Canadian tax rule squeezes horse racing industry

Canadian horse owners and breeders say a decades-old tax provision is driving horses, stables and investment south of the border, accelerated by a sweeping U.S. tax package that allows American buyers to deduct the full purchase price of a racehorse.

The Horsemen's Benevolent and Protective Association of Ontario said in a news release Wednesday that Section 31 of the Canadian Income Tax Act limits the losses a racehorse owner can write off to a maximum of $17,500 per year — a restriction that does not apply to other sectors of the economy.

By contrast, U.S. President Donald Trump's One Big Beautiful Bill, passed last year, allows buyers in the United States to deduct 100 per cent of the cost of a racehorse. Ontario Racing executive director Gordon Thain called the result a "horse drain."

"It completely put us on unequal footing compared to the Americans," Thain said. "It's started a horse drain, similar to the brain drain the country has experienced with doctors and professionals. Our best horses, our best breeders, our best stables and trainers and owners are migrating south to the States."

Woodbine Racetrack, near Toronto, was home to roughly 1,900 horses three years ago. That number has fallen to about 1,600, according to the HBPA release.

The tax disparity is illustrated with a side-by-side comparison the HBPA attributes to Thain: a Canadian who invests $100,000 in a race car and loses $65,000 can deduct the full amount. A Canadian who invests the same amount in a racehorse and loses $65,000 can deduct only $17,000 under Section 31 — meaning more than 70 per cent of the losses cannot be claimed.

"How can a race car (owner) write everything off but a race horse you can't?" said Sue Leslie, a thoroughbred breeder, owner and president of the HBPA. "The race horse has much more value, it employs more people — blacksmiths, trainers, etc. It just doesn't make any sense."

CP24 reported Friday that the finance minister's office said in an email it "recognizes the important contribution of Canada's horse-racing industry to communities and the economy" but that "it would be inappropriate to speculate on any potential or prospective changes" to Section 31.

Don Ferguson, a breeder, owner and lawyer based in St. Thomas, Ont., said the number of Ontario thoroughbred foals in 2026 has dropped 23 per cent, and that sales of Canadian-bred horses at auctions in Saratoga, N.Y., and Keeneland, Ky., rose substantially in both 2025 and 2026. "That has given Canadian breeders pause for thought — 'Do we really want to have our mares kept in Canada and bred here and sold here, or do we move them to the U.S.?'" Ferguson said.

Two British Columbia racecourses, Hastings and Fraser Downs, have closed. In March, Ottawa's Rideau Carleton Racecourse shut down after 62 years. Hastings had been in business for 130 years.

A report commissioned by the Jockey Club of Canada and prepared by McMaster University economics professor Dr. Atif Kubursi concluded that eliminating Section 31 and matching U.S. investment levels on a per-capita basis would generate more than $500 million in federal tax revenue, along with 35,000 additional jobs, $3.6 billion in additional GDP, $2.6 billion in annual expenditures and $2.1 billion in wages, according to figures Ferguson and Thain cited in the HBPA release.

Section 31 was created in the 1950s to prevent hobby farms from being used as tax shelters, the HBPA said.

"Our goal is to completely repeal the bill," Leslie said. "It's an archaic tax law that was established decades ago and it's never been properly reviewed by the tax department."

The HBPA is encouraging owners, breeders and members of the public to contact their Members of Parliament about the issue.