Section 179 of the Internal Revenue Service (IRS) code is a tax deduction that allows businesses to write off the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. Section 179 deductions are designed to encourage businesses to invest in themselves by allowing them to write off the full purchase price of certain business equipment and/or software.
What Equipment and/or Software Qualifies for Section 179?
In general, most types of tangible personal property used in a business are eligible for the Section 179 Deduction, including:
- Office furniture and equipment
- Machinery and equipment
- Computers and software
- Vehicles
What is the Maximum Deduction for Section 179?
The maximum deduction for Section 179 is currently set at $1,020,000 for the 2020 tax year. This deduction is subject to a phase-out rule, which means that if a business purchases more than $2,550,000 in qualifying equipment and/or software in the same tax year, the deduction begins to be reduced.
Can I Section 179 a Horse?
The short answer is no. Horses do not qualify for the Section 179 Deduction because they are considered livestock, not business equipment. The IRS specifically excludes livestock, such as horses, from the Section 179 Deduction.
What Other Tax Benefits are Available for Horses?
Although horses do not qualify for Section 179 Deductions, there are still other tax benefits available for those who own horses for business purposes. These tax benefits include:
- Depreciation deductions – Owners can depreciate the cost of horses used in their business over several years.
- Grazing expenses – Grazing expenses, such as hay and feed, are deductible.
- Veterinary expenses – Veterinary expenses related to a horse’s health and care are deductible.
- Transportation expenses – Horse-related transportation expenses, such as transportation to shows and competitions, are deductible.
Are There Any Limitations on the Tax Benefits Available for Horses?
Yes, there are some limitations on the amount of tax benefits available for horse owners. For example, depreciation deductions are limited to the purchase price of the horse minus the salvage value. In addition, deductions for grazing expenses, veterinary expenses, and transportation expenses are limited to the amount that is reasonable for the business.
Do I Need to Keep Records of My Horse-Related Expenses?
Yes, the IRS requires that you keep accurate records of all of your horse-related expenses. This includes receipts, invoices, and other documents that show the amount, date, and purpose of the expense.
Do Horses Qualify for Other Tax Benefits?
Yes, horses may qualify for other tax benefits, such as the Qualified Small Business Stock (QSBS) exclusion. The QSBS exclusion allows taxpayers to exclude up to $10 million of the gain from the sale of qualified small business stock from their taxable income.
What Else Do I Need to Know About Tax Benefits for Horses?
It is important to note that horses are subject to the same self-employment taxes as other business owners. This means that you must pay self-employment taxes on any income you earn from owning and operating a horse-related business.
In addition, if you plan to deduct horse-related expenses, you must be sure to keep accurate records of all of your expenses. This includes receipts, invoices, and other documents that show the amount, date, and purpose of the expense.
Conclusion
Can I Section 179 a horse? No, horses do not qualify for the Section 179 Deduction because they are considered livestock, not business equipment. However, there are still other tax benefits available for those who own horses for business purposes, such as depreciation deductions, grazing expenses, veterinary expenses, and transportation expenses. It is important to keep accurate records of all of your horse-related expenses in order to take advantage of these tax benefits.