Recently, I was asked if I would network to find a new home for a pony (this is not the pony by the way). The owner had stipulated that the pony was to go to a non profit organization only, so that the present owners could receive a tax write-off. This presented two issues that I hadn't come across before. 1) attempting to find a non profit that would be suitable for a pony that was a bit head strong, and didn't like the routine of a round pen, but wanted to go all day long on a trail and 2) the owners nor I were aware of what the tax code was for this type of donation.
I did my research on the Internet and found that donating a horse or pony isn't as easy or as "profitable" come tax time as one might imagine. Several factors are involved (I am not a tax professional by any means, so please consult one before considering donating your own horse). The actual tax deduction depends on the type of charity you are donating your horse to. Depending upon the charity that you chose you could potentially receive a deduction for 30-50% of the value of the donation. That value is further calculated and limited based upon your income tax bracket. In order for a horse donation to be a tax write off you can not receive any goods in exchange for the donation.
Determining current market value of the horse if over $ 500 may require an appraisal. You can claim only the current market value, not the original purchase price of the horse. You can't use a "comp" as you would in real estate to show similar horses and their prices, as a means of showing current market value. The American Society of Equine Appraisers (ASEA) can provide you with a qualified appraisal professional. Note: The person conducting the appraisal of your horse, cannot have a vested interest in the charity or horse, nor a relationship to the owner or trainer.
If the charity is going to sell the horse to raise funds, you are able to use the net sales price to determine the value of the donation. It's important to note that if the horse is being actively marketed for sale and the horse is still at your barn (a clear title has to be transferred to the charity first), you may be able to deduct some of the expenses of keeping the horse fed, shod, vaccinated, etc.. Documentation is key in establishing that the horse was actively being marketed, or the deductions will not be allowed.
If the horse is a business asset, a CPA needs to assist you to determine if the horse is considered a capital asset that you are depreciating, or an inventory asset of goods for sale. If an inventory asset, it matters when that horse was added to the inventory.
In the case of the pony that I was networking on it's owners behalf, I did find a non profit "dudette ranch" that was willing to accept the horse. There are stipulations to this type of donation (or to a therapeutic riding center for instance) and that is that if the horse is going to be used rather than sold, a tax deduction is allowable providing that the equine non profit uses the horse for a minimum of three years without selling it. This rule is in place to make sure that a horse isn't gifted, a tax write off is made, and then the horse is brought back to its original owner. Note: If you give a horse to a riding stable for instance, that isn't a 501 (c) non-profit, you cannot claim a deduction at all.
To update the story based upon what the owners learned, they have decided to keep the pony at this time.
Featured Rescued Horse and Owner of the Day: Lauren Knows and Alanna McPartlin
Yakima, WA by Columbia
Basin Equine Rescue in August 2008.
Basin Equine Rescue in August 2008.
Alanna McPartlin, was looking through the photos of the horses on the the rescue's website, and "really felt that she was the one". Alanna states that her older OTTB (off the track thoroughbred) was ready for less strenuous work and she needed a new event prospect and friend. Lauren Knows was not a successful race horse earning about $ 12,000 on the track through 2007. Alanna was able to adopt Lauren Knows through the help of a generous donor. Alanna renamed the mare "Roxy" and says that she has tons of sport horse potential. Roxy is currently in training to be an eventer and will also be shown in dressage. "She has been a ton of fun to get to know and retrain. She has a super sweet disposition and is a great worker". Alanna remarked "there are a lot of thoroughbreds that come through the feedlot at various times of the year. It is very sad".
Looks like Alanna and Roxy are going to have many fun adventures ahead of them.