Whether you’re a seasoned equine business owner or you’re just beginning your journey with horse ownership, it’s no secret that the expenses required to run a successful operation can add up fast.
Now, thanks to newly revamped equine tax law, you don’t have to suffer through another tax season with minimal write-offs and even more minimal returns.
With just a few simple strategies, you can reap the tax benefits of horse ownership and avoid a stress-inducing IRS audit proactively. Of course, we are not tax experts so please consult your CPA or legal advisor before taking further action as this information may not be the most up-to-date.
Today, we’re tackling all of our top tax tips for horse owners in the modern age, so that you can take back the reins of business once and for all.
How Does Equine Tax Law Work?
For many years, equine business ventures were held to intense scrutiny by legislators, often being restricted in their ability to effectively deduct appropriate business expenses based on a 24-month capital gains period per horse.
Thankfully, newly amended equine tax laws like the Equine Tax Parity Act have allowed horse owners to take advantage of these benefits after a reduced 12-month capital gain period, making it easier than ever for new business owners to grow their operations.
Of course, this can only be applied if the IRS concludes that your operation is acting as a business, not a hobby.
Horse Hobby Vs. Horse Business
So, how does the IRS make this determination?
It all comes down to your intent to earn.
Horse hobbies can be defined as…
- Operations where personal and professional accounting are one and the same
- Individuals with limited market knowledge of horse sales and bloodlines
- Minimal time devoted to growth strategies and daily operations
- Ongoing profit loss, despite continuing to deduct expenses as tax write-offs
Whereas horse businesses are described as…
- Operations that are treated in a business-like manner, including separate accounting books for all expenses
- Run by individuals with demonstrable knowledge in the sale of horses in a competitive marketplace
- Substantial time committed to both ongoing operations and long-term growth of the venture
- Measurable profit gain across an extended period of time
In other words, the more thorough your daily operations are, the more likely the IRS is to classify your project as a tax-deductible business venture.
What Horse Owner Expenses can be Deducted?
The easiest way to ensure that your equine activities don’t fall into the hobbyist category is to keep a careful list of all taxable expenses, allowing you to access the tax benefits of horse ownership risk-free.
With that being said, there are 5 main deduction categories you can track throughout the year to make sure every base is covered…
These expenses are what sets an average horse hobby apart from effectively running an equine business, even if you haven’t earned measurable profits just yet.
Administrative tax deductions include…
- Accounting and bookkeeping services or software
- Business licensing fees
- Insurance and other liability dues
- Computers, printers, and other office hardware
- Property taxes
- Internet, telephone, and other must-have utilities
If you use it to streamline your daily operations, you can bet that it qualifies as a tax-deductible business expense.
Employee and Staffing Expenses
It takes a village to run a successful equine business, and you deserve to benefit from providing employment opportunities.
Employe tax deductions include…
- Contacted labor payments
- Employee benefit and compensation programs
- Payroll taxes
- Liability and workers compensation insurance
The more people you put to work, the more deductions you can tack on for your business.
Advertising and Marketing Expenses
No business can succeed without reaching its ideal customer base, and the money you spend towards marketing your horse offerings can greatly benefit you come tax season.
Marketing tax deductions include…
- Paper materials for brochures, business cards, and posters
- Branded merchandise like pens, mugs, and t-shirts
- Advertising campaign expenses
- Contracted marketing specialist fees
With these expenses, you can spread the word about your growing operation and increase your tax deductions, all at the same time.
Horse Care Expenses
Your horses are the heart and soul of your business. That’s why it’s essential to track every last care expense that helps keep your animals healthy, thriving, and adding value to your operation.
Horse care tax deductions include…
- Barn and stable supplies
- Horse feed
- Trailers and horse transportation expenses
- Veterinary care
- Riding gear including saddles, boots, helmets, and breeches
- Organization fees for industry trade groups
- Breeding and broodmare expenses
When you put extra care into nurturing your prize-worthy horses, you gain a lasting advantage in every aspect of your business.
Of course, not every business expense will fit neatly into these categories. We recommend keeping an itemized list of all miscellaneous purchases that impact your business, so you can maximize your tax benefits.
Miscellaneous tax deductions include…
- Travel and transportation expenses
- Property repair and maintenance costs
- Ongoing education including courses, seminars, and workshops
- Interest gained on property or equipment loans
- Depreciation of business gear or vehicles
By keeping a thorough record of every last expense, you can increase your deductions and reduce the risk of an IRS audit.
How can I Get the Most out of my Expenses?
Even if you’re taking full advantage of the tax benefits of owning a horse, you can still reduce your overall operating costs and continue to maintain a high-quality horse business for years to come.
We offer a wide selection of ultra-durable, industry-leading, and competitively priced materials for footing, bases, and additives, all designed to give you professional-grade support that actually fits within your budget.
If you’re ready to upgrade your equine business, our team is here to help.
Contact our Footing Specialists today by calling (877)-835-0878 today.
*The information provided on this website does not, and is not intended to, constitute legal or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please read our disclaimer for more information.