Chasing and taxes

[Edward Ballou]

From a beginner's perspective -

So I've decided to take up storm chasing as an official hobby. Is there anything I can do on my taxes to justify my money spent? If so, what do I keep track of? Are there any incentives one can get if they do spotting as well?

Basically write down any tax-saving advice...thanks!

 

[Tyler Allison]

Im going to assume you don't intend to setup a real company with stock and a board of directors and the like. Given that...

I researched this myself not 6 months ago.

1. Hobby actually mean something to the IRS. If you make zero money on your activities or take a loss for more than 3(?) years the IRS will actually consider your activity a hobby and not look kindly on you taking credits based on your expenses/loss.

2. There are no tax breaks for a hobby

For folks that are "full time" chasers...they actually need to make a profit from selling DVDs or video clips or it's still a hobby. Last I read even the likes of Mike Hollingshead, one of the best in the business, doesn't make enough money from just his chasing. Not speaking for Mike, but I suspect he can't take a tax credit on his chasing equipment, cameras, gas, etc.

On a personal note:
Even though I run a VERY small sole-ownership business, that actually came to be out of this hobby, I can not expense my 'storm chasing' or 'spotting' since it's not directly related to my business. I could skirt the area of legality by possibly going to a chaser convention as a 'vendor' and then chasing before or after on my way home. Then all expenses during that chase would be business expenses. Of course if I do that for 3 (?) years in a row so as to show my company as loosing money (let's say I take in $2000 a year and I spend $3000 on chasing) then the IRS will call my company a hobby and we are back to square one.

Of course im not a tax attorney...but I did stay at a holiday inn express.

 

[John Diel]

Though similar to Tyler, I am able to get the expenses written off as necessary business expenses. Since I am a reporter for a radio station, it's my time and money that goes to the vehicle. I am not compensated by the station for this and I carry advertising on the truck for the station, I get to write of the mileage as well. I get a 1099 from the station (usually totaling around $1000 for other things) which allows me to do this. I get to write off all the mileage as well, since I'm advertising. Radio's are essentail to the duties of a reporter as well as Camera, Cell Phone, and other related equipment.

 

[Dan Robinson]

Tyler is right. Unless you make money chasing, which is very difficult, you can only take deductions for 3 years max.

I am trying it now with an honest intention to make money from a DVD I'm going to attempt to put out and sell locally in retail outlets as well as the occasional stock video / TV news video sale. I have gone part time with my day job to 'chase' and do this, and so far it is working OK, but it is not easy at all.

Starting a business is pretty complicated, especially if you live inside the boundaries of a city or large town. Lots of government people get a piece of your income and because of this, it is hard to make a profit if you're not making much to begin with. You have to deal with federal, state and local taxes. There are city B&O taxes and county property taxes on your equipment. It is pretty overwhelming when you do it for the first time and I am slowly figuring everything out.

I don't know if I will end up getting to do this after the IRS' three year timeline, if not I've got an employer that graciously will take me back full-time. I have not made a profit so far in two years, but most of that is due to first-time equipment purchases. Travel expenses (gas/vehicle wear) are a killer nowadays.

One thing is for sure is that if I wasn't passionate about the weather, I would never do this. There are much more reliable and easier ways to make money out there. You're probably better off getting a nice day job that allows you enough vacation time and pays you enough so you can afford the gear/travel expenses to chase like you want to.

Also, being single helps. If I ever get married, this 'chasing life' will definately have to end

 

[Tyler Allison]

Originally posted by John Diel
I carry advertising on the truck for the station, I get to write of the mileage as well.

Anybody have any links to say this is legal? Im not questioning what you are doing... I thought about doing the same thing with my car but everything I could find...though not specific to the question...seemed to point to the fact that since I wasnt actually driving the car for my business (ie: my wife driving the car around town to pick up our kids) I couldn't take the milage/gas on it. I could however take the milage/gas on it if I drove to a convention as a vendor for example.

I see a lot of small companies with signs on personal cars and I figure they can't be doing it just for the advertising...but I cant find a document that says I can expense it!

 

[David Wolfson]

No expert here, but some relevant background.... Anyway, unless you're running a tour company, I'd suggest you frame the business as "nature and journalistic photography". The main thing about a business is that it makes money or demonstrably tries hard to; otherwise it's a hobby or recreation.

In addition to what Dan said, you should consider the liability and insurance implications of declaring it as a business. A business may be held to a higher legal standard of liability and your personal insurance may have exclusions for business use.

 

[Edward Ballou]

Ok, so it's obvious if you're a business...you can write off your expenses up to legal limits and such...got all that.

But if you're a newbie chaser and you want to get into it as a hobby, you could write it off in your first three years and never claim anything ese after that. Then you've written off your initial expenses which is predominantly the worst part about getting into chasing...that is, if you like all the fancy doo-hickies.

