Buyers of Thoroughbred racehorses in 2014 got an early Christmas present when H.R. 5771, the Tax Increase Prevention Act of 2014, became law earlier this month. Retroactive through this past year, a provision of the law renews the three-year tax depreciation for racehorses, which allows taxpayers to depreciate racehorses 24 months of age and younger when purchased and placed into service on a three-year schedule as opposed to a seven-year schedule (full explanation of how the law applies to racehorses.)
The National Thoroughbred Racing Association has made maintaining the provision a “top legislative priority,” according to a release announcing the extension. The NTRA is a coalition of a variety of Thoroughbred racing industry stakeholders, including racetracks, breeders, owners, trainers, and horseplayers; its endeavors include HORSE PAC, a federal political action committee.
In addition to the three-year depreciation provision, H.R. 5771 continues “bonus depreciation” at 50 percent, which permits taxpayers to depreciate in the first year 50 percent of qualified property (in this case, Thoroughbred racehorses) purchased and placed into service.
The expense allowance remains at $500,000, “with a $2 million threshold for qualified new or used property purchased and placed in service by small business owners.” This allowance may apply to purchases of broodmares, which quality as “used property” (as distasteful as that characterization may be) due to their previous careers as racehorses or broodmares.
Such tax allowances are welcome news at the end of a year that saw fireworks at many of the high-end Thoroughbred auctions this year:
–At the Fasig-Tipton Saratoga yearling sale in August, early speculation abounded about hip 69, a filly that had been purchased in November 2013 as a weanling for $550,000. Less than a year later, could she bring a price to make that early investment worthwhile? The answer was a resounding “yes”: the yearling filly brought the sale’s third-highest price at an even $1 million. Continue reading at Forbes.com…
Featured image courtesy of Keenland