May 30, 2013 -- Congressman Andy Barr (R-KY) introduced the Race Horse Cost Recovery Act (H.R. 2212) on May 24, 2013. This bill would permanently place all race horses in the three-year category for depreciation purposes. A 2008 provision that temporarily puts race horses in the three-year category is set to expire at the end of 2013.
The 2008 Farm Bill included language that allowed all race horses to be depreciated over three years, regardless of their age when placed in service. Prior to then, race horses were depreciated over seven years if placed in service before they turned two. Horses placed in service after two (24 months and a day from foaling date) could be depreciated over three years. A horse is generally deemed to be placed in service when it begins training, which is usually at the end of its yearling year.
Depreciation is a means of recovering the cost of property, including horses, used in a business through deductions of portions of the horse's cost over a period of years. Generally, the recovery period approximates the estimated useful life of the property. The horse industry believes a three-year deprecation schedule more accurately reflects the actual time a horse will be raced than a seven-year deprecation period.
This change to the tax code will "sunset" at the end of 2013, unless extended by Congress. The Race Horse Cost Recovery Act would permanently make all race horses eligible for three-year depreciation.
The American Horse Council supports this bill.