Can You Write Off Your Horse?

I often see questions about the potential tax deductions related to horses. Some people have expressed their old tax preparer never let them write off their horse regardless of how the horse was used on their ranch. And that is not accurate per the Internal Revenue Code. Horses can in some cases be used as a tax deduction.

First and foremost the horse has to be used in the business you are trying to write them off in. If the horse is a personal horse and/or a pet and does not provide any benefit to the business they cannot be claimed by the business as an asset.

If the horse is used in the business exclusively the horse can be considered an asset of the business. There's even specific depreciation categories for horses depending on their age. When used exclusively in a business the full purchase price of the horse is considered the asset's basis. Like other assets in the business horses are subject to the deminimis exclusion. This allows the cost of the asset to be immediately expensed if it meets the deminimis limits. If it does not meet the limits the horse is capitalized like other assets and then depreciated based on IRS guidelines.

So what happens if the horse is used partitially in the business and partially for personal purposes? In this case the horse is treated like other assets that are used only partially for business purposes. The percentage of business use is used to calculate the appropriate percentage of expenses and depreciation that can be claimed. The way the horse can be depreciated on the business books would depend on how the business is taxed and who legally owns the horse.

So in summary, if you are using a horse in your business the cost of your horse may be deductible and the expenses to keep the horse may also be deductible. Examples of business use of a horse include working cattle, use when giving lessons, as a broodmare, etc.