{"id":22063,"date":"2018-05-01T13:00:00","date_gmt":"2018-05-01T18:00:00","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/newsroom\/the-kentucky-derby-horse-betting-and-the-irs\/"},"modified":"2023-03-01T13:01:33","modified_gmt":"2023-03-01T19:01:33","slug":"kentucky-derby-betting","status":"publish","type":"newsroom","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/","title":{"rendered":"Always dreaming of owning a Kentucky Derby horse"},"content":{"rendered":"

\"\"<\/p>\n

Derby Day is just around the corner. One of the big things happening at horse racing tracks is the opportunity to own a \u201cshare\u201d of a thoroughbred horse. Last year\u2019s Kentucky Derby winner, Always Dreaming, had five owners that split the Derby purse of $1.24 million. Always Dreaming was a horse-racing partnership horse. A partnership-owned racehorse gives people an opportunity to fulfill their dreams to own a racehorse and compete at the highest levels of the sport.<\/p>\n

Horse ownership and the IRS<\/h2>\n

There are some big tax deductions for horse owners. It depends on the \u201cstyle\u201d of ownership, with the key word being \u201cpassive.\u201d Passive income is investment in a business activity with no material participation. Passive owners can\u2019t use losses from their thoroughbred \u201cinvestment\u201d to offset wage or other business income, but must pay tax on income.<\/p>\n

To avoid passive loss limits, an owner must meet certain material participation requirements, such as spending 500 or more hours at this business activity during the year. A small piece of good news: if a spouse accompanies the owner to the horse track or other duties, their participating hours count towards the 500-hour requirement as well.<\/p>\n

Horse partnerships and syndicate owners<\/h2>\n

Horse owners who are part of a partnership or syndicate are typically considered \u201cpassive,\u201d i.e. individuals can\u2019t deduct net losses against other business income, but will pay tax on net income. They will also be responsible for reporting their share of income and expenses on a tax return. In this instance, the partnership will need to file a Form 1065 and send a Form K-1<\/a> to each partner, which all partners must use to report details of income and loss in their personal tax returns. Each partner\u2019s tax liability is based on an allocation agreed to in the partnership agreement.<\/p>\n

Horse racing and IRS hobby loss rules<\/h2>\n

To qualify as a business and not a hobby, for IRS purposes, a horse racing partnership should make a profit in two years out of any seven. If year after year, the partnership declares losses, the IRS could decide that it is a hobby and disallow all net losses.<\/p>\n

Horse betting and the IRS<\/strong><\/h2>\n

Taxpayers who win $600 or more may receive a tax form reporting the prize, a W-2G<\/a> or in some cases a 1099-MISC<\/a>. The IRS will compare the information on the taxpayer\u2019s return with the tax form reporting gambling winnings. For this reason, failing to report the prize as income is the surest way to get audited.<\/p>\n

Just because a taxpayer doesn\u2019t receive a tax form does not make the winnings tax-free. Taxpayers still have a responsibility to report their prize on their tax return as \u201cother income.\u201d<\/p>\n

Derby winners can deduct losses<\/h2>\n

Gamblers may deduct their losses, but only as much as they report in winnings. So, if a taxpayer entered two pools at $10 each and won $100 from one pool, they could net the entry fee from the winning pool against the income, reporting $90 in winnings. For taxpayers who itemize, the entry fee from the losing pool and any other gambling losses would be taken as an itemized deduction, up to a maximum of $90.<\/p>\n

Winners this weekend need to keep more than their ticket to claim their prize. They should keep a record of their expenses and income for next April\u2019s tax deadline \u2013 or if they\u2019re professional gamblers, their June 15 estimated payment deadline is approaching.<\/p>\n

Taxation in the horse industry can be complicated. Taxpayers should consult a tax professional about their participation in horse partnerships and whether they are eligible for tax advantages.<\/p>\n","protected":false},"excerpt":{"rendered":"

Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.<\/p>\n","protected":false},"author":418,"featured_media":37937,"menu_order":0,"template":"","tags":[],"news-categories":[23360,23361],"class_list":["post-22063","newsroom","type-newsroom","status-publish","has-post-thumbnail","hentry","news-categories-income","news-categories-other-income"],"acf":{"post_rest_thumbnail_alt_id":null},"yoast_head":"Kentucky Derby betting, winnings, syndicates | H&R Block Newsroom<\/title>\n<meta name=\"description\" content=\"Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Always dreaming of owning a Kentucky Derby horse\" \/>\n<meta property=\"og:description\" content=\"Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/\" \/>\n<meta property=\"og:site_name\" content=\"H&R Block\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/hrblock\" \/>\n<meta property=\"article:modified_time\" content=\"2023-03-01T19:01:33+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom-1080x630.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1080\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@hrblock\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/\",\"name\":\"Kentucky Derby betting, winnings, syndicates | H&R Block Newsroom\",\"isPartOf\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom.jpg\",\"datePublished\":\"2018-05-01T18:00:00+00:00\",\"dateModified\":\"2023-03-01T19:01:33+00:00\",\"description\":\"Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.\",\"breadcrumb\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#primaryimage\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom.jpg\",\"contentUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom.jpg\",\"width\":1200,\"height\":630},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Newsroom Articles\",\"item\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Always dreaming of owning a Kentucky Derby horse\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/\",\"name\":\"H&R Block\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>","yoast_head_json":{"title":"Kentucky Derby betting, winnings, syndicates | H&R Block Newsroom","description":"Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/","og_locale":"en_US","og_type":"article","og_title":"Always dreaming of owning a Kentucky Derby horse","og_description":"Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.","og_url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/","og_site_name":"H&R Block","article_publisher":"https:\/\/www.facebook.com\/hrblock","article_modified_time":"2023-03-01T19:01:33+00:00","og_image":[{"width":1080,"height":630,"url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom-1080x630.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_site":"@hrblock","twitter_misc":{"Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/","name":"Kentucky Derby betting, winnings, syndicates | H&R Block Newsroom","isPartOf":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website"},"primaryImageOfPage":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#primaryimage"},"image":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#primaryimage"},"thumbnailUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom.jpg","datePublished":"2018-05-01T18:00:00+00:00","dateModified":"2023-03-01T19:01:33+00:00","description":"Having partial ownership of a Kentucky Derby horse as part of a syndicate horse ownership can be fun but it may not be a great tax deduction.","breadcrumb":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#primaryimage","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom.jpg","contentUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/05\/Derby_Newsroom.jpg","width":1200,"height":630},{"@type":"BreadcrumbList","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/income\/other-income\/kentucky-derby-betting\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/"},{"@type":"ListItem","position":2,"name":"Newsroom Articles","item":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/newsroom\/"},{"@type":"ListItem","position":3,"name":"Always dreaming of owning a Kentucky Derby horse"}]},{"@type":"WebSite","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/","name":"H&R Block","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/newsroom\/22063","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/newsroom"}],"about":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/types\/newsroom"}],"author":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/users\/418"}],"version-history":[{"count":0,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/newsroom\/22063\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/media\/37937"}],"wp:attachment":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/media?parent=22063"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/tags?post=22063"},{"taxonomy":"news-categories","embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/news-categories?post=22063"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}