horses and tax write offs

[rdln]

I found this in amongst news tidbits from a email news letter "SMARTDETROIT"

<font color="blue"> Anyone who purchased or leased a horse after Sept. 12, 2001, can now write off $100,000 in horse-related expenses each year. Under the law, horse owners can deduct food, stabling, transportation, insurance, veterinary care, and even local and state taxes for the animal.
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and then it had a breakdown of tax cuts put into effect since 2001.

Now is this a horribly generalized statement that is trying to spin this into a "tax cuts for the rich" issue, where in reality the horse owner needs to participating in a "for profit" horse outfit?

Or is it that black and white were I can literally buy a $2000 horse and deduct $100,000 a year for it's care?

Please clarify, because I am getting some crazy ideas.....

 

[Bob_Skurka]

I am NOT an accountant, nor am I a tax lawyer, but I have both who work for me and I have sat in meetings with them enough to know that you don't have the whole story.

First, I know of NO WAY to write off more than you spend. So if you have spent $2000 the most you'd be able to write off is that amount (unless there is some special equine law).

Second, I think it is highly unlikely that you could write off any of it if the horse was a personal use/pet horse.

There is a law to encourage small businesses (I thougth it might have sunsetted but it may be continuing) that allows a write off of some types of expendatures of up to $100,000 in a year if they meet some criteria. Perhaps there is a care of horses clause in the wording. But even so, that is a law that was passed to help small businesses and to encourage them to purchase goods and not make them amoratize it over long periods of time.

Again, I may be totally wrong on all this stuff as it relates to horses, but I suspect that there is a clause or two missing from the message you posted. I strongly suspect the horse owners must own them as part of a profit making enterprise, not as pets. But all that is just a guess. The last time I checked, the IRS was not in the business of creating loopholes.

 

[cowboydoc]

Bob is right. 1st and foremost you HAVE TO HAVE A LEGITIMATE business. This has been talked about quite alot here. A horse business is no different than any other LEGITIMATE business. All the same rules apply. You certainly wouldn't go to all the hassle to start say a new furniture store to LOSE money. You go into it to be profitable and make a good income. Because so many people like horse they want to take them off on their taxes. This is where the issue of taxation comes in.

As far as the $100,000 rule that's just spun off on the horses for propaganda. It applies to any business buying any legitimate purchase. It isn't just for horses. But if you happen to run a LEGITIMATE horse business and go out and buy a new $100,000 race horse, cutting horse, stud, mare, etc. then you can take that horse off as a deduction. But you certainly can't spend $2k and take off $100k. You are always limited to your actual expenses.

 

[MarkLeininger]

My wife is a psychologist and works out of a home office, mostly with kids. We looked into this because she uses her dog, our horse and the chickens in some way for almost all the kids she sees. The accountant said that the fraction of time she uses the animals for business is so small compared to the time they are available for our own personal use, that it would make even prorating the expenses difficult to defend. So he discouraged taking any deduction at all. She has a friend who works at a clinic that uses a special kind of therapy for disabled kids called hippotherapy (spelling?), which involves having the kids ride the horses. They deduct all their expenses because the horses are kept at a stable on business property and are used exclusively for this business.