Racehorse spending surged to nearly $1.5 billion last year, fueled by a recently enacted tax provision allowing owners to immediately deduct the full cost of a horse purchase, according to industry analysts.
The tax break, formally part of the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), extends 100% bonus depreciation for qualified property, including racehorses, through the finish of 2025. Prior to the legislation, depreciation levels were slated to decrease, with purchases made in 2023 subject to only 80% bonus depreciation. The retroactive application of the 100% deduction to 2023 purchases is a key component of the law’s impact.
The Keeneland September Yearling Sale, the world’s largest thoroughbred auction, saw record gross sales of $531.7 million this year, a significant increase from the $427.9 million recorded in 2024. Fifty-six yearlings sold for at least $1 million, surpassing the previous record of 40 in 2005. A Gun Runner colt led sales, fetching $3.3 million from a group of investors including paper mogul Peter Brant.
The provision allows businesses owning horses to write off the entire purchase price in the first year the animal begins racing, along with related expenses such as specialized barns and equipment. This incentive, initially established in the Tax Cuts and Jobs Act of 2017, has been credited with driving increased investment in the thoroughbred industry. The National Thoroughbred Racing Association (NTRA) has actively lobbied for the continuation of this tax policy in Washington, D.C.
While the House of Representatives passed H.R. 7024 with bipartisan support, the legislation now awaits consideration in the Senate. The NTRA has expressed hope for swift passage and enactment and continues to provide updates on the bill’s progress. The industry has seen increased investment over the past several years, largely attributed to provisions like this one.
Experts caution that while the tax benefits are substantial, buyers should be aware of potential scrutiny from the Internal Revenue Service regarding hobby losses and inflated purchase prices. The “One Big Beautiful Bill Act” also increased Section 179 expensing to $2.5 million annually, up from $1 million, on up to $4 million of qualifying purchases, effective for taxable years beginning after December 31, 2024.
