Skydiving And Tax Deductions

[gary350 0]

User nightjumps posted the below in a thread, but I think it is important enough to be discussed separately (and again, if done previously).

Some time ago, I filed Schedule Cs a couple different years for skydiving coaching - very effective way to honestly reduce your taxes (assuming of course that you end up with a net loss for the year. . . pretty likely, but you can't keep doing it year after year)

Let me also say that I am not an accountant or tax professional and I'm not advocating doing anything except talking to a qualified tax professional about your options.

Thank you nightjumps

Quote

As Coaches and Instructors, one "may" have some tax relief as a "Sole Proprietorship."

1. Setup a sole proprietorship checking account.
2. Account for all monies that are spent and income received for jumps (educational jumps where someone pays for your slot is considered income for your sole proprietorship).
3. If at the end of the year, your losses exceed your income, you may deduct those losses of your gross income and receive a refund for an apportionment of those losses.

Some caveats - I do all my own book-keeping and my tax accountant assists me in making sure that I stay within the IRS guidelines. He assists me in maintaining that line of difference between hobby and business.

I deduct:

1. mileage to & fro DZs
2. Fun Jump tickets - as a requirement for currency.
3. Depreciation on gear purchases (if sold, the IRS wants that depreciation back).
3. Meals
4. Packer fees
5. USPA membership
6. Rating fees
7. Professional magazines
8. Rigging fees.
9. Jump Suits.
10. Computers
11. All costs associated with the WFFC Convention.

I claim as income:
1. Instructor payments
2. Coach jumps that are paid for
3. Barter Income.

Best advice is - talk with a good tax accountant prior to going in this direction to see "if" its an opportunity for you and you could survive an audit.

And the good news is - what I pay him annually is also... a tax deduction.

[paulagc 0]

I'm not an accountant...so don't take this too seriously.

It's perfertly legit to report income from skydiving work and take the related deductions. One of the only real good tax shelters left is being self-employed in some manner. Be careful, like was said, and don't show a loss every year, because the IRS will claim it's a hobby, not a business, and you can't take any deductions.

But, you probably should talk to your DZOs, if you like them, and find out how they handle your pay/trade for jumps, in their tax reporting. I think it's if you earn, as an independent contractor, over $1000, the business owner is supposed to send you and the IRS a 1099 reporting the payment. If you report more income from the DZ than that, and they haven't reported it, you could be getting your friends investigated.

If you're going to report, and your DZ doesn't treat you as an employee and give you a W-2, which most don't, definitely do it on schedule C, as your own business. Otherwise, you've got a whole slew of other issues for your DZO to contend with, like not doing withholding, Social Security/Medicare, etc.

[tombuch 0]

Your program is pretty legitimate, but you should be very careful about a couple of things:

Mileage to and from work is generally NOT deductible. If you drive FOR work, it usually is. I doubt the IRS will allow mileage to the DZ.

Meals are not 100 percent deductible, and have some very specific limitations on when they can be counted as business expenses.

Some "fun" jumps are needed for proficiency, but there is a limit to the number of those jumps actually required. You should think about what you can reasonably claim, then log those jumps so they show a direct relationship to a specific currency or training requirement.

Your trip to WFFC may or may not be deductible, depending on how it relates to your actual business. If you are generating income at WFFC, you can probably count the expenses of the trip against the income. If you are doing the trip as a "convention" meeting expense you will probably need to show some very specific business or training objectives.

There is nothing wrong with defining your skydiving business for tax advantage. However, if you are audited the IRS will apply very strict interpretations and it sounds like you are taking some liberal deductions. That could create problems. Discuss the issues in detail with your accountant so he/she knows exactly what you are doing and why. Be sure to explore the negatives and understand your deductions from the IRS perspective.

Tom Buchanan
Instructor (AFF, SL, IAD, Tandem)
Author JUMP! Skydiving Made Fun and Easy

Tom Buchanan
Instructor Emeritus
Comm Pilot MSEL,G
Author: JUMP! Skydiving Made Fun and Easy

[newsstand 0]

You can legitimately deduct hobby expenses as long as they do not exceed hobby income. Granted a business loss is even better but if you want to play it real safe you can offset coaching income with jumping expenses.

"Truth is tough. It will not break, like a bubble, at a touch; nay, you may kick it about all day like a football, and it will be round and full at evening."
-- Oliver Wendell Holmes

[nightjumps 1]

You're welcome.

Tom's thread has a lot of good info also. Bottom line - need a good tax accountant. Mine is retired IRS.