Section 31: The Tax Rule Threatening Canada’s Horse Racing Industry

By Steve Buffery

TORONTO, October 21, 2026 - The Canadian equine industry – including the horse racing sector – has been struggling for years to stay afloat and the One Big Beautiful Bill passed last year by U.S. President Donald Trump has turned out to be One Big Nightmare for Canadian horse people.

Prior to Trump passing the One Big Beautiful Bill, which extended tax cuts in the U.S., the Canadian horse racing industry was already in dire straits. But now that American horse owners can deduct 100% off the cost of a race horse, their Canadian counterparts have been put at a huge disadvantage with the result being, as Ontario Racing executive director Gordon Thain puts it, a “horse drain.”

 “It completely put us on unequal footing compared to the Americans,” said Thain. “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 and it’s a much more competitive jurisdiction than what we have up here.

“We’re losing owners and horses, both at Woodbine and Fort Erie (race tracks),” added Sue Leslie, a thoroughbred breeder, owner and President of The Horsemen’s Benevolent and Protective Association. “Every year, our horse population for the last five years as been down.”

According to published reports, three years ago, Woodbine Racetrack was home to roughly 1,900 horses. That number is now 1,600 and dropping as Canadian breeders, thoroughbreds and buyers move south of the border, lured by the tax breaks there. And that’s killing the Canadian horse industry and putting thousands of jobs at risk. Given those challenges, a group of associations involved in the horse industry, including the HBPA, CTHS, Ontario Racing/Fairness to Farmers, and the Jockey Club of Canada, have rallied together to try to repeal Section 31 of the Canadian Income Tax Act which restricts the amount of losses a race horse owner can write off to a maximum of $17,500 – an unfair restriction that is not applied to other sectors of the economy.

“What we’ve seen has been an increase in the Saratoga (New York) sales in the summer of ’25 and ’26 and an increase substantially in the Keeneland (Kentucky) sales in ’25 and ’26. And 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.?’ So, what we’ve seen is, the number of Ontario thoroughbred foals in 2026 has dropped 23%,” said Don Ferguson, a breeder, owner and lawyer who practices in St. Thomas ON. “That tells you that there are fewer Canadian and Ontario foals and that means the size of the yearling crop for sale in the first day or two of September, will drop. It means purse sizes are going down. And we’re going to be struggling to find a sufficient number of Ontario-bred animals to keep the race structure alive and well. That is a huge problem. And the only way I know to resolve that is to have Section 31 eliminated. We’ve made that case now to a few of the federal politicians.”

Section 31 was created in the 1950’s to prevent hobby farms from being used as tax shelters. That bill gives no incentive for investment in Canada and, over time, has weakened the nation’s horse industry and has led to losses and business closures. Meanwhile, the 100% write-offs American owners are allowed with the One Big Beautiful Bill has led to increased sales and growth of racing south of the border. Horse auctions in the U.S. are seeing record sales while, in Canada, it’s the opposite. Two British Columbia racecourses, Hastings and Fraser Downs, have closed. Hastings was in business for 130 years. In March, Ottawa’s Rideau Carleton Racecourse shut down after 62 years.

“The way the (Canadian) horse industry is taxed compared to the U.S. puts us in a huge disadvantage,” said Woodbine trainer Barb Minshall. “The huge reduction in foal crops (in Canada) sums it up. For most in the thoroughbred industry, this is their business, it’s not a hobby and we need to balance the loss and profit margins fairly. And we can’t do that right now. The industry is going to revert back to decades ago when (horse racing) was only for the elite.”

If the Canadian government’s mandate is to allow Canadian horse racing to die, with the loss of thousands of jobs in the industry, then they are doing a good job. If the industry in Canada continues to diminish, thousands of jobs would go with it – breeders, owners, trainers, veterinarians, feed suppliers, tourism and hospitality and farmers.

“We’re talking about jobs not only in horse racing, but anything to do with the equine economy,” said Thain. “We’re talking anywhere from half a dozen to a dozen direct jobs per horse and you don’t get that in AI data centres or anything other form of employment. These jobs are found in rural areas where economic opportunities can be very limited. In 2025, the Canadian equine sector generated $8.3 in industry expenditures, $11.4 billion in GDP. We’re talking (112,000) jobs. This is a big-time industry.”

