Tax Deductions for Canadian Professional Athletes

We’ve been working on a list of tax deductions for Canadian professional athletes, and in doing so, have compiled this list.

As of the date of posting this, this list is believed to accurate, although may or may not be inclusive of every possible deduction. In addition, there is no supporting legislation linked to these deductions – that will be coming. This list, is therefore not meant to be taken as fact, it’s always prudent to check and double check eligible deductions, to ensure that all possible deductions have been claimed and that none are missed.

Tax deductions unique to professional athletes.

1. Meals and Incidental Travel Expenses – According to tax law, a taxpayer who travels for business purposes can deduct “ordinary and necessary” travel expenses including meals, tips, local travel (such as taxi fare, rental cars, and other modes of transportation), as well as other miscellaneous expenses. Taxpayers have the option of either documenting their actual expenses or deducting a per diem amount per tax law.
2. Temporary Housing – Temporary living expenses may be deductible under certain circumstances. Law provides for deduction of these expenses if they stay in a location is temporary in nature (generally less than one year) and at the convenience of your employer. A lot of times minor league players fall into this category. In most cases, the living expenses of a player competing at the major league level will not be deductible given the indefinite nature of the stay.
3. Clubhouse Dues – Clubhouse dues are deductible as ordinary and necessary business expenses. It is best to pay these dues by check so there is acceptable documentation to support the payment was made. If you cannot pay by check, ask for a receipt from the clubhouse manager to save for your records.
4. Health Club and Training Expenses – Most or all of the conditioning and training expenses incurred by professional athletes are deductible as a miscellaneous itemized deduction.
5. Equipment – Most or all equipment purchased by a professional athlete used in competition or training is either wholly deductible or able to be deducted by taking a depreciation deduction over a number of years.
6. Union Dues – Union dues paid to a Players Association are deductible as a miscellaneous itemized deduction.
7. Agent and Management Fees – Fees paid to an agent or to a manager are tax-deductible, as are fees paid for account and tax preparations and consulting.
8. Charitable Giving and Planning – Charitable planning can play a significant role in the career and life of a professional athlete. If a plan is structured properly, the athlete can marry the goals of supporting causes that are meaningful to their family and him/her both during his playing days and long after they have retired.

This can be achieved while maximizing his/her charitable income deductions during his high income/high tax bracket years. Philanthropic athletes who don’t consider a formalized plan to integrate their desire to help others with a well thought out tax strategy would be doing themselves a grave disservice.

Get Ready for Filing Season… starting now!

taxes
Get ready for tax filing season… NOW

Now that the calendar has turned from 2012 to 2013, it’s time to get ready for filing your 2012 taxes.  There is no better time to start getting ready than today!  Below you will find some suggestions to help you get started with all of your End-of-Year reporting and tax requirements.

Right away, it never hurts to set up a meeting with your accountant early enough so they still have time to spend with you.  Your accountant will be able to asses your fiscal situation and advise you on things such as your retirement plan, charitable contributions and other deductions that might lower your tax bill, either for 2012 – like making RRSP contributions, or things you can arrange early in 2013 to get you up and running for the year.

Before you meet with your accountant, however, there are some things you should gather and have ready for the meeting:

  • Property tax bills for the year – especially if you use any of your home for business, then you’ll need to know the approximate square footage of your home and the room(s).
  • Letters and receipts relating to charitable donations made in 2012, which must include the monetary value of your gift to the organization, the date and year of the donation and that organizations charitable number (meaning they are legitimate).
  • Relevant reports from whichever of the online bookkeeping tools you are using to capture data.  Be sure the information is accurate and up-to-date.
  • If you hand-write your checks, make sure you have all your receipts and that they are detailed enough to categorize the expense.
  • Medical deductions for the year, if you qualify.
  • Retirement Account information – are they maxed out, have you stayed within the amount available?
  • Bonuses and Gift(s) information – Keeping in mind that employers tend to show their appreciation to their employees by issuing bonuses / giving gifts towards year-end and these are considered taxable benefits.
  • Insurance – Now is also the time to review all of your insurance policies. Life insurance, health insurance, even homeowner’s insurance need to reflect your life situation accurately. Major life changes like marriage, divorce or the arrival of a new baby (or 2) require changes in coverage.  A new job that requires you to travel for business means you have to change your car insurance policy.

Your accountant should also be able to help you keep track of what you received last year in the way of slips and returns and thus advise you what to expect this year and when it should come so that you don’t have to wait until the last-minute to file.

You should also get a box or magazine box and set it up in your office for all the tax information to reside in until you need it at year-end.  There is nothing worse than forgetting to gather something or losing a record at year-end.

End-of-Year preparations don’t have to be stressful and if you need a little more help, you could always hire a bookkeeper to reconcile your chequebook / online purchases with your bank statements among many other things which can simplify your life by keeping your data organized, which ultimately saves time for your accountant (and that saves you money!).

Happy filing!