Racehorse Tax Parity Act
The Racehorse Tax Parity Act would change how racehorses are treated for tax purposes by adjusting the holding period required for a horse to be considered a section 1231 asset. Specifically, it aims to set the holding period at 12 months for determining whether a horse qualifies as a section 1231 asset. The bill is titled to provide parity for racehorses with other business property in the tax code. It was introduced in the House on February 7, 2025 by Rep. Barr (along with Rep. McGarvey) and referred to the Ways and Means Committee, with the effective date applying to taxable years beginning after December 31, 2024. In practical terms, this change could affect whether gains (or losses) from selling racehorses are treated as section 1231 gains/losses, which can have different tax consequences than ordinary income depending on year-by-year net results. The bill does not specify any budget offsets or revenue effects within the text provided.
Key Points
- 1Amends the Internal Revenue Code to reduce the holding period for racehorses to 12 months to qualify as section 1231 assets.
- 2Specifically modifies subparagraph (A) of section 1231(b)(3) by striking the words “and horses,” thereby altering how horses are classified for 1231 purposes.
- 3Applies to taxable years beginning after December 31, 2024.
- 4The bill is titled the “Racehorse Tax Parity Act” and is introduced in the House, assigned to the Ways and Means Committee.
- 5The change is intended to create parity between horses and other business property in terms of the holding period required to obtain section 1231 treatment.