Livestock Depreciation: Recovery Periods, Section 179, and Bonus

Purchased livestock held for breeding, dairy, draft, or sporting use has a depreciation life of 3, 5, or 7 years under the Modified Accelerated Cost Recovery System (MACRS), depending on the species and, for horses, the animal’s age when you place it in service. Breeding hogs recover in 3 years. Dairy cattle, breeding cattle, breeding sheep, and breeding goats recover in 5 years. Breeding and working horses recover in 7 years, unless they were more than 12 years old when placed in service, in which case they drop to 3 years. Section 179 and bonus depreciation can compress any of these into a single year.

Which Animals You Can Actually Depreciate

The threshold question is whether the animal has a cost basis. A purchased animal does: it’s what you paid. A raised animal generally does not, because the feed, veterinary care, and other rearing costs were already deducted as current expenses on Schedule F. No basis, nothing to depreciate.

The animal also has to be held for a qualifying business purpose. The IRS recognizes four: draft, breeding, dairy, or sporting. Feeder cattle, market hogs, and anything else held primarily for resale is inventory, not depreciable property. And the animal has to have a useful life extending substantially beyond the year you place it in service.¹

Poultry sits outside this system entirely. Chickens, turkeys, emus, ostriches, and other birds don’t appear in the IRS farm property recovery period table, and the IRS excludes poultry from the definition of livestock for Section 1231 purposes. Cash-method farmers who buy hens or chicks for egg production or for raising and resale can generally deduct the cost as a current expense rather than capitalizing and depreciating it.¹

When the Depreciation Clock Starts

Buying the animal isn’t the trigger. Depreciation starts when the animal is placed in service, meaning ready and available for its intended function. A weanling heifer isn’t placed in service until she’s mature enough to breed. A juvenile boar isn’t placed in service until he can be used for breeding. The purchase fixes your cost basis; the placed-in-service date starts the recovery period.¹

Recovery Periods Under the General Depreciation System

The General Depreciation System is the default within MACRS. It assigns livestock to one of three classes based on species and, for horses, age at placed-in-service date:¹

3-year property: breeding hogs.
5-year property: dairy cattle, breeding cattle, breeding sheep, and breeding goats.
7-year property: breeding and working horses that are 12 years old or younger when placed in service.

Horses carry an age twist that catches people off guard. A breeding or working horse placed in service when it is more than 12 years old is 3-year property, not 7-year. The older horse depreciates faster because it has fewer productive years ahead of it.¹

When You Have to Use the Alternative Depreciation System

Some farmers can’t use GDS. The most common trigger is electing out of the uniform capitalization rules for plants produced in your farming business: if that election is in effect for a tax year, you must use the Alternative Depreciation System (ADS) for all property placed in service that year. A second trigger applies to farmers who elect to fully deduct business interest expense under Section 163(j); that election forces ADS for any property with a recovery period of 10 years or more and disqualifies that property from bonus depreciation.¹

ADS lengthens the depreciation life for several livestock classes:

Breeding hogs: 3 years (same as GDS).
Breeding sheep and goats: 5 years (same as GDS).
Dairy and breeding cattle: 7 years, up from 5 under GDS.
Breeding and working horses: 10 years regardless of age, up from 7 or 3 under GDS.

The horse rule is the biggest swing. An older breeding horse that would recover in 3 years under GDS takes 10 under ADS. Cattle stretch from 5 to 7. Those extra years push deductions further into the future and change how you plan cash flow.¹

Which Method Calculates the Annual Deduction

Once the recovery period is set, you pick the method. For farm property in the 3-, 5-, 7-, and 10-year classes placed in service after 2017, the default under GDS is 200% declining balance. That doubles the straight-line rate, applies it to the undepreciated basis each year, and switches to straight-line when straight-line produces a larger deduction.¹

You can elect 150% declining balance or straight-line over the GDS recovery period instead. Straight-line spreads the deduction evenly, which sometimes fits better in low-income years or when you want to preserve deductions for higher-income years down the road. The election has to be made in the year the property is placed in service, and it applies to every asset in the same class placed in service that year.

