November 09, 2022 4 min read
There’s no way around it—owning a horse is expensive. Not only do you have to pay for their food and shelter, you need to spend on costly vet visits, quality tack, grooming supplies, and a whole lot more. The cost of owning a horse is pretty steep, but it’s a price we’re willing to pay because people riding horses know just what a privilege it is to keep one.
It’s no wonder, then, that many owners are curious about whether or not they can get tax write-offs on their horse-related expenses. The short answer is “Yes”—there’s actually a surprising number of tax deductions you can get for your horse! The catch is that you’ll need to register your steed as a business asset in order to qualify for these deductions.
In this article, you’ll learn the basics for the following topics:
Before you read on, here’s a serious piece of advice: consult an equine tax expert before attempting to get any sort of deduction on your horse. Not only is this article meant to just be a starting point before you book that consultation, but horse tax laws can also differ from state to state. It’s always safer to defer to someone whose job it is to understand horse taxes. After all, the IRS takes these sorts of things very seriously, and you don’t want to accidentally commit a federal offense.
Without further ado, here are helpful tax tips for horse owners:
As of 2018, the only way you can get tax deductions for your horse expenses is if they count as business expenses. This means that you have to be able to prove to the IRS that you’re keeping your horse for business rather than just a hobby. Luckily, there’s some flexibility in the guidelines for qualifying your horse as a business asset.
In order to qualify as a business, you need to fulfill the following conditions:
Your operations are run in a business-like manner, which involves keeping all your horse-related expenses recorded in accounting books.
You need to be able to demonstrate knowledge of horses within your chosen field of business.
You have to show measurable profits in at least two out of seven years of operation.
You need to demonstrate a significant time investment in business-related activities.
Since these conditions are fairly broad, there are a number of horse-related businesses you can start in order to qualify for tax deductions. Here are some of the more common ones:
If you’ve got a lot of experience with raising horses, becoming a horse breeder might be a good option. You’ll need to invest in the proper equipment, a skilled team, and if you can afford it, a stud or two of good stock. With a few success stories, you’ll be earning a pretty good amount for your horses, and quite the amount of deductible business expenses.
Becoming a horse breeder might not be a bad idea if you love ponies.
Many horse owners don’t actually have their own stables, and rent spaces at nearby ones instead. If your property is large enough to care for multiple horses, this is definitely something you can look into. Just make sure that you’re equipped for the responsibility of caring for other people’s horses.
Sharing your wisdom as a rider is one of the most fulfilling ways you can earn from your horses. You get to instill a love of horses in so many young hearts, while letting your horses socialize with all sorts of people. This is a great option if you’re a people person and can bring out the friendliness in your horses.
Some stables earn money by employing skilled equestrians as trainers for budding athletes, but this isn’t the only type of horse training a business can offer. You could specialize in training horses for work in film and television. Another thing you can do is to train horses as therapy or service animals.
If you join a lot of competitions, there’s a chance you’d be able to register yourself as a professional rider. The main challenge in qualifying for tax deductions is providing the paperwork that proves you’re making a profit from this venture—which means you’ll have to win enough competitions to offset your expenses.
While this isn’t a business per se, you can register yourself as a charitable organization and dedicate a portion of your space to horse rescues. Depending on which state you’re based in, there are several tax benefits your charity can qualify for.
Because your horses are a business asset, nearly everything you need to keep them safe and healthy can be counted as a business expense, which makes them qualified for tax deductions. These include:
Construction materials for barns, stables, and tracks
Food and treats for training
Horse grooming products
Horse veterinarian and farrier fees
Horse injury recovery costs
Breeding expenses, if applicable
Any protective gear your horse uses can also be written off as a business expense, as well as any equipment you need to wear in order to go about your work. If the safety of your horse wasn’t reason enough to invest in high quality tack, the tax deductions might give you that extra nudge.
Always stay on top of your expenses. You want to be able to give your horses the best care.
Horse care isn’t the only aspect of your business that can qualify for tax deductions; depending on the nature of your work, a whole slew of other items can also be deductible. What matters to the IRS is that these are considered essential for the operation and growth of your business.
If, for example, you decide to buy and sell horses, any costs that go into the transport of these horses may be written off as deductions. The same goes for any marketing expenses that pop up whenever you need to advertise your business.
