12/16/2015 11:42AM

Three-year depreciation rule to remain in effect


Horse owners may continue to use a three-year depreciation schedule for racehorses under a provision that has been included in a federal tax and budget bill negotiated between Republicans and Democrats, according to the National Thoroughbred Racing Association, which conducts federal lobbying efforts on behalf of racing.

The accelerated three-year depreciation schedule has been a longstanding feature of tax law, but it requires congressional approval nearly every year. The omnibus tax and budget bill, which was negotiated in the House, is likely to be passed by the end of the year.

The provision allows horse owners to use the three-year depreciation schedule for any horse 24 months or older once it is placed in service, rather than the standard seven-year depreciation schedule for assets. The NTRA and its lobbying predecessors have argued that the accelerated depreciation schedule best reflects the typical length of a racehorse’s career, although the provision is often cited by critics as a tax break for horse owners.

The bill also includes a provision allowing horse owners to use a 50 percent “bonus depreciation” on most racehorse purchases. The 50 percent bonus depreciation will retroactively apply to purchases in 2015 and also apply to assets put into service in the tax years of 2016 and 2017. However, under the bill, the bonus depreciation allowance will be reduced to 40 percent in 2018 and to 30 percent in 2019, the NTRA said.