If you earned more than you spent, you made a profit -- congratulations! However, Uncle Sam wants to share in your good fortune (and hard work) by charging you a tax on your earnings.
If you did not earn more than your expenses, you have a loss. Luckily, in certain situations, the IRS will lighten your burden by allowing you to pay less tax on money you earned elsewhere for the year. This can be a boon for those of us who also work off of the farm.
According to the IRS most legitimate horse businesses fall into one of the following categories: breeding operations, equine camps and workshops, boarding, riding lessons (with a horse that�s not your personal pleasure horse) and horse racing.
Active particiption does not require that you physically perform work on the farm or with your horses. If you are actively making decisions about what stallion you will breed to, what training they will get, or other regular decisions about your horses care, you may be able to deduct your losses to offset your regular income.
If you do not keep good records, the IRS can refuse to allow you to deduct some of all of your expenses -- adding an additional financial burden to you and your business.
The greatest number of people in the tax field are accountants, followed by attorneys. In addition there are many seasonal tax preparers -- people that work only during the tax season and are able to help you fill out your tax returns. Few of these seasonal tax preparers will be versed in the complexities of horse tax law, so you should focus your search on the accountants and lawyers.
Most people looking for a tax specialist find their tax advisors by referral. Thus you should start your search by asking friends or your equine attorney. Often your attorney will know a tax preparer that does work for many of her clients. You can also ask your local horse breed association for a referral.
Whether or not your equine activities qualify you for a tax deduction, now is the time to think about it. And if you don't qualify this year, you may be able to make a few changes in the new year to comply with the tax regulations and save yourself on taxes next year!