The Horse Tax Deduction

The Horse Tax Deduction

1040 Tax Form

Sigh, it’s April 15th as I write this, a day I don’t look forward to every year. For some, however, it’s not as financially painful as it once was thanks to the ability to deduct certain expenses associated with horse ownership. Now as simple and nice as that sounds, deducting horse expenses is not something most horse owners will be able to do. In fact, there is no “horse tax deduction” unless you can prove ownership and maintenance of your horse is a business pursuit. An internet search revealed the following general rules:

  • You must maintain a separate checking account for business expenses. The IRS will look carefully at whether or not you’re running your “business” in a business-like manner. Save receipts, create profit and loss statements, write everything down.
  • You cannot operate at a loss indefinitely. The IRS will likely want to take a look at the profit/loss trend over time to make sure you’re trying to make a profit. Otherwise, it looks like you’re trying to write-off your hobby.
  • How pleasurable is your horse business? One article I found (linked below) noted two tax court cases where deductions were disallowed because owners referred to their horses with affection. This doesn’t seem fair, I know, but it sets some precedent.

I’m sure there are more “rules” out there but those should be enough to make us all wonder whether or not we really want to try and consider our horse expenses as business expenses. However, if your horse ownership venture really is for profit, best of luck to you saving on taxes! Legitimate horse businesses (according to the IRS) seem to be: breeding operations, equine camps and workshops, boarding, riding lessons with a horse that’s not your personal pleasure horse and horse racing. Apparently, if you give occasional lessons to the neighbor kids on your own personal pleasure horse, it’s not advisable to deduct your horse expenses from your personal income tax.

But remember, I’m far from a tax pro so don’t necessarily make any life decisions based on what I write. 🙂

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