Tax Question

[RampageFaction]

If anyone is familiar with tax code or is an accountant, I have a question. I’m probably going to leave out some key information out of ignorance which is the reason I’m asking. I’m intentionally leaving out money paid to his manager and gym to keep the waters as clear as possible. If it helps to simplify things by omitting tax brackets and all the technical info, by all means, do that.

Let’s say a fighter’s purse is 100k. If he spends 25k on a training camp:
1. Can he write this off as a business expense? Common sense tells me yes, but I’m not sure.
2. Assuming he can write this off, what exactly does this mean as far as how much money ultimately reaches his pocket?

 

[Calipwnia]

If anyone is familiar with tax code or is an accountant, I have a question. I’m probably going to leave out some key information out of ignorance which is the reason I’m asking. I’m intentionally leaving out money paid to his manager and gym to keep the waters as clear as possible. If it helps to simplify things by omitting tax brackets and all the technical info, by all means, do that.

Let’s say a fighter’s purse is 100k. If he spends 25k on a training camp:
1. Can he write this off as a business expense? Common sense tells me yes, but I’m not sure.
2. Assuming he can write this off, what exactly does this mean as far as how much money ultimately reaches his pocket?

private contractors can write off all expenses

 

[kimocomplex]

pros and cons of being a private contractor

just keep your paperwork in order

 

[genecop]

Yes, and it depends on the entire picture along with the creativity of the ACCOUNT

 

[RampageFaction]

So they can write it off, I assumed this was true. Can anyone take a stab at the second question?

 

[Mondo Freaks]

The trainers are employees. The fighter can't write off the salaries or hourly pay but they can write off the travel expenses and food that the trainers spend.

 

[kimocomplex]

So they can write it off, I assumed this was true. Can anyone take a stab at the second question?

pretty sure there is a formula that calculates taxable income in/out at the end of the year when filling taxes. And like everyone else who files, there are ways to manipulate numbers whether good or bad.

 

[Captain Herb]

Independent contractors can write off almost any expense related to their work (but they also have to pay a self employment tax). These write offs lower the amount of income they have to pay taxes on. An over simplified case would be a fighter makes 100K in total income but spent 40K on training etc. He or she would now only have to pay taxes on 60K

 

[RampageFaction]

Independent contractors can write off almost any expense related to their work (but they also have to pay a self employment tax). These write offs lower the amount of income they have to pay taxes on.an over simplified case would be a fighter makes 100K in total income but spent 40K on training etc. He or she would now only have to pay taxes on 60K

This was what I assumed going in. So that 40k is exempt from being taxed. After that it is a matter of figuring out how much tax 40k carries.

 

[Captain Herb]

This was what I assumed going in. So that 40k is exempt from being taxed. After that it is a matter of figuring out how much tax 40k carries.

You can find that in the tax tables published by the IRS

 

[RampageFaction]

So according to the IRS numbers I see. 25k is taxable at 12% single or head or household. 75k is taxable at 22%. I’m not sure if you break this up and apply the tax only to the 75k but but that’s what I did.
25k = exempt
75k = 16,500 in taxes.
75k-16,500 = 58,500. So add the tax exempt 25k and you’d bring home 58,500+ 25k= 83,500

Now factor in gym/manager fees.
Somebody tell me how way off, or close I am in simplifying this.

 

[NHBfilipino222]

 

[TriangleMonkey]

I think thats why they give out the Reebok coupons, you know, to lessen the burden of being 10-99’d every year

 

[Captain Herb]

So according to the IRS numbers I see. 25k is taxable at 12% single or head or household. 75k is taxable at 22%. I’m not sure if you break this up and apply the tax only to the 75k but but that’s what I did.
25k = exempt
75k = 16,500 in taxes.
75k-16,500 = 58,500. So add the tax exempt 25k and you’d bring home 58,500+ 25k= 83,500

Now factor in gym/manager fees.
Somebody tell me how way off, or close I am in simplifying this.

