Three-year tax depreciation of racehorses to expire at end of 2016

Posted: Dec. 13, 2016

A federal tax provision that allows for three-year depreciation of racehorses wasn’t extended before Congress adjourned in early December, the American Horse Council reported Dec. 13.

The AHC noted the failure to pass a tax-extender bill had nothing to do with opposition to three-year depreciation of racehorses; many other non-horse industry tax provisions will expire at the end of 2016, and the new Congress hopes to enact omnibus tax reform legislation that would eliminate the need for extensions.

The 2008 Farm Bill eliminated a seven-year depreciation period for racehorses and authorized the three-year cycle, which was in place from 2009 through the end of this year for all racehorses. Congress in recent years has regularly approved an extension of the Farm Bill provision.

The AHC said that beginning in 2017, the pre-2009 rules will have to be used, which means owners must decide whether to place a racehorse in service at the end of its yearling year and depreciate it over seven years or wait until it is more than 2 years old—24 months and a day after foaling—and depreciate it over three years.

The AHC said it will be closely monitoring the development of a tax reform bill in 2017 and analyzing its potential impact on the horse industry.