U.S. Senate Also Passes Three-Year Depreciation

A key provision that extends three-year tax depreciation for all racehorses through 2020 passed the U.S. Senate Dec. 19 by a vote of 71-23 following the U.S. House of Representatives passing the same racehorse provision as part of a larger tax package days earlier, the National Thoroughbred Racing Association said.

"We appreciate the Senate's work to include this important provision," said NTRA president and CEO Alex Waldrop. "We especially applaud the efforts of (Majority) Leader (Mitch) McConnell, who does so much to support Kentucky's signature industry."

Uniform three-year racehorse depreciation was among numerous tax provisions across many industries that either expired at the beginning of 2018 or this year or were set to expire as of Jan. 1. The bill reinstates the 3-year schedule for all racehorses retroactive to 2018 and through 2020.

The provision allows taxpayers to depreciate, on a three-year schedule, racehorses 24 months of age and younger when purchased and placed into service, as opposed to a seven-year schedule.

Three-year racehorse depreciation was most recently available to the industry in 2017, but Congress did not renew it for 2018 as part of the Tax Cuts and Jobs Act passed in December 2017. The TCJA did include 100% bonus depreciation and a $1 million Sec. 179 expense allowance for qualified depreciable property, two important investment incentives that lessened the need for three-year depreciation in many cases. However, three-year depreciation continues to be a beneficial option for many racehorse owners, especially racing partnerships with multiple passive owners, as it better aligns deductions with corresponding income opportunities on an annual basis.

Maintaining the three-year recovery period for racehorse purchases has been a top legislative priority for the NTRA federal legislative team since the provision's initial enactment as part of the 2008 Farm Bill.