Here are some other essential business expenses that might be eligible for tax deductions:
Taking care of a single horse is already quite the team effort, so running a full-fledged horse business means you’ll need to hire a full-time staff. Their payroll and insurance are covered by deductions, as well as any payments you need to make to contractual workers.
You’ll be happy to know that their benefits are also tax deductible, which gives you more incentive to keep your team happy. Depending on the type of work they do for your business, any training sessions and seminars they attend may also be deductible. Investing in your employees’ skills is always a worthwhile investment, especially since their success also means that your horses have the best possible family caring for them.
Anything you spend on to keep your business running may be eligible for tax deductions, too. This includes any office equipment, internet and other essential utilities, and accounting services you might be using.
One of the biggest benefits in starting a horse business is that your property taxes can now be deductible. Since you’ll need a sizable area to run your business in the first place, this can lead to a huge amount of tax relief. Any costs for the maintenance of the property, including repairs and upgrades, may be eligible for deductions, as well.
If your business requires you to travel for meetings, seminars, or conventions, you can declare most of your travel costs as business expenses, too. This includes any plane tickets, hotel bookings, car rentals, and travel insurance you spend on. It just needs to be clear that whatever you declare for deductions was in fact used for work; you can’t write off a family vacation to Bali as a business expense.
Finally, any business licensing fees you might need to pay can also be deductible, since these are also necessary expenses in operating your horse business.
One of the more interesting tidbits about horse taxes is that horses themselves may be eligible for deductions—more on that later.
Any interest gained on property or equipment loans can also be eligible for deductions, so don’t be afraid to expand your business and make some upgrades when it’s feasible to do so. Just make sure you aren’t rushing things; running any sort of horse-related business is an extraordinary amount of work, and you don’t want your horses to suffer from any management mistakes you might make.
Again, it’s always best to consult an equine tax expert about this. Your state might not recognize some of these business expenses as deductible, but they might consider others that haven’t been mentioned here. What’s important is that you keep a detailed record of all your horse- and business-related expenses, saving every receipt you can get. These will give your equine tax consultant a better picture of what you’re working with, and what you can do to secure tax deductions.
In 2008, the Equine Equity Act was passed, and one of the provisions that were passed into law was the recognition of race horses as depreciable assets. This essentially meant that horses could either be inventory, meaning they are bought and sold; or they could be depreciable assets, meaning they are used for generating profit, and lose value over time.
Since race horses’ athleticism wanes with age, it only makes sense that they could be viewed as depreciable. A horse in retirement age, after all, isn’t as financially valuable as one in their prime. And because this value decreases over time, you can actually get a tax deduction for the depreciation. For race horses, this involves a 3-year recovery period, meaning if you want to get deductions for horse depreciation, IRS guidelines allow them for the horse’s first three years of service.
This particular equine tax law originally had a fixed end date, covering only race horses that were put into service after December 31, 2008 and before January 1, 2017. It was later extended to cover horses who entered service before January 1, 2022.
In late 2021, the Equine Tax Fairness Act was introduced in Congress, and one of the provisions in its text was to make the 3-year recovery period for race horses permanent. As of this writing, there have been no actions taken yet beyond its introduction, which means that race horses who started service in 2022 might not be eligible for depreciation deductions.
If you’re considering starting a business that involves race horses, this is definitely something you should take into consideration, especially since it involves tax deductions. You may want to consult an equine tax specialist to know what your options are.
Are you in it for the tax write-offs or because you want to help invest in the wellbeing of these majestic creatures?
Now that you know the basic tax tips for horse owners, you can start making plans for getting some tax relief. Of course, your horse’s happiness should always take priority over everything else, so base your decisions on what you think is best for them. Are you going to be starting a business because you’re passionate about giving horses and horse-lovers the best experience possible, or are you doing it solely for the tax write-offs?
If you answered the latter, you might want to reconsider. Horses are thinking, feeling creatures, and they deserve to be treated as more than just property. They’re our partners and our co-workers, and definitely way more than just a tax shelter.
If you feel that the best way to express your love of horses is by building a business that involves them, then you’ll be glad to know that virtually every investment you make towards their wellbeing can be tax-deductible. It makes it a lot easier to give your horse the very best—and if you want to start with their equipment and accessories, feel free to check out our collection of saddle pads, boots, and bit accessories.
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