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Tax Breaks are Expiring as Racehorse Owners Run for Cover

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Tax Breaks are Expiring as Racehorse Owners Run for Cover

After today, you won’t be able to quickly depreciate your racehorse, your motorcycle-racing track or your movie-production expenses on your tax return. The first $4,000 of your college tuition will no longer be deductible.

Lawmakers swore last year they were burying Congress’s decades-old tradition of constantly rolling over a batch of temporary tax breaks. There was nevertheless skepticism because, well, this is Congress.

But now — with a comprehensive overhaul of the tax code looming as a possibility for 2017, dozens of breaks are set to expire Saturday with surprisingly little controversy.

Here are some of the tax breaks we may never see again:

THE NASCAR BREAK: Businesses are allowed to deduct the cost of their investments, though only over a number of years and according to complicated “depreciation” schedules. They’re always looking to speed up those deductions, and this provision allows NASCAR and others who operate car, motorcycle and truck racing facilities to write off their investments over seven years, which is more than twice as fast as they’d otherwise. This provision has been on the books since 2004, and it’s been mocked nearly as long as little more than an earmark for the Dale Earnhardt Jr. set. This year, it’s projected to cost $20 million. The racing industry has long argued it’s important to local economies. If there’s something to salve their concern over losing the break, it’s that they’d get even better depreciation rules under House Republicans’ tax-reform plans. They want to allow to junk those complicated depreciation schedules altogether, and allow businesses to immediately write off the cost of their investments.

BEWARE FIRST-TIME HOMEBUYERS: As part of its response to the recent housing crisis, lawmakers allowed homeowners to deduce the cost of mortgage-insurance premiums, just like they do with mortgage interest. Created in 2006, it was intended to help prop up the housing market by making it cheaper to buy a home. It’s been renewed ever since, claimed on 4.2 million tax returns in 2014, IRS data shows, with an average savings of $1,400. Home builders, realtors and mortgage bankers had urged lawmakers to extend the break, arguing it’s important to first-time homebuyers who are forced to buy mortgage insurance when they can’t afford a 20 percent downpayment on a home. This year the break is projected to cost $1.3 billion.

THE TAX BREAK FOR HOLLYWOOD: Lawmakers have long offered a special break for movie and television productions, allowing them to immediately deduct the first $15 million in expenses ($20 million if they’re produced in certain low-income areas). Though the break has been criticized as frivolous, Congress expanded it in recent years, at the urging of Sen. Chuck Schumer, to benefit theatrical plays as well (think: Broadway). It’s projected to cost $351 million this year.

MEDICAL EXPENSES: As part of the Affordable Care Act, Democrats made it harder to claim a deduction for big medical expenses. They raised the threshold at which people could begin claiming the break to when those bills amounted to 10 percent of their adjusted gross income, up from what had been 7.5 percent, a move that helped pay for the health care law. But they included a temporary carve out for seniors, granting those at least 65 years old the lower 7.5 percent threshold through 2016. In September, House Republicans voted to repeal the whole thing, so that everyone would be subject to the old 7.5 percent standard. But the bill died in the Senate, and lawmakers did not make a serious effort to extend this expiring provision.

HEY, LOOK SIMPLIFICATION!: The government offers 14 different tax breaks for higher-education expenses, and critics have long complained the provisions are duplicative and confusing. Lawmakers say they want to clean up this corner of the code, though they’ve never quite gotten around to it. But they’ll achieve a small measure of simplification by allowing a temporary $4,000 deduction for tuition expenses to expire. First offered as part of George W. Bush’s 2001 tax cuts, it was originally slated to die at the end of 2005, though it’s been renewed ever since. It’s hardly the biggest education tax break out there — at a cost this year of $400 million, it’s a fraction of the size of President Barack Obama’s signature American Opportunity Tax Credit (projected cost this year: $21 billion). But the tuition deduction was nevertheless claimed on 1.7 million returns in 2014.

THE RACEHORSE SPECIAL: Yet another depreciation tax break, this time for race horse owners. Backed by Senate Majority Leader Mitch McConnell, whose state is home to the Kentucky Derby, it allows them to deduct the cost of the animals over three years, rather than as long as seven years they’d otherwise have to wait. First added to the code in 2008, it’s projected to cost this year $22 million.

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