You might love your pets as much your children, but the IRS doesn’t exactly see it that way. Animals are generally seen a personal expense rather than a ‘dependent’. But, there are a few loopholes. There’s a chance you may be able to deduct pet expenses from your tax return if your critter serves an additional purpose. Here are 6 tax breaks pet owners need to know about.
1. Guard Dogs
It’s not exactly easy to claim your dog as a business expense. But, if your pet acts as a guard dog for your business you might be able to deduct the costs of keeping them healthy and fed. “The IRS has taken a fairly hard-nosed stance when it comes to deducting the cost of animals as business expenses — and the courts have agreed with them,” says accountant, Micah Fraim. “But one area that has been consistently upheld is when you own a guard dog. In fact, in Raleigh Cox and Brenda J. Cox v. Commissioner, the IRS didn’t even attempt to disallow deductions for a guard dog. The business was in a bad part of town, and the IRS felt that it was a legitimate expense.”
How to Get the Deduction: To convince the IRS that you are eligible for this deduction, it’s all about the breed and size of your dog. “A mastiff, pit bull or another large breed would be believable. A Maltese or Chihuahua would not,” explains Fraim. The dog-related expenses that are deductible include dog food, training and vet bills. Just make sure you keep a record of the dog’s working hours and work-related purpose.
2. Cats Used for Pet-Control
If you have a cat or other animal that keep your business free from pests like mice and rats, you could be eligible for this tax break. “Cats or other animals that are kept primarily for pest control are also deductible,” said Fraim.
He says one business he knows of was eligible for a $300 business expense deduction for the cost of cat food. “The couple owned a junkyard and put the food out to attract feral cats,” he said. “The court upheld the deduction as cats were there ‘to deter snakes and rats.'”
How to Get the Deduction: To claim your pet as a business expense, you’ll need to convince the IRS that having the animal onsite is “ordinary and necessary”. The animals must be “common and accepted in your trade or business” and “helpful and appropriate.”
3. Offsetting Hobby Income
If you make money from your pet at shows – which the IRS may consider a hobby – it’s possible to get a tax break for expenses. Kristina Grasso, master tax advisor with H&R Block says, “If the dog wins prize money in the endeavor, then the expenses incurred to train, show, etc., are deductible up to the winnings.” If you make income from a hobby, you’ll receive Form 1099 at the end of every year. “You can also deduct related expenses up to the amount of income earned on Schedule A of Form 1040,” said Fraim.
How to Get the Deduction: Getting this deduction can be a little trickier, however. “You must itemize to take the deduction…which many taxpayers do not,” said Fraim. In addition, certain restrictions apply that may not result in substantial savings. “These deductions are subject to a threshold of 2 percent of your adjusted gross income or AGI,” said Fraim. “For easy math, let’s say you made $1,000 from pet shows, had $3,000 in expenses and your AGI is $100,000 … You can deduct $1,000 of expenses. Not the full $3,000 — because you’re only allowed to take a deduction up to the amount of income earned. But even then, you don’t actually get any tax break.”
4. Foster Pet Parent Deductions
Got your pet from an animal charity? You might be able to get a tax benefit for your charitable contribution. “Any expenses you incur caring for foster animals from a qualified nonprofit are deductible on Schedule A as charitable donations,” said Fraim. These expenses must be unreimbursed if you want a deduction though, according to Grasso.
Maybe you are a volunteer at a shelter or rescue organization? If so, Grasso says you should “keep track of mileage for trips made to further the organization’s work because this is deductible at 14 cents per mile.”
How to Get the Deduction: If you fostered your pet from a municipal shelter, usually they won’t qualify for a deduction, unless they are tied to a charity. “Some private agencies take on responsibility for animal control [law enforcement] functions or handle sheltering for a municipal animal control department by contracting with one or more municipalities,” said Grasso. “Thus, if the private agency is set up as a nonprofit 501(c)(3) organization, the volunteers should qualify for any applicable deductions.” However, “people should foster animals because it increases the animal’s chances of being placed in permanent, forever homes and the animals get needed socialization — not because it potentially gets them a tax deduction,” she adds.
5. Guide Dogs and Service Animals
If a pet helps you in a health-related capacity, medical expenses are tax deductible if you itemize. This includes the cost of purchasing and training guide dogs for the blind or hearing impaired. The deduction can also cover veterinary care, food, and grooming costs. This counts for other service animals too, like therapy animals that help treat conditions like post-traumatic stress disorder.
How to Get the Deduction: “Make sure to get a prescription from your doctor. Or, some other documentation that shows your medical necessity — prior to obtaining any pet that you claim,” said Grasso. Or else, “the IRS may conclude that your pet does not meet the requirements to deduct these pet expenses. Keep any documentation that shows how the animal was specially trained to help you with your medical condition, too.” You can only get this deduction if your service animal has been specially trained to help you with a diagnosed illness.
You can get a deduction if you raise dogs for a charity like Guide Dogs for the Blind, too.
6. Moving Expenses
Despite not believing that your pet is a dependent, the IRS will still allow you to deduct moving costs if you move for job reasons.
How to Get the Deduction: It’s quite tricky to get this deduction though, as you must pass three tests.
- Your move must be time appropriate to the start of your work
- You have to pass the distance test
- You have to pass the time test
For instance, your new place of work needs to be 50 or more miles farther from your old home than your old workplace was. You also must work full-time for 39 weeks or more during the first year in your new location. Once the IRS is happy, you can deduct the cost of shipping your pets to their new home.
It’s not like you need another excuse. But, today you can give your furry friend extra kisses because they might just save you a bunch of money!