Favorable Horse Provisions in Tax Extender Bill Passed by Congress

Congress has passed a tax extender bill called the Protecting Americans from Tax Hikes Act of 2015 that includes several provisions important to the horse industry and supported by the American Horse Council.  

At the end of 2014, a number of favorable tax provisions for horse owners, breeders and businesses expired. In all, over sixty tax provisions expired; some applied to all businesses, including the horse industry, and one was specifically applicable to owners of race horses. All of the provisions extended are retroactive for all of 2015.

Importantly, the bill would reinstate 3-year-depreciation for all race horses for two more years. From 2009 through 2014, race horses could be depreciated over three years, regardless of when they were placed in service. This change, which eliminated the 7-year depreciation period for race horses and made all race horses eligible for three-year depreciation, expired at the end of 2014. The just passed extender bill would reinstate 3-year-depreciation for race horses placed in service after December 31, 2014 through 2016.

The bill would also increase the so-called Section 179 business expense deduction back to $500,000 and make this provision permanent. It is currently set at $25,000. This would allow anyone in the horse business to immediately depreciate up to $500,000 of the cost of any investment in business assets, including horses, purchased and placed in service. The deduction would be reduced dollar-for-dollar once investment in all one’s business activities hit $2 million.

The bill would restore bonus depreciation for qualifying new property, including assets used in the horse business, such as horses and other equipment, purchased and placed in service during 2015 through 2019. The bonus depreciation percentage is 50 percent for property placed in service during 2015, 2016 and 2017 and phases down to 40 percent in 2018, and 30 percent in 2019. The first use of the horse or equipment must begin with the taxpayer.

The extender bill would also restore and make permanent favorable tax treatment for land donated for conservation purposes, particularly land donated by farmers and ranchers.

The AHC supported the tax extender bill and originally achieved the 3-year-depreciation of race horses provision in the 2008 Farm Bill and supported its inclusion in subsequent tax extension bills, including this one.