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The 4 Rules to Deduct Anything

 

As a professional runner, you are a business owner. This means you have both a lot of freedom (in many different senses), but also a lot of new challenges and questions. One of the most common questions I get is related to figuring out your taxes, specifically: "What can I actually deduct as a business expense?"

 

It can feel confusing, but the IRS generally operates on a few core principles. If you understand these, you'll be much better equipped to manage your finances and most importantly, lower your tax bill. Let's break down the 4 key rules for determining if an expense qualifies:

 

Rule #1: Business Purpose

 

This is the foundation. Does the expense have a clear business purpose? You need to be able to answer "yes" to the question: "Was this cost incurred primarily to help my running business?" This can mean two things: 1. Does this help me make more money or 2. Does this help me grow my market share. Buying shoes for training and competition likely has a business purpose; buying casual shoes for everyday wear probably doesn't. It's about the why behind the spending.

 

Rule #2: Ordinary (Typical for Your Field)

 

Is the expense ordinary in the world of professional running? "Ordinary" here means it's common and accepted in your trade or business. It doesn't have to happen frequently, but it should be something people in your line of work typically spend money on.

 

• Example: It's ordinary for professional runners to travel to races. It's also ordinary to pay for coaching, agent fees, race entry fees, or even specific sports massages aimed at maintaining performance for competition. It's ordinary to have meals with coaches or teammates specifically to discuss race strategy or coordinate travel for a meet.

 

Rule #3: Necessary (Helpful and Appropriate)

 

Is the expense necessary to achieve your business goals? "Necessary" in the IRS view means it's helpful and appropriate for your business. It doesn't have to be absolutely indispensable, but it should contribute to your potential success.

 

• Example: Traveling to a major marathon is necessary if you aim to win prize money or fulfill sponsor obligations. Paying for a coach is necessary if it helps improve your performance, potentially leading to better results and higher earnings. If your sponsors ask you to attend an event or meet even if you’re not racing, then it was necessary for you to be there according to your contract. That strategy meal with your coach? Necessary to perform better as a team or individual.

 

Rule #4: Document EVERYTHING

 

This might be the most critical rule in practice. You MUST have documentation. If you can't prove you incurred the expense and its business purpose, the IRS can simply disallow the deduction, even if it meets the other three rules. Lack of proof trumps everything.

 

• What counts as documentation? Receipts (keep them, or even better, upload them!), invoices, bank statements, credit card statements, canceled checks, detailed logs (especially for travel/mileage deductions), notes on calendar entries explaining the business purpose of a meeting or meal, and even emails to and from race directors, agents, management, etc. The more detailed your records, the better.

 

Putting it All Together

 

Think about a typical expense for a professional runner: flying to a major race.

1. Business Purpose? Yes, to compete professionally. This is how you earn money and gain market share.
2. Ordinary? Yes, pro runners travel for races all the time.
3. Necessary? Yes, to earn potential prize money, gain ranking points (such as Diamond League standings), or meet sponsor requirements.
4. Documentation? Yes, you have flight receipts, hotel bills, and maybe notes on why this specific race was important for your business to cover your basis, but we can also include emails with coaches, agents, meet directors, itineraries and so much more to make your expenses audit proof.

 

Result: Deductible.

 

Now think about that meal with your coach:

1. Business Purpose? Yes, whether you are planning out your year of events, debriefing a race, or to discuss upcoming race strategy.
2. Ordinary? Yes, planning discussions are common.
3. Necessary? Yes, good strategy can lead to better performance/results - more money, more market share.
4. Documentation? Yes, you have the restaurant receipt, and you noted on it (or in a log) who you met with and the specific business topic discussed (e.g., "Dinner w/ Coach re: Boston Marathon pacing strategy").

 

Result: Deductible (but often subject to limitations, like 50% for meals - but better than not deducting it.)

 

A Note on the Home Office

 

Even specific deductions like the Home Office Deduction (which we’ll discuss next time!) must follow these principles. You need a business purpose for the space (admin work - whether that’s planning out a year of racing or it’s the fact that it is important for you as a runner to have a media presence), it must be ordinary and necessary for managing your running business, and you need documentation (like proof of expenses and square footage).

 

The Takeaway

 

When considering if something is deductible, run it through these 4 rules. Does it serve your running business? Is it typical for pro runners? Is it helpful for your goals? Can you prove it?

 

Always Get Professional Advice!

 

These rules provide a great framework, but tax law has many nuances, especially for athletes. This information is for educational purposes. Always consult with a qualified tax professional who understands self-employment and the specifics of athletic careers. We can provide personalized guidance and ensure you're maximizing your legitimate deductions while staying compliant.

 

Think like a business owner, keep good records, and don't hesitate to seek expert help!

 

Train hard, race smart, and manage your business wisely!

 

Disclaimer: This post is intended for informational purposes only and does not constitute tax or legal advice. Consult with a qualified professional 1 for advice specific to your situation. Tax laws and regulations are subject to change.