In recent years, Congress has typically passed a tax extender bill to renew dozens of temporary or expiring tax provisions for individuals and businesses at the end of the year. One of these typically extend provisions was three-year depreciation of racehorses. However, Congress has adjourned for the year without taking any action on a tax extender bill, allowing three-year depreciation of racehorses and dozens of other tax provisions to expire.

From 2009 through 2016 all racehorses could be depreciated over three years, regardless of when they were placed in service. This provision was passed in 2008 as part of a Farm Bill. The change, which eliminated the seven-year depreciation period for racehorses and made all racehorses eligible for three-year depreciation, expires at the end of 2016. Beginning in 2017, the pre-2009 rules must be used, meaning owners will have to decide whether to place racehorses in service at the end of their yearling years and depreciate them over seven years, or wait until they are at least 2 years old (24 months and a day after foaling) and depreciate them over three years.

The American Horse Council (AHC) said Congress took no action on a tax extenders bill because they hope to enact major tax reform legislation in the next Congress that would eliminate the need for many of the expiring provisions. Failure to pass the tax extender bill was not due to opposition to the three-year depreciation of racehorses or any other specific tax provision, the AHC said.

The AHC will be closely monitoring the development of a tax reform bill and analyzing its potential impact on the horse industry.