Thain offered this example as to how Section 31 unfairly punishes the horse industry more than other economic sectors: If a Canadian invested $100,000 in a race car - $50,000 for the cost of the vehicle and $50,000 for storage, tires, maintenance - and if the first year racing revenue is less than the $100,000 start up costs and the losses are $65,000, the individual can deduct the full $65,000 in losses at tax time. On the other hand, if a Canadian invested $100,000 on a race horse - $50,000 for the horse and an equal amount on training, boarding and other equine-related services - and the first year’s losses were $65,000, under Section 31, the individual could deduct only $17,000 in losses at tax time. More than 70% of the losses cannot be claimed.

“How can a race car (owner) write everything off but a race horse you can’t?” said Leslie. “The race horse has much more value, it employs more people - blacksmiths, trainers, etc. It just doesn’t make any sense. It’s so archaic. I find it very frustrating and I’ve been down this road for 30 years now.”

The Jockey Club of Canada commissioned esteemed McMaster University economics professor Dr. Atif Kubursi to examine what the elimination of Bill 31 would mean in terms of revenue loss to the federal government. It turns out, axing the bill would be a major financial boon for the feds and, ultimately, for the horse industry in Canada.

“He concluded in his report that if we had the same level of investment dollars on a per capita basis in Canada that was seen in the United States– if we eliminate section 31 – that would generate well over $500 million in income into the federal tax revenue,” said Ferguson. “It has massive, massive potential for the federal government to increase revenue. And it pales in comparison to the $130 million they’re taking in right now by the part-time farm category. And it would give credence to their philosophy of Building Canada Strong.

“That would come from an additional 35,000 jobs, an additional $3.6 billion in GDP, an additional $2.6 billion in annual expenditures, another $2.1 billion in wages,” added Thain, when asked what the consequences of repealing Bill 31 would be. “It really is a no-brainer. If they got rid of this bill, they could get four to six times as much as they’re currently taking in.”

Thain said Woodbine hosted Canadian Agriculture Minister Heath MacDonald at the CTHS Ontario stake sale in September the point was made to the Minister that the horse industry is no longer the realm of the rich and famous.

“As he’s walking around, we’re pointing out to him, who do you see here in a suit and tie? Who’s pulling up in their Ferrari? This isn’t the Bay St. crowd. These are Salt of the Earth people working hard all throughout the province that you’re supporting by recommending that this (tax) gets eliminated,” said Thain.

“The image of what our horse industry is, is not what it is,” added Leslie. “You look at Fort Erie, they are not wealthy people running horses. And I would say 80% of the people running horses at Woodbine are not wealthy people. They’re people that love horse racing and love horses. And they use their recreational money – instead of buying a nicer car or going on a trip or buying a motorhome – they’re investing in horse racing, because they love it.”

Everyone associated with horse racing and farming, as well as the general public, are being encouraged to contact their Members of Parliament, to bring awareness to the fact that horse racing in Canada, and all the jobs that go with it, is in danger of collapsing as a result of Section 31 of the Income Tax Law.

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

“We’ve got to get to Prime Minister Carney (on board) and that’s the thing that’s hard,” said Ferguson. “I believe in my heart, if Carney could have a look at this, it fits right into the platform that he’s promoting – Build Canada Strong. So, let's extend the agricultural community and increase jobs.”

Despite the considerable challenges in having Section 31 repealed, Ferguson is optimistic that the Canadian government will eventually come around and do the right thing.

“The government needs to respond to changes that occur in the United States and if we can make a change here and help out Canadian investors, then we should do it,” he said. “The other way I look at it is, this tax acts like a tariff and it’s imposed by the federal government on investors in the agricultural sector in Canada. So why in the world would Prime Minister Mark Carney and the federal government want to be seen as imposing a tariff on investors in the AG sector? It doesn’t make sense. And that’s how I view this tax, it’s a home-grown tariff on investors in Canada.”