Over the weekend, I ran my first ever half marathon. I’m not gonna sit here and say it was easy. It was not. It was hard (note to self: When the web site warns, “Our course is not considered easy and fast,” pay attention.) But I finished in a quite respectable 2:18.
So why did I do it? Mostly to prove that I could. A couple of years ago, I couldn’t even run a mile. I was tired and out of shape. So I started walking. And then I started walking faster. Eventually, I started running.
My first race was an 8k. After a few races from between 5k and 8k, I signed up for the Broad Street Run: it’s a 10 mile race through the streets of Philadelphia. It was fantastic. Flat and straight which translated to a great personal time. The crowd was amazing. I loved it so much, I decided that I needed to run a half marathon (I had also clearly lost my mind).
Most of the races that I run have a charitable component; that’s pretty common these days in the world of running. Every year, I run the Susan G. Komen Race for the Cure (5k) which raises money for breast cancer. I’ve also run to raise money for ovarian cancer, lung cancer and Philadelphia public schools. This, of course, raises the question of whether any of those races lend themselves to a charitable deduction (it’s a tax blog, remember?). It’s one of those “it depends” questions so let me break it down…
Clearly, any rounding up you do or extra funds that you donate to an organization which is recognized by the IRS as a qualifying charitable organization would result in a charitable deduction (assuming, of course, that you itemize your deductions on a Schedule A). So, if you pay your entry fee and then write an extra check, deduction on the extra.
But what if you only pay the entry fee? Assuming that the fee covers the cost of the race (including your chip, a shirt and the expo), it’s not deductible as a charitable contribution – even if the point of the race is to raise funds for charity. That makes sense, of course, since the rule is that the donation should not be a quid pro quo for services or goods. But what if the fee includes a charitable component? If you can separate it out, the charitable piece would qualify as a donation (just ask the race organizers what the value of the donation should be). It’s similar to making a donation to a charity and getting a tote bag in return; you have to deduct the cost of the tote bag and the overage is generally deductible.
So then what if you run not to raise money but to win money? To be clear, that’s nowhere on my radar. I do not anticipate ever being that fast.
But if you do, you must report your winnings on your income taxes. The actual treatment of the winnings, though, hinges on whether you consider running a business or a hobby. If running – or any other sport – is your hobby, then you would report winnings as “other income” (good ol’ line 21 on your federal form 1040). If that’s the case, you can claim deductions – like entry fees, running shoes and other related expenses – against your winnings but only if you itemize. You would include your related running expenses as “miscellaneous itemized deductions” on your Schedule A. Those miscellaneous itemized deductions are limited to those in excess of 2% of your AGI (adjusted gross income).
Additionally, if you treat running as a hobby, your deductions are limited to the amount of your winnings. You also can’t carry excess deductions forwards or backwards. So, if you’re like me and you pay an entry fee to run but don’t win anything except for the odd finisher medal (my last one was carved out of wood into a whistle), you can’t properly claim any running-related deductions. But that’s okay – I’m only running because I like it. And for the shoes.
If, however, running is a business for you, you would report your winnings on a Schedule C. Similarly, you would claim your deductions on your Schedule C. In that event, your deductions wouldn’t be limited to a % of your AGI and you can report deductions in excess of your income.
How can you tell if running is a hobby or a business for you? The IRS looks at a number of factors. First of all, the IRS assumes that you’re in business to make money. There’s nothing that says that you can’t enjoy your business, but if you’re running primarily because you like it and not to make money as your main motive, it’s likely a hobby. Additionally, the IRS assumes that a business will eventually make a profit. If you spend more than you make year after year, the IRS is going to lean hobby – especially if you’ve lost money for three of the past five years. For more on the hobby rules, see my prior post about hobby income tests and Mary Kay.
Lots to consider, right? Or, if you’re like me, you just take your medal and run. No tax consequences for those of us in the middle of the pack.
But lots of aches and pains nonetheless. As part of my celebratory oh-my-goodness-I-did-it moment, I’m joining forces with the folks at BENGAY® Cold Therapy for a quick giveaway. BENGAY® Cold Therapy is the only brand to use PRO-COOL™ Technology, a scientifically created formula that combines the pain relieving power of menthol, an OTC topical pain relieving ingredient, with the cooling benefits to alleviate the minor aches and pains associated with muscle strain, arthritis, backache, bruises and sprains. BENGAY® Cold Therapy uses PRO-COOL™ Technology to provide its cooling effect with a blast of cold as the menthol in the unique formula evaporates, providing a cooling sensation.
And it’s a cool blue color. We checked it out at the office (one of my associates likes to play a little ball off hours).
Five lucky readers can win their own BENGAY® Cold Therapy – just in time for marathon season. All you have to do to enter is tell me why you run, walk or otherwise move about. Do you like to run for fun? Walk for charity? Play ball because you want to hang out with your pals? Post your answer in the comments below.
Here are some more rules because, as you know, I’m a lawyer and I like rules:
- Entries must be posted in the comments section for this blog post in the space below by 10:59 p.m. EST on October 26, 2011.
- Don’t panic if your comment doesn’t show immediately. If it goes to moderation because, for example, you’re new here, the time stamp on your comment is what counts.
- I love my Twitter followers and my Facebook fans but for this particular giveaway, tweets and Facebook comments will not be counted. Ditto for emails. You must leave your comment on the blog at this post.
- You can enter as many times as you like but you must leave a different answer each time you comment.
- Offensive comments or comments that otherwise violate the comment policy will be deleted and will not be considered valid for purposes of the contest.
- Pingbacks and other links will be disregarded for purposes of the contest.
- You must include your full name and your email address with your entry, just enter it when you register to comment. I won’t publish your email address but I do need contact information for the winning entry.
- Due to shipping considerations, only United States addresses, please. Sorry, Canada, eh?
- I respect your privacy and I will not send you anything unrelated to your entry in this contest.
- By entering the contest, you agree that I may post any part or all of your submission including your name as a part of the contest announcements or promotions, with the exception of your email address.
Comment away!