2012 Tax Incentives

Tax Incentives for Horse Industry in 2012

2012 Investment Incentive Summary (PDF)

Expense Allowance and Bonus Depreciation Update


Section 179 Expense Allowance

  • The expense allowance for horses, farm equipment and most other depreciable property is $125,000 for 2012
  • Property must be purchased and placed in service before 1/1/2013
  • The expense allowance is reduced by one dollar for each dollar of eligible property purchased during the year that exceeds $500,000
  • Applies to new or used property
  • Can be used to reduce taxable income from any business of taxpayer

Bonus Depreciation

  • 50 percent bonus depreciation for 2012
  • Applies to horses, farm equipment and most other depreciable property
  • Property must be purchased and placed in service before 1/1/2013
  • Full 50 percent bonus depreciation allowed regardless of when during the above timeframe eligible property is purchased and placed into service
  • Property must be new – the original use of horse or other property must commence with taxpayer and any prior use makes the property ineligible
  • Can be used in conjunction with expense allowance

Faster Depreciation For All Young Racehorses

Click here to download more. (PDF)


The Farm Bill
 includes an important depreciation provision that benefits the equine industry:


Accelerated Depreciation

  • Change to a three-year depreciation schedule for all young racehorses
  • Yearling purchases are eligible for 3-year depreciation
  • After second tax year, 62.5% can now be depreciated compared to only 29.85% under previous, seven-year schedule
  • Effective January 1, 2009 through 2013


Comparing Schedules – $100,000 yearling example

Current 3-Year Schedule for Racehorses 24 months and under* 3-Year (4 tax years) Previous 7-Year Schedule for Racehorses 24 months and under* 7-Year (8 tax years)
Year Depreciation Year Depreciation
 1.  $25,000 (25.0%)  1. $10,720 (10.72%)
 2. $37,500 (37.5%)  2. $19,130 (19.13%)
 3. $25,000 (25.0%)  3. $15,030 (15.03%)
 4. $12,500 (12.5%)  4. $12,250 (12.25%)
$100,000 Total  5. $12,250 (12.25%)
 6. $12,250 (12.25%)
 7. $12,250 (12.25%)
 8. $6,120 (6.12%)
 $100,000 Total

 

*These schedules assume the half-year convention applies, meaning all horses placed in service during the year are deemed to be placed in service on July 1. (If more than 40% of the cost of depreciable property placed in service during the year is placed in service in the last quarter of the year, a different rule applies.) The schedule uses 150% declining balance depreciation (200% may be available for some owners).

2016-12-14T16:10:24+00:00 September 7th, 2012|Categories: Legislative Tax Center|
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