May 15, 2019

How to Properly Deduct Sports Team Sponsorship

Properly Deducting Sports Team Sponsorship

Are you considering sponsoring a local sports team this year? Maybe you already are. The sponsorship usually entails buying the uniforms (the practice name appears on them), bats, balls, and masks, and possibly even contributing to the fund that pays for the umpires.

You get good publicity with this. In fact, the games are reported in the local newspaper. Can you deduct the sponsorship costs for advertising?

Yes. You are right on point with Revenue Ruling 70-393 (a good thing). The ruling states that the monies spent to outfit and support the team are similar to monies spent on other methods of advertising; accordingly, you may deduct them as business expenses for federal income tax purposes.

Acme Dental Group advertised its business primarily through either word of mouth or athletic sponsorships. As part of the athletic sponsorships, the practice paid for the uniforms, logo design, hats, T-shirts, sweatpants, coats, bags, and pants for all players on its sponsored teams (soccer, softball, wrestling, etc.).

In addition, Acme made monetary donations for high school wrestling organizations and provided equipment and league/tournament fees for its sponsored athletic teams. These expenses are ordinary and necessary business expenses and that Acme could deduct them as advertising or promotion.

As you can see from the above, sponsoring sports teams—with the hope that it is going to increase your business —creates business tax deductions for advertising and promotion.

Note the word “hope” in the above paragraph. It’s true: you place an ad in the newsletter, and you hope it works. The same is true when you sponsor a sports team.

But you need to treat the sponsorship as you would an ad. If you run the ad multiple times over a few years and don’t get any results, you stop. You should do the same if the sponsorships are giving your practice no boost.

Have questions or need some additional advice on this topic? Chat with us anytime, 24/7, on our home page. Our team of Dental Financial Experts is available to help when you need it most. Less stress. Less tax. More profit! That’s Engage Advisors.