On a previous post, we talked about deprecation for horses that fit the 3-year property criteria for depreciation when they are used in a trade or business.
To review, racehorses over two years old when placed in service qualify as three-year property for depreciation. Also, sport horses, breeding horses, work horses, or any other horse over twelve years old when placed in service qualify as three-year property.
What if your horse does not qualify under the requirements mentioned above? Racehorses under two years old when placed in service, as well as sport horses, breeding horses, work horses, or any other horse under twelve years old when placed in service, qualify as 7-year property for depreciation.
It is important to know that if your horse is held for sale and the ownership period is expected to be one year or less, depreciation should not be claimed.
To help you with this classification, we designed the decision tree shown in the image below:
Click here for more details about horse depreciation. Do you need the help of a CPA for your equestrian business? Contact us!
This post may not contain a complete analysis of the tax issues discussed herein and does not represent official conclusions or advice regarding the matter.