You may trade services from your farrier for lessons for his daughter. Your favorite restaurant may provide goodies for your barn's Christmas party in exchange for the owner's occasional use of your indoor arena. But that's not actually income for you (and for the fellow barterer), is it?
There are two aspects of that question. Is it income to you for tax purposes and is it income to you for "business" purposes? First, the tax aspect: To quote the IRS: "Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company. Income from bartering is taxable in the year it is performed."
An example of an even swap would be two hours of riding lessons (regularly priced at $50/hr) in exchange for having 5 horses clipped for winter (regularly priced at $20/horse). For tax purposes, you have $100 of income from your lessons and the person doing the clipping has $100 of income for clipping your horses. Cash might be included in a barter situation if you provided one hour of riding lessons but only had one horse to be clipped. The person doing the clipping might also pay you $30 in cash.
Income from bartering should be tracked separately from regular income. Any business expenses incurred in performance of the bartered transaction are deductible - e.g. the cost of ring fees for the lessons for your farrier's daughter if they are not held at your facility. The IRS offers guidelines on record keeping for barter transactions at the IRS Website.
Be sure to use a reasonable value for the property or services received in a barter transaction to include in your income. If you exchange a $2000 filly for 6 months board (in a barn where board is usually $500/month), there is a $1000 gross profit on the transaction because goods worth $2000 were exchanged for services worth $3000.
An especially tricky barter situation occurs if you are bartering and giving and/or receiving services that could be construed as employment. For example, you exchange barn help for a reduction in the cost of board. The IRS may consider this relationship to be employment on your part. In addition to reporting the barter income, you would also be responsible for the employer portion of Social Security and Medicare taxes.
Depending on the nature of the work, at the very least, the person doing the work might be considered an independent contractor by the IRS. If you provided $600 or more of some form of compensation to the worker, you would be responsible for providing them and the IRS with a Form 1099 at year end.
There can also be sales tax issues if the product/service that you barter is considered taxable in your state.
Second, the business aspect: if you are receiving vet services in trade for lessons for your vet's daughter and the daughter loses interest in horses, you now have to pay for your veterinary services. For future planning, you need to know how much you "spent" on vet services previously.
For some services, such as lessons, the cost is easy to quantify. You may charge $50/hr for a lesson. Your vet bill is $200 so you owe your vet four lessons. But what about something like exchanging handyman services for rough board? What may seem like a good deal when you have several stalls available and plenty of work to be done, might not be economically advantageous when you have someone willing to pay top dollar to rent your last stall.
If cash is in short supply or you are giving/receiving a commodity that is scarce, bartering can be a wonderful opportunity. But be aware that it is not as simple a transaction as it may seem.
See the IRS Bartering Center for more information.