Canada’s horse racing industry, already dealing with stagnant purses and high inflation, is also facing an existential threat from restrictive, unfair and outdated Canadian tax laws. Industry leaders say the issue is compounded by the fact that the United States has enacted 100 per cent bonus depreciation tax rules which has sent the prices for Thoroughbreds soaring at U.S. horse sales and grown the gap between the U.S. and Canadian racing sectors.
Mark Halloran, one of the managing partners of Canuck Racing, said he was at Keeneland for the sales and watched the price of horses skyrocket. “Look at the price of the horses right now [in the U.S.],”Halloran said. “It’s all gone up.”
Keeneland’s September Yearling Sale grossed a record $531.7 million and also set records for average ($175,808), number of seven-figure yearlings sold (56), and median ($80,000). Keeneland’s November Breeding Stock sale had the highest gross (more than $246 million) since 2007. In September, the Saratoga Sale grossed over $100 million for the first time. The Fasig-Tipton Kentucky October Yearling Sale set records for gross ($71.8 million) and average ($52,392).
Many industry analysts say the biggest catalyst for the gains in the U.S. is the fact 100 per cent bonus depreciation rules were made “permanent” and retroactive to January 2025 as part of President Donald Trump’s One Big Beautiful Bill Act passed in July.
“It sure seems like the U.S. government is trying to help and promote the horse racing and breeding industry there and it doesn’t seem like the Canadian government is too interested,” said Horsemen’s Benevolent and Protective Association (HBPA) of Ontario president Sue Leslie. “It’s a huge, huge issue for Ontario and Canadian horsepeople, because we can’t compete. The sales in New York, Kentucky and Florida just went through the roof after the Big Beautiful Bill.
“We had our [CTHS Canadian Premier] sale back in September and it showed a marginal difference, because the cost of owning a horse is through the roof and the tax laws are so antiquated. It’s ridiculous, really.”
Rob van Blokland, another of Canuck Racing’s managing partners, said, “Unquestionably, the U.S. tax revisions are a significant incentive. They recognize that each Thoroughbred that trains and races creates jobs and work for breeders, trainers and a multitude of suppliers, along with taxable revenue and incomes. Seeing that bigger business picture, the U.S. basically got out of the way and enacted bonus depreciation rules that actively encourage that trickle-down effect.
“Meanwhile in Canada, the CRA (Canada Revenue Agency) still considers horse racing to be a farming operation for tax purposes. Outside of the rudimentary connection that you sometimes find horses on farms; there is nothing akin to ‘farming’ in what we do as a Thoroughbred ownership group. If our current tax code was just modified to reflect that reality instead of relying upon a narrow, inaccurate definition of Thoroughbred ownership and racing today, it would revitalize the industry in Canada as it has south of the border.”
The difference between the two countries, said Halloran, is people in the U.S. recognize horse racing as a business. His concern is that Canadian breeders will sell more horses in the U.S., hurting the Canadian sales, and then fewer of those horses will return to race in Canada.
Therein lies the danger for Canada’s breeding industry and the racetracks that rely on racing stock to fill fields to entice the betting handle that supports the entire enterprise. Bill Ford, Woodbine’s general counsel and Executive Vice-President of Racing, said, “Strong local ownership is vital to the success of the Woodbine racing program.
“We understand that costs are going up significantly and we need to work with all stakeholders to ensure that we can attract new owners and keep the ones that we do have interested in investing in Canadian-bred horses. Right now the combination of Section 31 and the new U.S. rules, puts us at a competitive disadvantage when it comes to ensuring owners have some ability to recoup their investments or to at least be able to write off their losses against other income. We are very worried that unless we address the issue, the number of individuals prepared to invest in Canadian-breds will continue to decrease year over year.”
Glenn Sikura, owner of Hill ‘n’ Dale’s Thoroughbred breeding operation in King City, ON, said Canadian horse owners were already at huge disadvantage compared to U.S. owners before the updated tax code south of the border made the disparity worse.
“The amount of money that [Canadians] can write off is not significant,” Sikura said. “It hasn’t even kept up with inflation since it was initially introduced. There has been, for decades and decades, an argument that the horsepeople have made that we’re not being treated fairly. And I think it’s fallen on deaf ears. But now, you see the effect. I think [bonus depreciation] is the most likely reason why the sales have gone ballistic down in Kentucky. And you think, ‘How the hell can a Canadian compete with that?’”
Section 31 is “A Total Joke”
In Canada, Section 31 of the Income Tax Act states that a person that owns horses as a hobby business may only write off a maximum of $17,500 of losses annually in the horse racing business against their main business. Thoroughbred owner and breeder David Clancy of Track West Racing of Toronto is an accountant. He said, “Section 31 is terrible for Canada’s horse [industry]. Basically, you can deduct up to $17,500 but you have to spend $32,500 to get the $17,500 deduction. That’s really terrible.
“Section 31 basically says you’re limited if farming is not your main pursuit, which, for most guys in the horse racing industry, farming is not their main pursuit. It’s a total joke.”
