Racehorse Depreciation Extension Passed By Congress

[Wandering Eyes]

A key provision that extends three-year tax depreciation for all racehorses through 2020 passed the Senate by a vote of 71-23 earlier today. The racehorse provision was passed by the House of Representatives Tuesday by a vote of 297-120 as part of a larger tax package.

“We appreciate the Senate’s work to include this important provision,” said NTRA President and Chief Executive Officer Alex Waldrop. “We especially applaud the efforts of Leader McConnell, who does so much to support Kentucky’s signature industry.”

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 three-year schedule for all racehorses retroactive to 2018 and through 2020.

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.

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 (TCJA) 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.

 

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