 

[David Wolfson]

The three-out-of-five profit establishes intent. The reverse isn't the case, whereby you can run three years of losses and get a free pass. Practically speaking you might get away with it, but technically your "business" deductions might not survive an audit. From http://taxes.yahoo.com/basics/life/selfemp.html

Since the IRS business profit motive test is subjective, you stand a better chance of surviving any tax questions if you conduct your business professionally. That is what matters, as well as your training and background in the field, the amount of time you put into the venture, the operation's profit/loss history, your overall financial status and the \"recreational\" elements of the project. That doesn't mean you have to hate your own business, but neither can you claim your hobby is your work.

 

[Rob_Davis]

Originally posted by Tyler Allison
Even though I run a VERY small sole-ownership business, that actually came to be out of this hobby, I can not expense my 'storm chasing' or 'spotting' since it's not directly related to my business.

It is interesting that you put "spotting" inside quotes. I too am no tax attorney, but it seems like there *might possibly* be some kind of allowance in there for "storm spotting" if you are a Skywarn volunteer. You can deduct expenses that are related to being a volunteer fireman. Wouldn't this be a similar case? Surely, somebody here has checked into that.

And I don't believe that Skywarn activities are necessarily limited to your home community by legal definition.

 

[Tyler Allison]

Originally posted by Rob_Davis+--><div class='quotetop'>QUOTE(Rob_Davis)</div>

<!--QuoteBegin-Tyler Allison

Even though I run a VERY small sole-ownership business, that actually came to be out of this hobby, I can not expense my 'storm chasing' or 'spotting' since it's not directly related to my business.

It is interesting that you put "spotting" inside quotes. I too am no tax attorney, but it seems like there *might possibly* be some kind of allowance in there for "storm spotting" if you are a Skywarn volunteer. You can deduct expenses that are related to being a volunteer fireman. Wouldn't this be a similar case? Surely, somebody here has checked into that.[/b]

Interesting idea. And I hope someone can comment. The only difference I can really see is a volunteer fireman/police/ema has official recognition by a government entitity. I realize SKYWARN has an official recognition as well but it's not at the same level. I think volunteers in the fireman/police/ema area are sorta a special case.

 

[David Wolfson]

Expenses directly related to storm-spotting in your community sound like a slam-dunk deduction to me. Now, that's a "charitable" deduction where you use the charity mileage deduction rate, itemize non-cash items, and get a letter from the donee agency acknowledging your contributions as regulations require.

AFA a Skywarn spotter from (for example) Tyler, Texas, deducting expenses for their spotting near Chadron, Nebraska, well, I dunno.... :wink:

 

[David Drummond]

It's part in what you call it. Lots of freelance photographers work as a business and they have many of the same expenses we do, especially if they travel much to do it.

When you really look at it, if your selling or licensing your images or video and you don't actually work for someone while your doing it, your a freelance photographer.

You can do this, and it's tough, and you can write off some things, but that self employment tax will bite you in the rear hard. It got me good for 2003 and 2004 it was even worse, and that was only on my chase stuff.

 

[John Diel]

Since the station does not pay me mileage and advertises on the truck, it becomes an expense. Just about everyplace I go is generally within the listening area and the advertising doesn't just stop at business hours.

 

[Steve Miller TX]

The tax codes are very complex with LOTS of gray areas that could easily, with the very slightest of "interpretations" or "definitions" in the tax law, swing your way or to your detriment. Not only do you have federal tax codes to deal with but at the very least state tax codes where you operate your "business-hobby".

I've been looking into this myself and it quickly becomes apparent that a tax attorney needs to get involved that will take the time to truly understand what you are trying to do and then explain the implications/benefits. I've done this with a real estate venture that I tried a few years ago and I can tell you for a fact that NOTHING is clear cut when it comes to dealing with the IRS. It's very complex with lots of room to make a mistake....not to mention all of the detailed paperwork and bookkeeping that you have to do.

I actually think it would be a good idea to get a group of chasers together, pool our resources, and hire a competent and savvy tax attorney to guide us. What do ya'll think?

 

[David Wolfson]

Honestly, I don't think it's that complicated, unless you involve a high-powered lawyer! :wink: It's not like real estate IMHO.

I filed a Schedule C for some years to offset significant Form 1099 income (and sometimes a bit more) from singing with expenses including lessons, music, and travel. I was audited and passed without problems. Meanwhile I had other earned income.

It's pretty easy to justify offsetting any income from chasing with expenses. It's more difficult to also justify offsetting a big chunk of your unrelated earned income with a lot of excess chasing expenses. Unless you keep good records and build up a good case for intent, it looks like what it is :wink: : a way to deduct hobby and recreational expenses from your earned taxable income.