Tax Law Change Would Recognize Horse Ownership as a Business

The Equine Tax Parity Act, which would make horses eligible for capital gains treatment after twelve months rather than the currently legislated 24 months, has been introduced by Congressman Andy Barr (R-KY). If passed into law, the act would give horses a similar status to other business assets.

The federal tax code allows gains from sales by individuals of property used in a trade or business. These sales, including those of horses, qualify for long-term capital gains and are taxed at 15% for taxpayers earning less than $450,000 or 20% for those earning more than this figure. Compare these rates to those for individuals, which can be as high as 39.6%, and it’s easy to see that the capital gains rate is desirable. However, the rate applies to horses held for breeding, racing, showing, or draft purposes only if they are held for 24 months. Other business assets, with the exception of cattle, must be held for only 12 months to qualify.

Passage of the proposed act would recognize the horse industry as a business and would give horse owners a financial break when selling their horses.