Fairness for Farmers, an Ontario Racing group lobbying to have Section 31 repealed, points out that the section, “discriminates against rural Canada… There is no such limitation faced by other economic sectors.”
The outdated policy, which was adopted in the 1950s to stop wealthy city dwellers from writing off “hobby farms” to reduce taxes long ago proved to be an unfounded fear. Yet, Section 31 still unfairly targets those in the horse racing sector and people in rural communities.”
“Someone I know quite well is in NASCAR, the Canadian NASCAR series,” Halloran said. “They run a car. Now, a car is not a horse, but let’s operate under the same premise that it’s a race vehicle. They can write it all off. They write off the oil. They write off all of these different things. And we can’t do that [in horse racing in Canada].”
“It’s not a sport made up of millionaires, and we’re not asking for tax breaks for all the millionaires.” ~ Mark Halloran
Fairness for Farmers has written that, “Those hurt most of all by the policy [are] small farms [and] the many rural workers in the horse economy. These are individuals earning modest incomes, caring for horses, maintaining farms, training animals, and providing the myriad of goods and services to that rural horse economy.
“The rural horse economy is unusual in agriculture as one of only two major areas that employ many workers. But it is different from the other labour-intensive sector – fruit, vegetable and horticulture – in that most workers in the horse economy are local residents rather that temporary foreign workers.”
CRA data shows that of the roughly 250,000 part-time farmers in Canada, more than half report a loss each year. Also, since Section 31 fences off nearly half of every dollar lost, most write-offs expire unused – raising taxes on rural households without raising lasting revenue.
A detailed analysis by the CD Howe Institute found that repealing Section 31 would cost approximately $134 million annually – about 0.02% of projected federal revenue. “From my point of view, the amount of money we’re talking about as tax deductions for the horsepeople, horse owners, the whole scheme of things, is totally nothing,” Clancy said. “In the recent budget, they were throwing around billions here, billions there, as if it was $50 bills.”
Meanwhile, proponents of abolishing Section 31 say it would unlock real growth in Canada’s horse racing industry – growth that could lead to driving tax revenue. “It could lead to an increase in the labour market, an increase in fences, trucks, tractors, property purchases, hay, straw, feed,” Leslie said. “It would boom and would touch so many different places. I think the government is being very short-sighted on it.”
Fighting the Myth That Horse Owners Are Wealthy
What the industry is fighting is the myth that horse owners are wealthy people.
“It’s not a sport made up of millionaires, and we’re not asking for tax breaks for all the millionaires,” Halloran said. “We’re saying, ‘It’s a business, and there are people that are in our sport who buy a horse for $3,000 or $4,000, and they should be able to have the incentives to stay in the business and continue in it and not be priced out of it.’”
Sikura said he doesn’t consider himself a rich horse owner. “I don’t have a trust fund and I don’t have an alternative business,” Sikura said. “I’ve got 36 stalls between my two farms, and I’ve got eight or 10 employees that I have to pay, an accountant and a bookkeeper and a blacksmith and some veterinarians and a feed company. And I need to get a new pickup truck, and I have to get my roads plowed. And so, by the time you look at… what an owner, rich owner or otherwise, puts into the industry, I think they’re spread pretty thin, and the compliment of people that they have on their payroll is remarkably high.
“The other thing you see, I think, with horsepeople is, the more money that they take in, the more money they spend. So, that’s good for the economy… I think the churn is spectacular. And like I said, I don’t consider myself a big guy at all, but I see my feed bill every month can be $15,000 to $20,000, there is my veterinary bill, my trainer, she’s got hot walkers and grooms and exercise riders… one horse equals employment for numerous people.”
Sherry McLean the owner of Northern Dawn, a small Thoroughbred breeding farm in Hillsburgh, ON, said, “If we could write off the horses against business, or at least write off a much larger percentage than that small little bit, it encourages people to invest in horses.”
She added that not only do Canadian tax laws decrease investment in the horse racing sector in Canada, there is also a high likelihood that those owners that have businesses on both sides of the border will be attracted to buy American horses.
“In the states, they can write everything off… Canadian [owners] that have the option [to buy horses] in the U.S., they’re going to be down there.”
What is Bonus Depreciation?
Bonus depreciation was first introduced in the U.S. in 2002 in response to the post-9/11 economic downturn. The law initially allowed businesses to immediately expense 30 per cent of the cost of qualifying property in the year it was placed in service, rather than depreciating the cost over time. That rate increased to 50 per cent in 2003, and has been extended and modified several times since. In 2017, bonus depreciation was temporarily increased to 100 per cent, with a scheduled phase-down beginning in 2023 and full sunset in 2027. Federal legislation enacted in early 2025 reversed that phase-down and restored 100 per cent expensing for qualifying assets placed in service that year, including racehorses and breeding stock.
Writing off 100 per cent of an asset immediately, rather than depreciating it over three years for racehorses in training or seven years for breeding stock, creates a major cash-flow advantage. A horse is considered “placed in service” when training begins for a racing prospect or when a broodmare or stallion is first made available for breeding. Taking the full deduction in year one reduces taxable income right away, lowering the current tax burden and freeing capital to reinvest in horses, training, breeding seasons, staff, and infrastructure.
