Sure!
In some municipalities here with huge land values, getting and maintaining farm status can save you so much money, it is valuable in itself and possibly more than any actual income youād make from say baling hay. Since property tax is municipal the details vary by district or city
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Itās hard to do for someone who rode professionally for 25+ years, let alone someone casually pursuing it.
Your best bet would be to lease the facility to a trainer to cover your costs. Look at insurance costs for having them there, costs for wear and tear on the facilities, improvements, and then covering a percentage of the mortgage. I highly recommend if you go that route, you lease at a dry stall rate and let the trainer figure out shavings/hay/feed deliveries.
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Consider that you are effectively asking for the income generated off 7-8 stalls to cover your home mortgage, maintenance of the farm, and the cost to keep 2-3 horses. I am a mortgage banker in my real life. Assuming a 3000/month mortgage payment, 400/horse/month fixed cost for feed/hay/bedding (which is probably very low) and 7500/year maintenance (also probably a low figure but I am spitballing here) to make the business part of your farm pay for those costs, you would have to have $53,100 in net profit if you keep two horses. Assuming that same 400/horse cost for feed/bedding that means total cost per year is $91,500 your cost basis is now at $953/month per stall without any additional labor.
I think where a lot of people go very wrong here is that they start with āthis is my hobby and what I enjoy doing, I want to turn that into a businessā and then they are deeply resentful when it is not profitable enough to compensate them adequately for the time and financial investment because of factors in their cost basis that come from what their personal wants are, not what a business of a specific type in a specific area can support. For example, having 2-3 hobby horses of your own automatically is cutting 20-33% of your potential business revenue and adding their care costs into what the business has to cover.
I recommend leasing your barn out to someone who you respect. Get a lease and have an equine attorney review it. 250 per dry stall is a rough estimate for lease costs, and would readily cover paying board on a personal horse and offset your cost on the property.
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Pm sent. Thank you!
when I had our farm corporation running we were clients of the farm just as the other horses, we paid the farm board
Primary reason was to demonstrate this was not a personal hobby second the farm was a business on its own not a charity
Get an LLC and put everything in it. Then put your farm in a trust. Get a good accountant that knows the business.
You can write EVERYTHING off at the end of the year. Claim losses. My farm has a 31 year claim loss on it.
I write off:
Training board, horse show fees, trailering fees, lessons etc.
Feed (including supplements)
Hay
Tack everything you bought for your horses (saddles, bridles, etc), including consumables (shampoo, grooming gear, tack trunks, blankets, sheets)
Riding clothing, boots, helmets, socks, helmet nets etcā¦ everything!
Barn items (buckets, muck forks, cleaning supplies, toilet paper, towels!
Food
Truck. trailer and farm equipment (including upkeep, oil changes, etc. insurance)
Fencing
Riding rings etc, upkeep costs.
Barn
House
Claim everything as a loss. My equipment has a 7-year loss. Fencing is 14 years.
Edit: Barn, House and Fencing can be taken as a depreciation. Still saves you money.
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Follow Nikkiās advice!
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Instead of being the person offering lessons, you might be better off leasing your farm to an existing trainer/program. I make the most money off of my place when I lease it as a dry farm.
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If you are in an area conducive to retirement board and have decent turnout, this is my second best source of income. I take in medically complex retirement horses. I charge $700/month for full care pasture board and $1350 for full stall board. I am completely full with a waiting list about 10 names long. I do not put any money in my pocket at the end of the month, but my client horses cover 100% of my overhead including my employees and they pay for my personal horses to eat and get their feet done. I still need my consulting job to buy groceries, pay vet bills, and horse show/do fun things, but I am very much able to keep my farm afloat. Iām in the Ocala area on 30 acres with 6 stalls.
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As a CPA and tax professionalā¦this is really bad advice. THIS is the reason that horse farms/businesses are audit fodder for the IRS. I am not sure if this poster a willinging committing tax fraud OR if they just donāt understand what their tax accountant is saying. (Example: there is no 14 year loss for fencing. You CAN take depreciation over 15 years as a land improvement, which I think this is what this poster means) I am sure @Nikki will come back and say she has never been auditedā¦but that doesnāt mean that someone else wonāt be.
The IRS really hates financing expensive, hobby pets. For example, if you have 10 stalls and 3 are filled with your personal horsesā¦you cannot deduct 30% of feed, hay, bedding, repair/maintenance, ring maintenance, barn depreciation, etc. You can only deduct the expenses related to your income-producing animals (in layman terms).