For each bracket, take your income that falls within that bracket and multiply by the tax rate. Then add up your taxes from each bracket. That should be your Federal Tax due.

 

[Tnellie30]

So according to the IRS numbers I see. 25k is taxable at 12% single or head or household. 75k is taxable at 22%. I’m not sure if you break this up and apply the tax only to the 75k but but that’s what I did.
25k = exempt
75k = 16,500 in taxes.
75k-16,500 = 58,500. So add the tax exempt 25k and you’d bring home 58,500+ 25k= 83,500

Now factor in gym/manager fees.
Somebody tell me how way off, or close I am in simplifying this.

You don't fall into 1 tax bracket based on your taxable income. For example, if you make 75k, your whole income isn't taxed at 22%. Everybody pays the same rate on the same amounts...everybody pays 12% tax on their 1st 25k of taxable income, based on your example. Any amount above that bracket is taxed at the next rate, etc.

Also, gym/manager fees that you mentioned would be deducted as expenses, lowering a fighter's taxable income.

For your example, take the 100k gross income, deduct all expenses related to the fighter's business, and you will arrive at net income. This amount will be taxed according to the listed rates.

To find the take-home pay, which is what you are seeking, you will take the gross income (100k) less the income taxes payable.

 

[RampageFaction]

You don't fall into 1 tax bracket based on your taxable income. For example, if you make 75k, your whole income isn't taxed at 22%. Everybody pays the same rate on the same amounts...everybody pays 12% tax on their 1st 25k of taxable income, based on your example. Any amount above that bracket is taxed at the next rate, etc.

Also, gym/manager fees that you mentioned would be deducted as expenses, lowering a fighter's taxable income.

For your example, take the 100k gross income, deduct all expenses related to the fighter's business, and you will arrive at net income. This amount will be taxed according to the listed rates.

To find the take-home pay, which is what you are seeking, you will take the gross income (100k) less the income taxes payable.

Makes perfect sense. I completely forgot that you can write off those other fees as well.

 

[DrunkChicken]

If this is in the US as a sole proprietor or single person LLC, there's the Fed tax, plus 15% self-employment tax, plus state income tax depending on which state.

If the fighter has incorporated it's different.

 

[Tnellie30]

Makes perfect sense. I completely forgot that you can write off those other fees as well.

I guess the take-home pay would actually be = gross income - income taxes - expenses. (if you're looking to calculate how much a fighter "banks" for a fight.)

 

[ThaiSexPills]

I don’t know the ins and outs well as I don’t touch books but I’ve subcontracted on and off again for years and it’s very easy to expense things. I expensed a huge lift kit and tires on my “company truck” for example. I’m sure trainers could be manipulated into some “gym membership” or some kind of business expense

 

[POWER2]

If anyone is familiar with tax code or is an accountant, I have a question. I’m probably going to leave out some key information out of ignorance which is the reason I’m asking. I’m intentionally leaving out money paid to his manager and gym to keep the waters as clear as possible. If it helps to simplify things by omitting tax brackets and all the technical info, by all means, do that.

Let’s say a fighter’s purse is 100k. If he spends 25k on a training camp:
1. Can he write this off as a business expense? Common sense tells me yes, but I’m not sure.
2. Assuming he can write this off, what exactly does this mean as far as how much money ultimately reaches his pocket?

• If he earned $100,00, he pays 20-30% in taxes off top.
• AFTER taxes, he then pays $25K for training camp, per your example.
• He can now deduct the training camp, airfare, workout clothes, food, equipment, doctor and physical therapy bills, a PERCENTAGE of any bills if he owns his gym, and a smaller percentage of his household bills if he has a home office or home gym.
• He'll also pay 20-30% of his sponsorships to taxes as well.
• If he is gifted anything - a car, a house, etc. he'll pay personal property taxes and income taxes because they were given as payment for services rendered.
• I'm sure lots of fighters fail to pay all their taxes. Eventually, the IRS will catch up MMA fighters like they caught up to boxers and other athletes.