For racehorse owners and breeders, this is especially powerful because the industry requires major upfront investment long before revenue arrives. Buying yearlings, acquiring broodmares, developing stallions, and improving farms all demand capital at the outset, while purse earnings and foal-crop sales often take years to materialize. Immediate expensing improves liquidity, reducing the financial strain of early investment and helping operations scale and compete.
The ability to deduct 100 per cent of a horse’s cost in the year it enters training or breeding also makes the sport more appealing to new investors.
Leslie, Clancy and Halloran all said the reverse is true in Canada where the current tax laws are dissuading people from becoming horse owners.
“It’s precluding us from drawing more investors and owners into the business,” Leslie said. “Just me personally, I can think of six or seven people right now that I know, and have known a long time, that would come in and get in on horses immediately if they had tax relief.”
Halloran said, “I can think of one man that I was talking with last year who’s a very smart guy. He wanted to get into the industry. He’s a very sophisticated money management guy. And he said, ‘I can’t write any of this stuff off?’ I said, ‘No.’ He said, ‘Well, forget it. I’m out.’
That’s a real-life example.
“Most of the people that come into Canuck are new to the industry. They’re coming into it because they want to have fun. They want to enjoy it. Now that being said, they’re also businessmen and women, and they also have accountants, and they also understand that if they’re going to put money into something, it would be nice to be able to get specific write-offs within the Canadian marketplace… We are a business and our closest competitors, i.e. the U.S., are providing incentives… The question [we get] is, ‘I’ve seen this in the news Why can we only write off like we’re a part-time farmer, and only write off this amount? Shouldn’t we be able to write off a vet bill or this or that?’ And they’re not wrong in asking those questions.”
Clancy said it would be wonderful to have industry leaders knocking on doors in financial communities looking for new horse owners, but the tax laws make it a non-starter.
“It makes no sense… You say to them, ‘When you lose money [owning horses], you can’t fully deduct it,’ and then they are looking at you squirrely,” Clancy said. “If I lose money in the stock market, at least it’s tax deductible. And other businesses, too. Every other business that I know of, if you lose money, it is tax deductible against other income.”
Falling on Deaf Ears
The lack of fairness when compared to other businesses also irks industry leaders.
“As a general principle, you want to treat businesses fairly,” Sikura said. “You want to make sure your businesses have an opportunity to compete. Our competition in Ontario is Kentucky and New York and places like that, as far as racing goes, and certainly Kentucky as far as sales go. You’d like to think, at the very least, if you bring in Ontario-registered, Ontario-breds to the sale that you’re on even footing and that you’re not at a disadvantage.”
Halloran said the horse racing industry is no different than other sectors and supports some 23,000 full-time equivalent jobs in Ontario alone.
“We are looking for the elimination of Section 31 and just have our business treated like any other business.” ~ Sue Leslie
“You just want things to be done the right way, and you want them to be able to look at all industries equally,” Halloran said. “You look at oil and gas; you look at automotive and manufacturing. We are an industry that has thousands of people working within it in Canada, and there’s a component that if you put in the right tax incentives and incentivize properly, you’d be bringing more people in to the sport in Canada, driving more tax revenue into the marketplace, as opposed to us looking now and saying, ‘Wow, just across the border where a lot of our sales are, a lot of our horses, Canadian-breds and so forth, some of these Canadian-breds that are down there, they’re not coming back to Canada.’ They’re going to race them at Turfway. They’re going to race them in New York. They’re going to race them in Maryland. They’re not coming to Canada. And that’s a shame.”
It’s particularly frustrating for Canuck Racing which has, proudly, built its club on celebrating Canadian horse racing and the country’s icons.
“I’m a guy who is part of running a group that is very, very Canadian – you know us, we’re Canuck for goodness sake,” Halloran said. “We’re all Canuck-based horses and our members are all in Canada – but the allure and the draw of being able to run a more robust business out of the States could push us to have Canuck LLC running pretty quickly. We don’t want to do that, but it’s the competitive landscape.”
Leslie said she’s spent 25 years trying to get Section 31 repealed without success, including making multiple trips to Ottawa to lobby politicians.
“We are looking for the elimination of Section 31 and just have our business treated like any other business,” Leslie said. “And I don’t know why the government is so afraid of it. I think, somehow, they think it’s going to really hurt their bottom line. But I don’t think they’re right.
“They want to talk about the odd rich person, but the fact is, the grassroots of our industry are not rich people. They’re struggling. They’re struggling to buy feed and to buy straw and to keep their help. It’s a very misunderstood industry, I think, at the federal level, and I guess you have to blame us to a degree that we haven’t done a good job of getting through to them, but we’ve got to keep at it, because there just isn’t the influx [of revenue] through wagering… Wagering is down. Purses are stagnant, basically… and we’re just forcing the owners out of the industry. They can’t afford to stay in.”
Using the U.S. case as a clear example, repealing Section 31 would go a long way to rectifying the problem in Canada, encouraging investment and helping to grow the Canadian horse racing industry.
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