Two major investment incentives for small businesses, including those in the Thoroughbred industry, are set to expire at the end of the year. The incentives permit write-offs of certain property with a depreciable life of 20 years or less.

  • Bonus depreciation is set at 100 percent through 12/31/2011. This incentive allows taxpayers to write off the entire cost of qualified new property that is purchased and placed in service before 1/1/2012. Property is considered new if its original use begins with the taxpayer. Examples of such property include yearlings and new farm equipment, fences and barns.
  • The expense allowance permits write-offs up to $500,000 for qualified new or used property.  Similar to the requirement for bonus depreciation, the property must be purchased and placed in service before 1/1/2012. An example of used property is a broodmare.

Although there are no investment limits with bonus depreciation, the $500,000 expense allowance is reduced by one dollar for every dollar spent over $2 million on qualified property.

Consult your tax advisor today to plan your investment strategy. Click here for more information.