How Your Pet Can Help Lower Your Tax Bill

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Although you may consider your pet as your child, the IRS doesn’t necessarily agree. You can’t claim your pet as a dependent, but there are some deductions you may be entitled to take. Let’s take a look…

How you’ll look at your cat after reading this (and probably how he’ll look at you, too)

Medical Deduction

If you itemize and your medical costs exceed 10% of your AGI (7.5% if you’re 65 or older), you can get a benefit for certain pet-related expenses. If you need a guide, service, or therapy animal (must be certified and trained to treat a diagnosed medical condition or illness), you can deduct the following expenses on Schedule A:

    • Buying costs
    • Training (related to guidance or medical/therapeutic treatment)
    • Vet fees
    • Food
  • Grooming & maintenance

Business Deduction

If you have a watchdog, a cat for pest control, or any other guard animal protecting business location and/or property, you can deduct the following expenses on Schedule C:

    • Buying costs (must be depreciated over seven years, unless deducted in full using Section 179)
    • Training (related to guard duty)
    • Vet fees
    • Food
  • Grooming & maintenance

One important note to remember is that––stop me if you’ve heard this before––size matters (breed, too). The IRS won’t buy into your claim that your Chihuahua or Teacup Yorkie is scaring off intruders. Stick to the German Shepherds, Rottweilers, and Pit Bulls of the dog world.

If you work from home, your household pet is not considered “business property”; you would not be able to deduct the above costs in that case, no matter the breed.

Hobby Expenses

If you and your pet are involved in an income producing hobby (e.g., attending & winning dog shows, racing horses, breeding animals, etc.), you can deduct the following expenses on Schedule A:

    • Training (related to the hobby)
    • Grooming & maintenance as preparation for shows or events
  • Travel and transportation of animals

Hobby expenses can only be deducted to the extent of the income earned from the hobby activity. Even then, they do not directly offset income; they are deducted on Schedule A and must exceed 2% of your AGI (totaled with your other miscellaneous itemized deductions) in order for you to receive any tax benefit.

Charitable Deductions

If you offer your home to foster pets from a qualified nonprofit organization, you are entitled to deduct the following unreimbursed expenses on Schedule A as charitable deductions:

    • Vet fees
    • Food
    • Grooming & maintenance
    • Supplies
  • Mileage deduction for trips to and from the shelter/organization or any other trips related to fostering animals ($0.14 per mile in 2016 and 2017)

Moving Costs

If you’re moving and you meet the requirements that allow you to deduct general moving expenses, you can also deduct the cost transporting your pet(s) to your new home on Form 3903.

Be a “Good Boy/Girl” and Keep Receipts, Certifications, Etc.

All of the above-mentioned deductions are perfectly legal and allowable under IRS rules. Given the nature of the deductions, however, it is very important to hold onto any receipts, certifications, or any other important documents that show proof of the legitimacy of your claims to those deductions.

Now go take your dog for a walk or give your pet a treat for helping save you some tax dollars.

The photo used for the featured image of this blog post, “Cute Dog with Money”, is copyright (c) 2015 OTA Photos and made available under an Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0) license.

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Nick Aiola is a CPA and the owner of Aiola CPA, PLLC. Nick and his team provide the highest quality of tax and advisory services to real estate investors and individuals and business owners in the real estate industry.

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