How Are Horses Depreciated?
Updated: Jul 22
Before starting, we recommend having a general idea of what is depreciation.
Are you already familiar with the concept of depreciation?
Then, let's get a little more specific and talk about how horses get depreciated.
Tax-wise, the IRS classifies a horse's depreciation as 3-year property if the horse fits one of these criteria:
1) Racehorses over two years old when placed in service. (Exception: Any race horse placed in service after December 31, 2008, and before January 1, 2022, is treated as 3-year property regardless of the age of the race horse.)
2) Any other horse over twelve years old when placed in service.
Keep in mind that the IRS does not automatically age all horses on January 1 the way many breed organizations do so it is important to document the horse's date of birth, if known, to place the asset under the correct property classification.
Also, horses are eligible property for an accelerated expense under the Internal Revenue Code Section 179. Don't be confused by the tax code section - just know that it may be possible for you to claim the entire purchase price in the year of acquisition instead of depreciation.
To read more details about how to depreciate horses, visit the IRS Publication on how to depreciate property.
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.