Forbes.com featured a story this week, entitled “Tax Deductions for Yearling Thoroughbreds”, that may be of interest to many horse businesses. To read the article, click here. Many Thoroughbred racing industry experts are quoted in the article, including Kentucky equine lawyer Joel B. Turner, whose guest post was featured on the Equine Law Blog this
The second incentive of the Economic Stimulus Act of 2008 brings back 50% first-year “bonus depreciation” for horses and most other depreciable property purchased and placed in service during 2008. “Bonus depreciation” was first passed in 2002 but had phased out at the end of 2004. Bonus depreciation helps horse businesses by allowing…
On February 13, 2008, President Bush signed into law the Economic Stimulus Act of 2008. “The new law includes two tax incentives that would allow a much bigger write-off for horses and other depreciable property purchased and placed into service in 2008,” said Jay Hickey, President of the American Horse Council. The Act applies to taxable years beginning after December 31, 2007.
Increase of the Section 179 Expense
The first incentive for horse owners in the Act is an increase of the Internal Revenue Code Section 179 expensing allowance for horses purchased and placed into service in 2008 from $128,000 to $250,000.
How does Section 179 help horse owners? Typically, if horses or property for your horse business has a useful life of more than one year, the cost must be spread across several tax years as depreciation with a portion of the cost deducted each year.
But there is a way to immediately receive these income tax benefits in one year. The provisions of Section 179 allow horse businesses to fully expense tangible property in the year it is purchased.
The changes made in the Act mean that in 2008, a horse business can expense $250,000 in capital expenditures up to an overall investment limit of $800,000.
Eligible Property. The expensing allowance applies to horses, farm equipment and most other depreciable property such as trucks, trailers, and tractors purchased and placed into service in 2008 (but it would not include buildings such as barns or stables).
How it works. Assume a horse business purchases $750,000 of depreciable property (including horses, a pickup, and a new trailer) in 2008. That business can write off $250,000 on its 2008 tax return and depreciate the balance.…