Federal legislation includes three-year depreciation for racehorses

Posted: March 1, 2019

Bipartisan tax and disaster-relief legislation introduced in the United States Congress Feb. 28 includes three-year depreciation for racehorses, according to the National Thoroughbred Racing Association.

The legislation was introduced by Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, and Oregon Democratic Sen. Ron Wyden. Under the proposed package, three-year racehorse depreciation would be retroactive for 2018, continue through 2019 and grant taxpayers the option to depreciate all racehorses over a three-year period.

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 act did include 100% bonus depreciation and a $1 million Section 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.

The NTRA said its federal legislative team will pursue passage of three-year depreciation as part of this tax-extenders legislation as it has done since its original inclusion in the 2008 Farm Bill.