|NTRA Legislative Update: 2005 Tax Benefits
for Horse Owners
The President’s “American Jobs
Creation Act of 2004” signed into law in October provided incentives
for investment in racehorses.
Deduction Based on Sale Profits: Beginning in 2005,
breeders will benefit from a new deduction being phased-in completely
by 2010. Along with current deductions already in place, breeders can
now take deductions based on profits from sales of foals they produced.
The deduction will be 3 percent of profits in 2005 and 2006, increasing
to 6 percent for 2007, 2008 and 2009 and reach full implementation of
9 percent in 2010 and thereafter. The deduction cannot exceed 50 percent
of wages paid to employees or the taxpayer’s total taxable income.
At its 9 percent fully implemented rate, the deduction will equate to
a tax rate reduction of over 3 percent.
$100,000 Expensing Allowance Extended Until 2007: The
$100,000 expensing allowance has been extended and now applies to purchases
made January 1, 2003 through December 31, 2007. A purchaser can continue
to write off up to $100,000 of the cost of horses, provided total purchases
of all depreciable property during the year do not exceed $400,000.
Deductions for State and Local Taxes: The Foreign Sales
Corporation bill, also signed into law in October, contained legislation
that will allow citizens of states without income tax to deduct their
state sales tax from federal income taxes. This provision will lessen
the tax burden on residents of Florida, Nevada, South Dakota, Tennessee,
Texas, Washington and Wyoming.
NTRA is currently formulating new legislation for accelerated depreciation
of racehorses and seeking an appropriate legislative vehicle for this
For more information about the NTRA’s legislative programs, call
Joe Clabes at the NTRA, 800-792-NTRA or email Jclabes@NTRA.com.