Having a horse earns you money Income Tax Time?
 
 

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Having a horse earns you money Income Tax Time?

This is a discussion on Having a horse earns you money Income Tax Time? within the Horse Talk forums, part of the Keeping and Caring for Horses category
  • What can i claim on income tax when having a horse business
  • Where do you enter horse racing income and expenses on your tax return

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    11-04-2011, 08:23 AM
  #1
Weanling
Having a horse earns you money Income Tax Time?

At the barbershop yesterday, A guy was saying that he knew a guy who was big time into horses, had a lot of them and said he heard that having any horses or animals like horses, cows, for example means more money you can get back on your income taxes. Is that true and how so?
     
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    11-04-2011, 09:01 AM
  #2
Trained
I am very much NOT a tax expert but I imagine if horses are your legal business...then you can write off any loss in your business on your taxes. But having horses for simply personal use? I don't think so. But will be interested in hearing from those who know more about this.
     
    11-04-2011, 09:02 AM
  #3
Foal
I would have to check the laws but if you lease a horse I think it can be written off.
     
    11-04-2011, 09:56 AM
  #4
Green Broke
I wouldnt let a tax guy cut my hair, nor would I take tax advice from a barber. Business expenses can be deducted generally. But you have to have a legitimate attempt to make a profit. Hobby farm expenses can be deducted from hobby farm income only not your other income.
Lets say you have a horse for recreation that you occasionally enter in a local show or rodeo. One day the stars align and you win a $1000 saddle. Well that is income you have to report, so you add up $1000 dollars worth of expenses you incured like feed, vet , farrier, trailer depreciation, tack, gas to the event. Pretty much anything horse related as long as the number is over 1000 you have a zero net income from the hobby and owe no taxes. What you can't do is say you had $2000 in expenses and take an additional $1000 off your other income.

Now the disclaimer, I did taxes for several years and had quite a bit of training but the last time was in 2000 so things do change but I think in this case they havent. During that time I frequently had , "well so an so said this so and so said that" with clients. Of course So and so had zero training and knowledge about tax code.
gigem88 likes this.
     
    11-04-2011, 05:39 PM
  #5
Showing
You can only claim horses and horse expenses as deductions on your tax return if you are using the animals as your source of income. Because I train horses and that is where my income comes from, I can claim my hay, tack, and many other things as deductions. Someone with a horse in their backyard that they use for a hobby cannot.
     
    11-04-2011, 06:40 PM
  #6
Trained
I also have a business that requires the use of a horse (several in fact) and I deduct everything I spend on them all year long. I even dedusted the cost of my dog and all her vet bills because she is also used in my work.
     
    11-04-2011, 06:40 PM
  #7
Weanling
Thanks to all who replied
     
    11-04-2011, 06:49 PM
  #8
Trained
Hobby Farms are no longer deductible in any way, the IRS closed those loopholes a while ago. Now in order to have deductions you have to be in business, for real trying to make a go of it, and keep really detailed records or you will get nailed hard.

I run my horse business just like a dentist or any other professional would run their business. I track all of my expenses and my income and keep my records in order so that at tax time I have everything ready and itemized for filing. In the case I ever am audited I can produce a well kept set of books for the IRS. I have a tax ID number, have filed an LLC and do everything possible to keep my business separate from my personal stuff. In OK, you can have a farm tax exemption number for your farm expenses which means I don't pay sales tax on anything legitimately farm related. I am however, taxed PER head on every animal on the farm and that is payable to the state every year. So far, I have saved more than I have to pay, but it's given with one hand and taken with the other.

Thank God I have an excellent tax accountant who keeps me on the right side of the law, she tells me what is and what is not allowed and we file and keep out records exactly as she says.

So, your answer is yes, you can save some tax money if animals are your business and no, you can't just own them and start taking deductions. My life would be a lot simpler tax wise if I'd close down the business and just enjoy my critters. But then I'd have to go out and be employed by someone else because I'd still need an income to feed them all but I wouldn't have the joy of being my own boss.
     
    11-04-2011, 09:12 PM
  #9
Green Broke
Quote:
Originally Posted by Dreamcatcher Arabians    
Hobby Farms are no longer deductible in any way, the IRS closed those loopholes a while ago. Now in order to have deductions you have to be in business, for real trying to make a go of it, and keep really detailed records or you will get nailed hard.

.
This is completely WRONG, I just looked up the current tax code, The way I described it is 100% correct. Your hobby expenses can be deducted but only so much as you have hobby income.
Cut an paste from tax code,
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses. If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). T

So you can't use hobby deductions to offset OTHER income, but you do use it to offset hobby income.

Like I said you can deduct the horse expense, but only and a big only if you have horse income and then only up to the amount of that income. If you spent 2000 on horses but only earned 1000 you only have a 1000 deduction,
I used to tournament bass fish, I kept track of all my expenses, I couldnt deduct any of them unless I won a tournament. SOme of those had a 10,000 pay out so I wouldt want my winnings eaten up in taxes. But if I didnt win I had zero deductions. Make since ?

The next two posters that run horse business are different. They are a business trying to make a living on horses, as such those expenses are business deductions. A completely different setup than personal deductions.
     
    11-04-2011, 09:21 PM
  #10
Showing
Quote:
Originally Posted by kevinshorses    
I also have a business that requires the use of a horse (several in fact) and I deduct everything I spend on them all year long. I even dedusted the cost of my dog and all her vet bills because she is also used in my work.
Me too. I had a friend along the other day when I went to the local farm store, she has a horse for pleasure and read me the riot act that I didn't have to pay sales tax on my farm stuff. I told her I'd trade her bills and then she could complain. I had 3 pull carts of stuff, she had 2 bags of shavings and a salt block. End of discussion
     

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