Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. is an animal-loving organization through-and-through.
Our staff members support rescue organizations, have dreams of owning a farm, want to raise goats, and one practically lives in a zoo.
We all had, have, or will soon have beloved furry, feathered, and scaly roommates.
Although we may feel like our pets are members of our families, we cannot claim them as dependents on our taxes.
The IRS does, however, allow a few specific tax deductions for our pets and their related expenses.
Before we go on, though, it’s important to note that you should always seek the advice of a trusted accountant on tax matters.
Does your pet live full time on business premises and provide a service that protects your livelihood or inventory, like a guard dog or mouse-catcher?
If so, then pet-related expenses including veterinary care, training, and food can be deducted as business expenses.
Of course, you must provide an accurate accounting of the animal’s on-the-job hours and demonstrate how they protect your livelihood or inventory.
Furthermore, your pet’s breed must be one that’s typical for its job. For example, a teacup poodle may not have the same guard dog credibility as a more imposing German Shepherd.
A certified service animal assists in a health-related capacity.
They are typically dogs that help vision and hearing-impaired individuals, or people with psychiatric conditions, seizures, and other medical conditions.
If they are a certified service animal, then according to IRS Publication 502 you can deduct expenses related to its purchase, training, food, grooming, and veterinary care.
It’s worth repeating that the animal must be certified as a treatment for the diagnosis if the IRS is to accept the deduction. As always, record keeping is critical.
To get the deductions, include documentation from the doctor and proof that the animal is certified and trained as a treatment for the diagnosed condition.
The most common pet-related deductions are charitable donations to 501(c)(3) organizations that care for, shelter, and re-home animals.
It’s important to note that adoption fees to a rescue shelter are not tax deductible.
However, you can write-off unrelated donations of supplies, money, time, and mileage (14 cents per mile for trips that further the organization’s work).
If you donate your valuable time, then be sure to get a valid letter from the 501(c)(3) charity acknowledging your volunteer work.
Fostering is temporarily housing and caring for an animal until they have been re-homed.
If you foster pets for a qualified 501(c)(3) organization or rescue group, then reimbursable expenses incurred while taking care of your foster pet can be deductible. This includes pet food, supplies, transportation, grooming, and veterinary bills.
Once you’re sure the itemized deductions have exceeded the standard deduction amount, you can itemize your fostering expenses under the Schedule A charity section.
With good records, people have been known to write off portions of their utility bills, paper towels, garbage bags, and more as animal fostering expenses.
Many people include their animal companion in their wills or establish trusts to see that their animal companion will be cared for after their death.
All states have laws that allow for pet trusts and you don’t have to be wealthy to set one up.
If this sounds like something you may want to do, then Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. strongly recommends that you work with an attorney who specializes in this type of law.
Does your animal companion generate income for you? Maybe your puppy acts in movies, on TV, or in advertising. Or, perhaps you commercially breed animals.
If yes, then you can deduct the related expenses as long as you keep accurate records, as per usual.
It’s important to note that the Tax Cuts and Jobs Act of 2017 eliminated the hobby deduction. Even if your hobby expenses are meant to offset its income, it can’t be deducted.
But, there are things you can do to show that your pet-related income is for a business and not hobby related:
√ Show that you’ve been researching profit-making opportunities
√ Show that you’ve hired expert consultants for the business
√ Maintain good records and bookkeeping
√ Invest adequate time to justify it as a business activity
√ Show occasional large profits and attribute losses to unusual events
√ Show that you’ve had success with other ventures
Animals bring loads of joy to many people.
No matter whether your day is brightened by a guinea pig or a goldfish, we all want the best for our non-human family members.
Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. aims to improve the quality of life for all creatures, great and small.