The bill would extend for 2014 several tax provisions favorable to horse owners, breeders, and equine businesses that expired or were reduced at the end of 2013, including three-year depreciation for all race horses. The bill extends these provisions retroactively for eligible equine assets, including horses, purchased and/or placed in service at any time in 2014. The extensions are effective only through December 31, 2014. On January 1, 2015 they again expire or revert to prior levels.
179 Expense Deduction. For the last few years, the so-called Section 179 business expense deduction was set at $500,000. This meant that anyone in the horse business could immediately depreciate up to $500,000 of the cost of any investment in business assets, including horses. The deduction was reduced dollar-for-dollar once investment in all one’s business activities hit $2 million.
This provision was not extended by Congress and had reverted to $25,000 for 2014.
The legislation extends the expense deduction at $500,000, with a phase-out at $2 million, for assets, including horses, purchased and placed in service during 2014.
Bonus Depreciation. Anyone in the horse business could depreciate up to 50% of the cost of new property purchased and placed in service in 2013, including horses and other equipment. This was known as “bonus depreciation.” It was restricted to new assets, which meant that the first use of the horse or other property had to begin with the taxpayer.
This provision was not extended by Congress and had expired for 2014.
The legislation would extend bonus depreciation at 50% for the cost of new assets purchased and placed in service during 2014.
Depreciation of Race Horses. From 2009 through 2013 all race horses were depreciated over three years, regardless of their age when they were placed in service. This provision was passed in 2008 through the efforts of Minority Leader Mitch McConnell (R-KY).
This change, which eliminated the 7-year depreciation period for race horses, expired at the end of 2013.
The legislation would extend the three-year recovery period for all race horses placed in service during 2014, regardless of age.
Conservation Easements. Favorable rules for contributions by farmers and ranchers of capital gain real property for conservation easements, allowing a deduction of up to 100% of the donor’s contribution base, expired for 2013.
The legislation would extend through 2014 the enhanced deduction involving conservation easements.
The legislation now goes to the President, who is expected to sign it into law.