Jockeys: 7 Tax Moves to Consider in 2025
As a horse racing jockey, managing your finances efficiently is critical to maintaining long-term financial success. With the unique income structure and expenses involved in your profession, careful tax planning can help you maximize earnings and minimize liabilities. Here are essential tax moves jockeys should consider for 2025.
1. Develop a Bookkeeping Process or Hire a Bookkeeper
Accurate and consistent bookkeeping is the foundation of good business and tax planning. Jockeys often have numerous business-related expenses, including travel, lodging, and equipment. Without proper tracking, it’s easy to miss valuable deductions and fail to understand your true earnings.
Why It Matters:
Helps you understand your financial health.
Aids accurate tax filings.
Prevents missed deductions and minimizes audit risks.
Action Step:
Invest in accounting software like QuickBooks, tailored for small business owners, or hire a professional bookkeeper. Additionally, consider maintaining separate bank accounts for personal and business finances to streamline the bookkeeping process.
2. Regularly Update Tax Projections
Tax liabilities can fluctuate based on race winnings, sponsorship income, and other variables. Regularly updating tax projections ensures you’re prepared for estimated tax payments, prevents unexpected liabilities, and allows for better financial planning.
Why It Matters:
Helps avoid penalties for underpayment of estimated taxes.
Enables smarter business and financial decisions.
Helps forecast cash flow for business and personal goals.
Action Step:
Schedule quarterly meetings with your tax advisor to analyze income changes and adjust estimated payments. Use these projections to determine optimal times for major purchases, contributions to retirement accounts, or other financial moves.
3. Consider Converting to an S Corporation
Operating as a sole proprietor may result in higher self-employment taxes. Converting to an S Corporation can reduce these taxes by enabling you to pay yourself a reasonable salary while taking the remaining income as business distributions, which are not subject to FICA taxes.
Why It Matters:
Saves on self-employment taxes (Social Security and Medicare).
Provides a more tax-efficient way to structure income.
Action Step:
Consult with a tax professional to assess whether S Corporation status is beneficial for your business. They will also guide you through the process and ensure compliance with IRS guidelines regarding reasonable compensation.
4. Create a Solo 401(k)
A solo 401(k) is an excellent retirement savings vehicle for self-employed individuals like jockeys. It allows higher contribution limits compared to traditional IRAs, enabling significant tax-deferred savings.
Contribution Limits for 2025:
Employee Contribution: Up to $23,500 ($30,000 if age 50+).
Employer Contribution: Up to 25% of net earnings, with a combined limit of $70,000.
Establishment Deadline:
The plan must be established by December 31, 2025, but contributions can be made up until your tax filing deadline, including extensions.
Action Step:
Speak with your financial planner to establish a solo 401(k) and determine the appropriate contribution levels based on your earnings.
5. Make Roth IRA Contributions if Eligible
Roth IRAs offer tax-free growth and withdrawals in retirement, making them a valuable tool for jockeys who qualify under income limits. Additionally, contributions for 2024 can still be made until April 2025, providing extra flexibility.
Key Details:
Income Limits for 2025: Single filers earning up to $150,000 can make full contributions, with a phase-out of up to $165,000. For married filers, the phase-out range is $236,000 to $246,000.
2024 Contribution Deadline: April 15, 2025.
Action Step:
Determine your eligibility and contribute the maximum amount to a Roth IRA if possible. If you exceed the income limits, consider a backdoor Roth IRA contribution by funding a traditional IRA and executing a Roth conversion.
6. Tax Loss Harvesting in Brokerage Accounts
If you hold investments in taxable brokerage accounts, tax-loss harvesting can help you reduce your tax bill. This strategy involves selling underperforming investments to offset realized capital gains or up to $3,000 of ordinary income annually. Unused losses can be carried forward to future tax years.
Why It Matters:
Lowers your current tax liability.
Improves the after-tax performance of your investment portfolio.
Action Step:
Work with your financial advisor to review your portfolio before year-end. Identify opportunities to sell underperforming assets strategically while maintaining a balanced investment strategy.
7. Tax Gain Harvesting in the 0% Long-Term Capital Gains Bracket
If your income is low enough to qualify for the 0% capital gains tax bracket, you can sell appreciated assets without incurring taxes on the gains. For 2025, this bracket applies to single filers with taxable income up to $48,350 ($96,700 for married filing jointly).
Why It Matters:
Realizes gains tax-free at the federal level.
Resets the cost basis, reducing future tax liabilities.
Action Step:
Monitor your income levels and consult with your tax advisor to determine if you qualify for tax gain harvesting. This strategy can be especially beneficial in years with lower-than-usual earnings.
Final Thoughts
For horse racing jockeys, proactive tax planning is an essential part of financial success. Implementing these strategies in 2025 will not only help you minimize your tax burden but also position you for long-term financial growth. From creating a robust bookkeeping system to leveraging advanced tax strategies like S Corporations and tax gain harvesting, the right moves can make a significant difference.
As a financial planner who focuses on working with jockeys, I’m here to help you navigate these complex decisions. Let’s create a customized tax and financial strategy that fits your unique needs. Contact me today to get started on securing your financial future.
