Can I Write Off My Horse Showing Expenses?
- If you pursue horse showing as a hobby, which means you would perform the activity regardless of the profit or loss, you can only deduct hobby expenses up to the amount of income received from the activity. For instance, say you earned $5,000 last year in horse shows and spent $10,000 prepping your horses for them. You can only deduct $5,000 in expenses in this scenario.
- You can circumvent the income restriction on the deduction of hobby expenses by converting your horse showing hobby into a business. The IRS does not let you declare anything a business. For most hobbies, you must show a profit in three out of the last five years. For horse showing, you only need a profit in two out of the last seven years, according to H&R Block. If you cannot meet the profit test, the IRS might consider other factors that indicate your hobby is a business, such as time put into horse shows, financial situation and whether you pursue horse showing as a job.
- Expenses you incur for the current year in connection with horse showings usually are deductible, such as entry fees, care for the horse, veterinary costs and travel expenses. You can depreciate assets -- deduct the property over its expected life -- such as a barn and even the horse itself, but you need receipts and explanations of why the expenses was necessary. If you depreciate the asset, you will have to repay the deduction once you sell the item, so you might want to keep an item until it no longer has any use.
- Often, turning your horse showing hobby into a business results in a higher tax burden than keeping the activity recreational because you probably have to pay payroll taxes on your income. In 2010, the payroll tax rate was 15.3 percent. You should hire a tax professional to help you determine how you can take your expenses, because there are numerous tax court cases dealing with horse showing not contained in IRS manuals.