If you’re stuck with ADS, the only method available is straight-line over the ADS recovery period.

The Mid-Quarter Convention and Fall Purchases

MACRS normally uses the half-year convention, treating every asset placed in service during the year as if placed in service at midyear. That gives you half a year’s depreciation in year one and half in the final year. But if more than 40% of the total depreciable basis of all MACRS property you place in service during the year lands in the last three months, the mid-quarter convention kicks in instead. Fourth-quarter property then gets treated as placed in service at the midpoint of the fourth quarter, worth roughly six weeks of first-year depreciation rather than six months.²

This bites livestock operations because breeding-stock purchases often cluster in fall. A group of replacement heifers bought in October can push you over the 40% threshold and pull every other MACRS asset from that year onto the mid-quarter convention. Spreading acquisitions across quarters is the simplest fix.

Section 179: Deducting the Whole Cost in Year One

Section 179 lets you deduct the full purchase price of qualifying livestock in the year it’s placed in service instead of spreading it over the recovery period. For 2026, the maximum Section 179 deduction is $2,560,000, up from the 2025 limit of $2,500,000 through an inflation adjustment. The deduction phases out dollar-for-dollar once total qualifying property placed in service during the year exceeds $4,090,000.¹

Qualifying livestock includes cattle, horses, hogs, sheep, and goats held for draft, breeding, dairy, or sporting purposes. Two other limits apply. You can’t deduct more than your taxable business income for the year, and any amount you can’t use carries forward rather than creating a loss. For most small and mid-sized operations, Section 179 is the fastest route to recovering the cost of purchased breeding stock.

Bonus Depreciation After the 2025 Law Change

Bonus depreciation runs alongside or in place of Section 179, and the rules shifted mid-2025. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualified property acquired after January 19, 2025. Buy livestock in 2026 and place it in service that same year, and the whole cost can come off in year one under this provision.³

Timing matters at the boundary. Livestock acquired before January 20, 2025 but not placed in service until 2026 falls under the old Tax Cuts and Jobs Act phase-down. Under that schedule, the bonus rate for property placed in service in 2026 is only 20%.⁴

Unlike Section 179, bonus depreciation has no dollar cap and no taxable-income limit. It can create or enlarge a net operating loss, which makes it the tool of choice for large purchases or thin-income years when you want a loss to carry forward. In a stacked deduction, Section 179 comes first, then bonus depreciation on any remaining basis, and then regular MACRS depreciation on whatever is left.

If the Animal Dies or Is Sold Before the Period Ends

Losing an animal mid-life doesn’t erase the remaining basis. For a purchased animal, the adjusted basis minus any salvage value or insurance proceeds is deductible as a casualty loss; if insurance pays more than the adjusted basis, the excess is taxable gain. A raised animal generally has no basis to write off because you already deducted its rearing costs.¹

Selling a depreciated animal triggers depreciation recapture under Section 1245: gain up to the depreciation you claimed is ordinary income, and only gain beyond that can qualify for Section 1231 capital-gains treatment.⁵ The capital-gains treatment also requires a holding period of at least 24 months for cattle and horses, or 12 months for other livestock such as hogs, sheep, and goats.⁶

1
Internal Revenue Service. Publication 225 (2025), Farmer’s Tax Guide
2
eCFR. 26 CFR 1.168(d)-1 – Applicable Conventions, Half-Year and Mid-Quarter Conventions
3
Internal Revenue Service. Publication 946 (2025), How To Depreciate Property
4
Internal Revenue Service. IRS Notice 26-11 – Interim Guidance on Additional First Year Depreciation Deduction
5
Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets
6
eCFR. 26 CFR 1.1231-2 – Livestock Held for Draft, Breeding, Dairy, or Sporting Purposes