Back To School 2014: Deducting The Cost Of Playing Sports -Kelly Phillips Erb, Contributor So the good news at my house first: my middle daughter made travel team for field hockey. The bad news: we have to figure out how to pay for it. In addition to the fees for travel, we have to get her a bigger stick and an entirely new kit. It doesn’t end there. In addition to my field hockey player, I have an ice hockey player (who also runs cross country) and a soccer player. In between fees, equipment, jerseys, sneakers, cleats, skates and travel, it’s pretty expensive to play team sports these days. There has to be a tax break available, right? Something? Anything? Sadly, no. Most expenses associated with after school and extracurricular sports are not tax deductible – even if the programs are affiliated with school. That includes what you spend on instruction, equipment, accessories and uniforms. But I did say “most” expenses – not all. There are a few exceptions to this rule. The most obvious – and least common – exception is that expenses related to sports can be deductible if your child is engaged in the activity for profit. That changes the nature of the expense from a personal expense to a business expense. While your mind likely goes first to professional athletes who are paid by teams – the Peyton Mannings and Lionel Messis of the world – “for profit” is more encompassing than that. If your child wins prize money (or equivalent, like medals) for participating in sports competitions, you can offset taxable income from those prizes by deducting the associated costs. How much you can claim as a deduction – and where to report the income and deductions – depends on whether you treat the sport as a business or a hobby; since most of us aren’t raising a little Serena Williams, it’s likely a hobby which means you’ll report winnings as “other income” on your federal form 1040 and take the deduction as a miscellaneous expense on Schedule A. The more popular exception to the rule is child care. While instructional fees are generally not deductible, if the activity is taking the place of other child care, it might be. The cost of sending your child to an after school program may be a qualifying child care expense, even if it focuses on a particular sport. As with summer camp, you’re not required to choose the cheapest child care option to claim the expense so long as it otherwise qualifies. To qualify, care must have been provided for a qualifying person – that generally means your dependent child age 12 or younger when the care was provided – and the care must have been provided so that you (and your spouse if you are married filing jointly) could work or look for work. The credit is non-refundable and can be up to 35% of your qualifying expenses, depending upon your adjusted gross income (AGI). For 2014, you can include expenses of up to $3,000 for one child or $6,000 for two or more children to figure the credit; if you receive dependent care benefits that you exclude or deduct from your income (generally, as a work perk), you’ll have to back that out of the total. Some exceptions and restrictions apply so be sure to read the fine print – or ask your tax professional for more information. There’s one more potential tax break. One of the things that they don’t tell you when you sign your kid up for sports is that you’re really signing up for yourself, too. Inevitably, you’ll end up being a team parent or coach. While the value of your time spent volunteering is never deductible, out of pocket expenses relating to volunteering for qualifying charitable organizations are deductible. You would claim those expense on your Schedule A as a charitable deduction so long as you itemize. To qualify, those expenses must be unreimbursed; directly connected with the services; expenses you had only because of the services you gave; and not personal, living, or family expenses. field hockey barbie Some examples of out of pocket expenses relating to providing services for a charitable organization include: 1. The cost of transportation. You can either deduct the actual costs of gas and maintenance related to your travel so that you can perform services or you can claim the standard mileage rate – which, sadly, remains at 14 cents per mile for charitable activities – to figure your contribution. No matter which method you use (mileage or actual), you can still deduct parking fees and tolls. 2. Travel expenses. You can also claim travel expenses while you are away from home, assuming that the expenses are related to the volunteer services and not for personal use – you can’t write off a trip to Europe to “coach” rugby just because you always wanted to go to Paris. Travel expenses include air, rail, and bus transportation (as well as expenses for your car); taxi fares or other costs of transportation between the airport or station and your hotel; the cost of lodging and the cost of meals. 3. Uniforms and related accessories. While you can’t deduct the cost of uniforms for your kids, if you buy uniforms or equipment as part of your charitable services, you can deduct those costs. Be aware, however, that to qualify as an expense, the uniforms or equipment must be worn only while volunteering and are otherwise not suitable for everyday use. For example, the cool sneakers and running capris that I wear when I coached for Girls On The Run don’t count since I also wear it outside of training on my personal runs. But if I bought a hockey mask to help out on the ice (trust me, nobody wants this to happen), it might. And be smart. Attending ballgames in order to cheer your child doesn’t count as volunteering. Also not deductible? Sipping on a Vitamin Water on the sidelines while chatting with other parents. Performing volunteer services for a sports team should meet the same standards as you would expect at any other charity: we’re talking real work. And always keep good records when you travel or otherwise spend money out of pocket – that means receipts and travel journals. Just as when you’re making in kind or cash contributions, documentation is key for out of pocket charitable expenses claimed as deductions. You’ll also want to check to make sure that it’s a qualifying charitable organization. Most schools qualify and if you’re not sure about a specific team or organization, ask for a copy of the tax-exempt paperwork or search the IRS using the EO Select Check tool. So, some costs might be deductible (!) while others are not. To help you with all of those nondeductible out of pocket costs related to sports, Sports Authority is offering gift cards worth $100 to TWO readers as our next giveaway. Sports Authority is one of the nation’s largest full-line sporting goods retailers. Customers can find all the gear and equipment they need from the brands they love like Nike, Under Armour, The North Face and Adidas – just to name a few. Sports Authority has all the essentials for back-to-school and extra-curricular activities from active apparel like tees and tank, footwear, backpacks, accessories including bags, water bottles and watches and all team sports needs. To enter to win one of the two gift cards, just post a comment below telling me your favorite athlete of all time. It doesn’t have to be a professional athlete, though it certainly can be. I’ll go first to get you started: Mia Hamm. I grew up in a rural North Carolina and was constantly told that girls shouldn’t play sports. Clearly, Hamm didn’t get the memo. Entries must be posted in the comments section for this blog post in the space below by 10:00 p.m. EST on September 18, 2014. It’s just that easy. I’ll choose two winners randomly (using a number generator) out of all of the qualifying entries. Be sure and read the fine print for more rules because, as you know, I’m a lawyer and I like rules:
Posted on: Thu, 18 Sep 2014 18:56:51 +0000
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