U.S. House, Senate approve three-year depreciation as part of tax bill

By: NTRA

Posted: Dec. 17, 2019

A key provision that extends three-year tax depreciation for all racehorses through 2020 passed the United States House of Representatives by a vote of 297-120 Dec. 17 and then cleared the Senate on a 71-23 vote Dec. 19.

The racehorse provision is part of a larger tax package agreed to by Republican and Democratic leaders.

Uniform three-year racehorse depreciation was among numerous tax provisions across many industries that either expired at the beginning of 2018 or this year, or were set to expire as of Jan. 1, 2020. The bill reinstates the 3-year schedule for all racehorses retroactive to 2018.

The provision allows taxpayers to depreciate, on a three-year schedule, racehorses 24 months of age and younger when purchased and placed into service, as opposed to a seven-year schedule.

“Reinstatement of three-year depreciation for all racehorses helps attract and retain investment in the horse racing industry,” National Thoroughbred Racing Association President and Chief Executive Officer Alex Waldrop said. “We appreciate the House’s work to include this important provision.”

Three-year racehorse depreciation was most recently available to the industry in 2017 but Congress did not renew it for 2018 as part of the Tax Cuts and Jobs Act passed in December 2017. The TCJA did include 100% bonus depreciation and a $1 million Sec. 179 expense allowance for qualified depreciable property, two important investment incentives that lessened the need for three-year depreciation in many cases.

However, three-year depreciation continues to be a beneficial option for many racehorse owners, especially racing partnerships with multiple passive owners, as it better aligns deductions with corresponding income opportunities on an annual basis.

Maintaining the three-year recovery period for racehorse purchases has been a top legislative priority for the NTRA federal legislative team since the provision’s initial enactment as part of the 2008 Farm Bill.