Did Trump’s “One Big Beautiful Bill” Help Horse Racing? Yes, It Did! Here’s How.

Key Tax Benefits for Horse Racing

The One Big Beautiful Bill Act (OBBBA) of 2025, signed by President Trump, revitalized the horse racing industry by permanently reinstating 100% bonus depreciation for investments in racehorses. This allows owners to immediately deduct the full cost of purchasing horses and breeding stock in the first year, causing a record-breaking influx of capital into the market, such as a $531.5 million Keeneland September 2025 Yearling Sale.

• 100% Bonus Depreciation: Owners can write off 100% of the cost of a racehorse, breeding stock, qualifying property or equipment (like barns and tractors) in the year they are "placed in service". Previously, this rate had dropped to 40% in 2025 and was scheduled to hit 0% by 2027.
• Expansion of "New" Assets: The definition of eligible property was expanded to include used horses, such as broodmares or stallions purchased after they have already started racing, provided the buyer has not owned the horse previously.
• Loss Offsets: Owners can deduct horse-related losses against other types of income, including salaries and capital gains, which acts as a "partner" for investors in a high-risk industry.
• Permanent Three-Year Depreciation: Separate legislation, the Race Horse Cost Recovery Act of 2025, permanently established a three-year depreciation schedule for all racehorses regardless of age, providing an alternative for those who do not use immediate expensing.

Market Impact and Records

These incentives have driven record-breaking results at major thoroughbred auctions:

• Keeneland September Yearling Sale (2025): Grossed an all-time record of $531.5 million, with 56 horses selling for at least $1 million.
• Fasig-Tipton (2025): The November sale saw $245.9 million in transactions, the highest-grossing since 2007.
• Increased Asset Values: The tax breaks have turned racehorses into a "hot investment" for the ultra-wealthy, with top-tier colts selling for $3 million to $4 million even when they have minor physical flaws.

Important Limitations

To claim these benefits, owners must meet specific IRS requirements:

• Business vs. Hobby: Owners must prove the activity is a for-profit business rather than a hobby. The IRS generally presumes a business motive if the operation shows a profit in at least 2 out of 7 consecutive years. (Note: Please consult and verify this with your accountant who is familiar with the tax laws for an equine business such as Len Green.)
• Reporting Thresholds: Starting in 2026, the threshold for issuing a Form 1099 to vendors (like blacksmiths or contractors) increases from $600 to $2,000, reducing administrative burdens for smaller farms.
• Wagering Losses: While owners gained significant breaks, bettors saw a slight reduction, with wagering loss deductions now limited to 90% of losses compared to the previous 100%.

Did this tax act benefit you? We’d like to hear how. Email us at info@equineinfoexchange.com

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