What taxes are paid and what insurance is needed to run a horse farm?

ForeverYoung–: What taxes are paid and what insurance is needed to run a horse farm?
Hello,
I’m doing a project and I need to find the appropriate taxes, licenses required, and insurance needed for a business. I chose a horse breeding/training farm. I found no licenses required to run a horse farm, but can anyone give me any resources for the taxes and insurance requirements and costs?

Thanks!

Answers and Views:

Answer by Karin C
Most states impose a property tax on land. The rate varies from state to state and is also dependent on the land use; agricultural land is usually taxed at a much lower rate than residential or business property. You can find out what the property tax rate would be by first deciding where your imaginary farm is located, and then going to the State Franchise Tax Board to look up the tax rate.

You also pay taxes on utilities. Utilities include electricity, water and gas. Every single utility has taxes associated with it. When you get your utility bill, if you look at the breakdown, you’re charged for the water or electricity or gas that you use, and you’re additionally charged taxes (sometimes described as “fees”) on top of that. Get your mom or dad to show you some utility bills and you’ll see what I mean.

You pay sales tax for items you buy for your farm; that includes equipment, like tractors and manure spreaders and trailers; vehicles, like cars and trucks and golf carts or ATV’s that people use to get around on the farm. In most states, you can also be charged sales tax on things like stud fees and the purchase of horses. (Before everyone who reads this goes “Aha! She’s wrong, I’ve never paid sales tax on a horse I bought, many states have an exemption for “occasional sales” and state governments don’t have the resources to go after individual buyers and sellers who aren’t in the business of selling or buying horses. But if you raise and sell horses or stallion services for a living, you better believe they’ll go after you.)

You can also be charged special assessments for roads that go through your property or other such things.

And of course you pay income tax on all money you earn. Additionally, and this shocks a lot of people who go into business for themselves, you have to pay Social Security tax if you’re self-employed: not just the portion you’d normally pay if you were working for someone else, you have to pay the portion of Social Security tax the employer normally pays!

If you employ people, you may have to pay a payroll tax and possibly a head tax. You also may have to pay unemployment insurance and workman’s compensation insurance.

As for licenses required, some counties/municipalities require that you have a general business license. This is usually not very much, and all you have to get it is fill out some forms and pay the license fee.

I don’t know if you call these “fees,” but if you’re in the business of breeding purebred horses, you will probably have to pay breed association fees annually, and you may also have to pay fees associated with standing a stallion at stud.

If the horses you are breeding are Thoroughbreds, Standardbreds or Quarter Horses for racing purposes, you don’t have to have an Owner’s license unless you race some of your horses, but every single racehorse breeder I’ve ever known ends up with a horse that they have to race themselves for some reason, so if you’re in the business of breeding racehorses, you might as well get an Owner’s License for the state where you’re doing business.

As for insurance, you generally need to carry a Workman’s Compensation policy if you employ people. And horse farms and agriculture in general is a high-risk occupation, which means the premiums are very expensive.

If you have a mortgage on your property, the mortgage holder is going to require you to carry insurance of some kind. Ditto for any equipment you buy on credit (like cars, trucks, trailers, tractors, etc.) If you’ve bought expensive breeding stock, you can buy mortalitity insurance or you can “self-insure”: “self-insure” means you don’t carry insurance on your animals, and if you lose one you take the loss yourself. If you’ve borrowed money to buy the animals, you may be required to carry mortality insurance by the lender.

All horse-training operations need liability insurance. Particularly if you’re training horses for others to ride, or if you give lessons to other people on horses you own, you need to carry liability insurance. And again horse operations are high-risk, so the premiums are high.

If you’re running a breeding operation only, and the only people who handle the horses are yourself and your employees, your liability exposure is lower, but most farm owners carry liability insurance anyway, because if (for example) a horse belonging to you gets out on a road and causes an accident in which people are injured or killed, you’re toast.

The costs of these things depend on how much insurance you purchase and to some extent the location where you do business. Insurance costs vary enough that it’s hard to give a quote without specifics.

I know that’s a lot of variables, but that’s the way it is with horse businesses. Hope it helps somewhat.