At Durfee Law Group, we are tax lawyers and tax planners at heart. It’s in our nature to think about the world through a tax focused lens—whether it’s crafting estate plans, advising on corporate structures, or unraveling the tax implications of global sports like Formula 1 (F1). With F1’s growing popularity in the United States, thanks in part to Netflix’s Drive to Survive, fans are becoming more engaged not just with the on-track action but also with the intricate business of racing.
As thrilling as it is to watch drivers like Max Verstappen or Lewis Hamilton battle on the track, the real-world implications of racing extend far beyond the finish line. For the drivers and teams, taxes are an invisible yet critical part of the sport. Let’s dive into this often-overlooked dimension of F1, where every dollar earned is as carefully engineered and managed as every lap driven.
The Explosive Popularity of Formula 1
Formula 1 is no longer just a European-centric sport; it’s a global phenomenon. Here’s what has driven its surge in popularity, particularly in the U.S.:
1. Netflix’s Drive to Survive:
This documentary series has given fans an unprecedented behind-the-scenes look at F1. By focusing on driver rivalries, team dynamics, and high-stakes drama, the series has attracted millions of new fans, particularly younger audiences.
2. U.S.-Based Races:
The addition of the Miami Grand Prix and the Las Vegas Grand Prix, alongside the established Circuit of the Americas in Austin, Texas, has cemented F1’s presence in the United States. These races are not just sporting events but cultural spectacles.
3. Celebrity and Media Attention:
A-list celebrities frequently attend Grand Prix events, turning them into star-studded affairs. The involvement of figures like Lewis Hamilton in social and environmental advocacy has further elevated F1’s profile.
4. Technology and Accessibility:
With apps, live-streaming platforms, and real-time race data, F1 has embraced digital innovation, making it easier for fans to follow and engage with the sport.
This Year’s U.S. Race Schedule
In 2025, three U.S.-based races stand out on the F1 calendar:
Miami Grand Prix (May):
Racing around Hard Rock Stadium in South Florida, the Miami Grand Prix combines technical corners with vibrant fan zones and a party-like atmosphere.
Circuit of the Americas, Austin (October):
This Texas track is a fan favorite for its challenging layout, enthusiastic crowds, and unique “stadium section” turns.
Las Vegas Grand Prix (November):
Returning to the U.S. racing lineup, the Las Vegas Grand Prix delivers high-speed drama under the dazzling lights of the Las Vegas Strip. It’s a spectacle that blends F1’s precision with Vegas’s flair. While these races deliver thrills for fans, they also bring unique tax obligations for the drivers and teams.
Why U.S. Taxes Matter in F1 Racing
When F1 drivers compete in the U.S., they earn income that is subject to U.S. taxation. The Internal Revenue Service (IRS) considers non-resident athletes taxable on U.S.-sourced income, which includes:
- Prize Money and Race Bonuses: Earnings from podium finishes, fastest laps, or even participation fees.
- Sponsorships and Endorsements: Income from promotional activities tied to U.S. events or audiences.
- Merchandise Royalties: Revenue from branded gear sold at U.S. races, such as hats, T-shirts, or digital assets like NFTs.
- Licensing Fees: Payments from U.S.-based companies for using a driver’s name or likeness in marketing, video games, or collectibles.
The Substantial Presence Test: A Hidden Pitfall
One of the most significant challenges drivers face is avoiding U.S. tax residency. Under the substantial presence test, an individual may be deemed a U.S. tax resident if they spend 183 or more days in the U.S. over a three-year period (using a
weighted calculation of days across the current and prior two years). Becoming a U.S. tax resident means paying taxes on global income—a scenario drivers and their advisors work hard to avoid by closely monitoring travel schedules.
Tax Deductions: Mitigating Liability
Drivers can offset their U.S. tax liabilities by deducting business expenses, such as:
- Travel and Accommodation: First-class flights, luxury hotels, and even private charters used for race-day logistics.
- Support Teams: Salaries for personal trainers, physiotherapists, and PR managers.
- Vehicle Transport and Maintenance: Costs of shipping race cars, spare parts, and technical equipment to U.S. events.
- Branding and Marketing: Expenses tied to maintaining a public image, such as social media campaigns and press tours.
A Case Study: Hypothetical Tax Scenario
Imagine an F1 driver, “Larry,” who earns $15 million annually, with $4 million sourced from U.S. races and activities. At a top rate of 37%, Larry owes $1.48 million in federal taxes. If Larry competes in California, he could face an additional $532,000 in state taxes. By claiming $500,000 in race-related expenses, Larry reduces his taxable income to $3.5 million, saving $185,000 in federal taxes alone. Additionally, Larry’s home country might offer foreign tax credits, reducing the overall burden.
The Ripple Effect: Teams, Sponsors, and Fans
Taxes in F1 extend beyond drivers. Teams, sponsors, and even fans are impacted:
- Teams: Must account for cross-border tax compliance, employee payroll, and withholding taxes.
- Sponsors: Face tax obligations for U.S.-based activations and promotional events.
- Fans: While fans don’t directly pay taxes on tickets, the costs of hosting races—factoring in tax incentives or liabilities—can influence ticket prices and merchandise costs.
Digital Revolution: Taxes on New Revenue Streams
As F1 embraces the digital age, drivers are gaining new earnings from NFT royalties and streaming content.
Any U.S.-based NFT sales tied to a driver’s brand are taxable, and drivers creating paid, U.S.-accessible content (e.g., exclusive behind-the-scenes videos) generate taxable income. The evolving digital landscape further enhances the demand for innovative tax solutions.
Conclusion: Precision on and Off the Track
At Durfee Law Group, we know that success in Formula 1 requires more than just skill on the track—it requires strategic planning. F1 drivers exemplify this principle, navigating the complexities of U.S. tax law with the same precision they bring to their races.
So, the next time you watch an F1 race, remember: Behind every breathtaking overtake is a carefully managed financial strategy. Taxes may not be glamorous, but they are a critical part of the sport’s success. F1 drivers are a prime example of how vital planning is for success. The next time you cheer for your favorite driver, remember: their success isn’t just about mastering the track but also about mastering the financial challenges behind the scenes.
F1 Racing and U.S. Tax Implications: Behind the Scenes for Super Fans © 2025 by Norris Lozano is licensed under CC BY 4.0 
F1 Racing and U.S. Tax Implications: Behind the Scenes for Super Fans