MEMORANDUM
To: AHC Organizations
From: American Horse Council
Re: Congress Extends Certain Tax Benefits
Date: May 15, 2006
Congress has passed and sent to the President a tax bill that
includes extensions of several tax incentives which are beneficial to horse
owners and breeders. The President is expected to sign the bill.
The provisions affecting horse owners are explained below.
Extension of the Current Expensing for Small Business
The 2003 tax act increased the amount that a small business,
including a business in the horse industry, may “expense” when it places an
asset, such as a horse, fencing, equipment, etc. in service, from $25,000 to
$100,000. The original provision was effective through the end of
2005. In 2004, Congress extended a slightly expanded version of the small
business expensing provision (with higher phase-out levels for small business)
through 2007. The bill just passed by Congress extends the current law
for two more years through the end of 2009.
This means that horse owners may continue to write-off up to
$100,000 of the cost of such assets through 2009. This benefit is reduced
dollar-for-dollar for as the total cost of purchases exceeds $400,000 per year.
Extension of the Current Rates on Capital Gains and Dividends
Under current law, capital gains and dividend income are taxed at
a 15-percent rate. Without action, these rates would have increase after
2008. The bill just passed extends these reduced rates through 2010.
Increase of Individual AMT Exemption Amount
The 2003 tax act increased the Alternative Minimum Tax exemption
amount to $40,250 ($58,000 for married couples filing jointly for 2003 and 2004
to prevent new taxpayers from becoming subject to the AMT). The Working
Families Tax Relief Act of 2004 extended those exemption amounts through the
end of 2005. The bill just passed would again extend the exemption levels
through the end of 2006 but at a higher level - $62,550 (married) and $42,500
(other).
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