When Is Sponsorship Tax Deductible?

I recently noticed a lot of racers using the line “sponsorship is tax deductible” in their proposals. So I wanted to quickly address what that means, and why you shouldn’t use this as a selling point.

The Truth

This line makes it seem like “hey free money for everyone!”. However, that is not what that means. Sponsorship is tax deductible, BUT not in a charitable sense. As a business, that deduction is going to come out of marketing, or advertising.

What It Really Means

At the end of the day it is reducing the profits of the company. Instead of using this as a selling point, let the potential sponsor know what value you can bring. A business will be more interested in how you can bring a return on their investment.

When It Is Deductible

Sponsorship is not charity, unless it is one of the few organizations in racing that have a 501C3 charitable status. Their are a few groups in racing that work with veterans, autism foundations, and other things like that, that are also involved in racing. These are the only companies that have a true deduction from sponsorship.

Closing Thoughts

That line really shows a disconnect on what you are really offering a sponsor, because it insinuates you are a charitable case. No racer is a charity, so please don’t use that line.

You can find more tips for having a better sponsorship proposal and gaining sponsorship here.

I also have a course teaching sponsorship and marketing for racing, to check it out click here.