Spending bill includes renewal of racehorse depreciation schedule

The U.S. Senate passed an omnibus spending bill on Thursday that includes the renewal of a three-year depreciation period for racehorses through the end of 2020.

The spending bill had been passed by the House earlier in the week. The Senate was under pressure to pass the bill by Friday in order to avert a government shutdown.

The three-year depreciation period was most recently in place through the end of the 2017 tax year, but it was dropped as part of the tax bill pushed by conservatives in 2018. However, that tax bill also included a “bonus” depreciation of 100 percent and several other breaks for the expensing of qualified depreciable property.

Alex Waldrop, the president of the National Thoroughbred Racing Association, which pushed for the renewal of the three-year depreciation schedule, said that the reinstatement of the break “helps attract and retain investment in the horse racing industry.”

A release from the organization noted that provisions of the 2018 tax bill more than offset the loss of the accelerated depreciation schedule, but it also said that 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.”

Most capital assets are depreciated on a seven-year schedule, but the federal legislature has routinely carved exemptions to the rule into the tax code. The provision passed this week is retroactive to 2018, affecting all racehorses purchased when 24 months or younger and subsequently “placed into service.”