1099 you got from the ABC for winning more than $600, can only deduct expenses up to the amount of income. So, if you have total income (winnings) of $943 in a year, you can only deduct $943 of expenses for that year. Any unused deductions can be carried forward
indefinitely and used in that year when you win the High Roller.
A taxpayer who has a bowling "business" can deduct all their expenses in the year they were
incurred, even where expenses exceed income. Obviously this is a big advantage taxwise, but it is more difficult for an activity to be classified as a business. Typically, you need to show a profit for three out of each five year period to be classified as a business. The presumption by the IRS is that you wouldn't continue in business intentionally losing money.
One thing that absolutely makes you "in business" rather than "participating in a hobby" is to be a PBA or PWBA member. Of course, I'm not saying that everyone should run out and join the PBA - you need to bowl where you have a reasonable expectation of cashing. And you can absolutely be "in business" without being a PBA member, but it's a little more difficult to get and maintain that status due to the "three out of five" rule.
As far as what expenses you can claim, the typical IRS test is "ordinary and necessary." Some of the more obvious ones are:
Some less obvious expenses would be:
- Entry fees - Pay them by check or credit card so you have a record!
- Travel - You can claim 32 cents per mile (for 1999) for travel by car to and from tournaments. And don't forget bridge tolls and parking fees.
- Lodging - Your motel room is deductible.
- Meals - You can use the standard daily rates ($30 meals) but you can only deduct 50 per cent of them.
- Equipment - Not just the cost of the ball, but new grips or resurfacing, that new pair of shoes and your new "name" shirt are deductible. The test on clothing is whether it may be worn when you're NOT engaged in the activity. Unless you're a raging egomaniac who wears their "name" shirts everywhere, they should qualify.
- Practice - Here is where the PBA members have another advantage. They can claim the cost of practice as a deductible expense. Of course, they can only claim the actual amount they pay for practice; there is no rule allowing them to claim "so much a week" in practice fees without documentation.
Are you a junior coach? You can deduct (not as a business expense, but as a Charitable
Contribution on Schedule A) any unreimbursed mileage carting the kids around. For tax year 1999, the rate was 14 cents per mile. For other years, check the instructions to Schedule A for the "charitable mileage" rate.
- Any postage or long distance charges directly associated with bowling.
- Cost to dry clean (or professionally launder) your "name" shirts.
- Cost of brackets and sidepots - but do declare the winnings as income. I know a lot of people that don't declare bracket money, but this could help you be a "business" rather than a "hobby."
- League fees and winnings - Technically, a person who bowls as a business could claim the amount of their league fees as an expense, but would also have to claim their league winnings as income. Since it's uncommon for winnings to exceed league fees, this is another advantage to the "professional." However, I know of very few bowlers doing this.
A trap to watch out for is in the travel area. If you are going to make a vacation out of your bowling trip, be careful. It has to be obvious that the primary purpose of the trip was business related (meaning bowling) and not for pleasure. The costs for a personal vacation are not deductible, and this is a "hot button" area for the IRS.
Let's say you're flying to Reno next spring to bowl in the ABC Tournament, and spend a week
total in the Reno area as a vacation. Clearly you would not spend a week in Reno unless the ABC was there (if you've been there, you understand what I mean.) So your airplane ticket to Reno and back should be deductible. However, your hotel room and meals for the days
you're not bowling would be questionable, and my recommendation would be to not claim the non-bowling days.
The biggest thing with taxes and the IRS is documentation. What I do is maintain a notebook for my
bowling, with one page for each tournament. It lists the date and location, entry fees, winnings, and expenses. I'll note how each expense was paid (such as by check, credit card, cash etc) and later match those up with my bank and credit card statements. This way I don't have to "scramble" at tax time to gather the information.
The IRS does have publications available to help. Publication 334, "Tax Guide for Small Business,"
Publication 463, "Travel, Entertainment, Gift, and Car Expenses," and Publication 583, "Starting a Business and Keeping Records" may be found on the web at:
Obviously this is only intended to be a general guideline, and you should consult your tax preparer about your specific situation before putting anything on your tax return.
About the Author: Pat Douglas is a licensed Certified Public Account in Oregon and California and has 19 years of tax preparation experience. He is also an accomplished bowler, with four 300 games, and two 800 series and a high average of 217. He has also had years where he ended up making money bowling."