The American Horse Council recently detailed some of the
benefits to horse owners contained in the Economic Stimulus Bill, which Pres.
Barack Obama signed into law in mid-February.
As it turns out, there are quite a few new benefits and
others that have been extended. The Stimulus Act continues the bigger write-off
for horses—that write-off expired in 2008 but has been re-enacted.
Buy an Expensive Horse.
One provision, the expensing allowance, is an incentive that
allows an owner who purchases a horse or other business property and places it
in service in 2009 to expense up to $250,000 of the cost. This so-called
“Section 179” expensing allowance applies to horses, farm equipment and most
other depreciable property, according to the AHC’s press release.
To illustrate the expensing allowance, assume a horse
business purchases $750,000 of depreciable property in 2009, including $650,000
for horses. That business can write
off $250,000 on its 2009 tax return. The amount of the purchases not expensed
may also be eligible for bonus depreciation, as explained below.
Appreciate Depreciation.
The second incentive continues the 50% first-year bonus
depreciation for horses and most other depreciable property purchased and placed
in service during 2009. However, if you do buy a horse, it has to have not been
used at all, for anything, prior to the purchase. To illustrate expensing and
bonus depreciation, assume that in 2009 an owner pays $500,000 for a colt to be
used for racing and $50,000 for other depreciable property, bringing total
purchases to $550,000. The young
colt had never been raced or used for any other purpose before the
purchase. The horse business would
be able to expense $250,000 deduct another $150,000 of bonus depreciation (50%
of the $300,000 remaining balance), and take regular depreciation on the
$150,000 balance.
Go Ahead, Buy that Truck.
The bill asks states to deduct sales and excise taxes on new
vehicles. The deduction phases out for taxpayers with adjusted gross incomes of
$125,000 and $250,000 for taxpayers filing a joint return.
Stumble It!