- Training board, show fees, lessons? Nopeā¦only to the extent the horse brings you income.
- feed/hay/bedding: to the extent that your client horses cost.
- Tack for personal horses? Hard no
- riding clothes: helmets and boots sureā¦if you are a professional trainer and this is your sole gig. āClothes and Uniformsā are only deductible if they are a requirement for the job and cannot be worn in other places, generally.
- barn items: to the extent your clients (not YOU) use them
- Food: what?
- Truck/trailer/farm equipment: to the extent your business uses them, generally prorated by # of personal horses vs # client horses
- Fencing/rings: prorated as above
- Barn: depreciated over 39 years, limited by personal use
- House: hard no. We do have instances where mortgage interest and property taxes are one bill that covers home and barn. Again we use % in some way to break out business versus personal use.
If you get a CPA that really knows the industryā¦they will sus out your personal use costs.
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well you beat me to that and must add ā¦but I am not a CPA or Tax Attorney, I just had excellent ones who following their impute/guidelines for our farm was never questioned or audited by the IRS
another posterās commit of really would not be normally acceptable by the IRS unless they were reporting the services as personal income, but even so the way it is worded the transaction is clouded. It is best to have all transactions presented in an unquestionable method.
I do not put any money in my pocket at the end of the month, but my client horses cover 100% of my overhead including my employees and they pay for my personal horses to eat and get their feet done.
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Yes. Since my horses are under the business, I can.
Sorry, Deprecation on fencing, house, barn are included. Thanks for the clarification.
My house is my business as I run an air bnb out of it, same for the barn.
Food, as in taking clients out, or stocking up for my clients. All can be deducted. Same for cleaning supplies for my air bnb home.
I can deduct milage from going to the feed store too.
I can deduct tack as a depreciation as its equipment used for my business.
For horse boarding and showing, I can. Iāll have to get a W9 from my trainer.
The accountant I use is highly recommended and itās large family business. All the farmers use them.
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Ah! The devil is in the details. You did not mention that your horses are 100% business use or anything about your AirBNB.
I am still skeptical about deducting your houseā¦surely there is somepart that is personal use? On the other handā¦since all the farmers use your accountantā¦they must be doing their due diligence.
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I do this. I make money when it comes to average variable costs, but not average total costs. However, the goal is to minimize my own equine expenses by using the money I make to invest in capital improvements.
I tend to under-claim on my taxes because I do not want any questions as to whether I am deducting too much. I figure if the IRS audits me, theyāll end up giving me a lot of money back for the hassle!
The one area I have losses on is sales horses. I have taken a couple of baths on sales horses, but I have the veterinary records on the horses so I can easily prove why I didnāt make money on them.
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Yes. Iām so sorry. I do appreciate corrections.
Yes, the horses are business and the farm. I built it from the ground up and it was a nightmare. Thatās another story. I had a huge loss the first two years.
Yes, my home is used for air bnb and business. What I use for personal use cannot be deducted, but everything for the business is. I spoil my clients who rent the farm. Fully stocked fridge, farm eggs from my chickens, the works!
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Do you make any income off the farm??
Yes to this. I am not a tax professional but a CPA and you cannot write off personal horses and you must have a business plan and profit motive. Hard to prove to the IRS that Bubba, the retired 19 year old gelding sitting in the pasture, is going to create revenue unless you can sell his manure.
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The good folks at the IRS arenāt stupid.
If you have huge losses and little income year after year, they will come calling.
I think this is the difference of ābook incomeā and ātax incomeā.
For example, many are happy if the profit from boarders that covers the cost of bedding/feed for their own horses. That is a fair trade off for having the inconvenience of boarders.
Taxable income is a different story. This person is using special tax deductions to reduce taxable income to reduce their taxes paid.
The good folks at the IRS arenāt stupid.
but are for now humans, I happened in on a friendās business that was being audited by an IRS agent. I noticed the agent was tallying the bank deposits to get the total business income. I pulled my friend off to the side asking him about returned checks? I knew he redeposited those two times before turning the issuer over to the district attorneyās office for collection. Light bulb moment for him, but he said he was told to not to interrupt the agent while he was working. So after two days of the agent digging through all his paperwork the agent presented friend with a sizeable tax bill with penalty for underpayment.
Friend then asked agent how he determined the gross income? Then explained to the agent how the method of determining it was incorrect handing him all the redeposits receipts which was a few hundred thousands of dollars.
Rather than him owing the IRS they owed him money
