President Obama signed into law H.R. 5771, The Tax Increase Prevention Act of 2014, in December and those in the horse racing industry stand to benefit from this legislation that extends retroactively through the end of 2014 several provisions which expired or were reduced at the end of 2013:
- Three-year Depreciation for all racehorses – this compares to the previous seven-year schedule for racehorses 24 months and under that was in place prior to its initial enactment as part of the 2009 Farm Bill.
- 50 percent Bonus Depreciation – for new property that is purchased and placed in service during 2014. For property to qualify as new, its original use must commence with the taxpayer. Examples of new property may include yearlings and farm equipment.
- $500,000 Expense Allowance – for new or used property that is purchased and placed in service during 2014. Examples of used property may include broodmares or racing and stallion prospects. The expense allowance is reduced by one dollar for each dollar of eligible property purchased that exceeds $2 million.
Taxpayers may combine these incentives in some cases. Please consult your tax advisor to determine how you may benefit.