Most of us love our dogs like children. Sadly, the law doesn't recognize them as such, and we can't claim them as dependents on our taxes. While you can't claim your dog, you may be able to deduct a few pet related expenses on this years return. So let's take a look where you can save.
In 2015, Michigan Representative Thaddeus McCotter has introduced a bill called the HAPPY Act, allowing deductions of up to $3,500 a year for pet expenses. This new bill has been endorsed by:
- The Humane Society,
- The Animal Law Coalition,
- The American Veterinary Medical Association,
- The Pet Industry Joint Advisory Council,
- The American Society for the Prevention of Cruelty to Animals.
Despite that, it couldn't really get any traction. While we're still waiting for legislation, some pet owners can still find some deductions. A lucky few can make dog or other animal related claims on the U.S. tax return right now.
If you aren’t sure if your dog or pet related expenses are deductible, or if this is your first year filing for your business, it’s probably better to get professional tax help.
Tax laws concerning the sharing economy and services over the Internet are still evolving as well. Someone who is qualified and educated on the latest regulations might even help you claim other business or dog related deductions that we haven’t even thought of yet.
17 Tax Deductions for Dog Owners
1. Guide Dogs
If you’re visually impaired or hearing disabled, your service dog is a legitimate expense. That means, under IRS Publication 502, you can deduct your dog's medical and dental expenses, some of which may include:
- The animal’s purchase price
- Their training costs
- Their maintenance costs like food, grooming and veterinary care
2. Trained Therapy Animals
There are other physical disabilities and mental conditions recognized by the government that benefit from a trained companion. If you have a therapy dog breed that's a certified therapy animal, the same maintenance costs can also count as a medical expense.
You need an official diagnosis; pets without certification are unlikely to pass with the IRS. As with all other medical expenses, though, you can only claim those over 10 percent of your gross income or 7.5 percent for seniors, over 65.
3. Raising Guide and Therapy Dogs
You might not need a guide or therapy dog yourself, but if you are raising and/or training any type of assistance dogs that are certified animals for a recognized organization, your expenses are a charitable deduction.
You’ll need to keep your receipts, and an itemized list of all expenses, the same as with all deductions, so make sure your accounting is in check.
4. Guard Dogs and Other Animals
This one only applies to businesses where your animal is an ordinary and necessary part of the workplace, not just a welcome addition. You’ll need accurate records of your dog's hours spent on the job, and if you can actively document their protection skills, that’s even better.
Dogs need to be the right breed too, or look suitable to their task. A poodle’s bark doesn’t make it a guard dog, according to the IRS, but there have been cases where cats have been employed for their mice catching skills.
The value of your animal must also depreciate with age (like a piece of equipment).
5. Farm Dogs
Guard dog breeds aren’t the only ones on the job, as any farmer can tell you. Many farm dog breeds can also get on the list. Something like a good sheep dog can definitely be a vital part of raising and protecting livestock. Outdoor animals might keep pests and wildlife away from your crop too.
The key is being able to prove that these are working animals, not regular pets.
6. When You and Your Pet Move to a New Home
There aren't many deductions that apply to pets, but one exception is when you're moving, and your animals need some kind of special pet transportation, such travel crates or any other equipment.
That can fall under IRS Publication 521 – Moving Expenses. The other option is to file an above-the-line deduction, using the long Form 1040 and Form 3903, which can include all your moving costs.
7. Professional Dog Breeders
Sometimes, dogs are your business because you are a professional breeder. Even breeding as a hobby produces taxable income, but the total of any itemized deductions on your Schedule A form have to be more than 2 percent of your gross breeding income.
You have to make a profit for expenses to be deductible, which for many hobbyists just isn’t the case. Since you’re running a dog breeding business, that means you have to follow local zoning rules.
You may need to be ready for an IRS inspection as well in order to show you're following any other rules that apply. But if you're doing it all legitimately, don't worry about it.
8. Dog Show Prize Winners or Animal Movie Stars
We all think our pets are cute enough to be stars, but some actually are stars.
The business of dog modeling/acting is becoming more popular, and dogs might be in TV commercials, have a part on a TV show and even become pet movie stars, thus generating regular income. If they are big prize winners, and that’s a major part of your yearly income, that’s also a legitimate dog related business.
Not only does this mean you can list some things on your Schedule C form, but you might also be able to claim “ordinary and necessary” expenses and “other” business expenses.
Dogs that are winners of show dog competitions like Westminster that go on to advertise something and generate income are also contenders for tax deductions. If this is the case for you and your canine companion, it's best to work with a CPA, lawyer or other tax professional to be sure that you take all the deductions possible.
9. Dog Trainers
Dog trainers are in a great position to get some pet related tax deductions this year, and it especially applies to those who are running their own dog training businesses.
On top of regular business expenses, if you’re a professional certified dog trainer, continuing your own education can be deducted as an “other expense” for your venture. Your dog might also be an “ordinary and necessary” part of your workplace, as a demonstration model, which allows you for further tax relief with the IRS.
10. Dog Sitters, In-home Trainers, Volunteer Travel Expenses
Some business models mean you have to travel to your clients and their dogs, such as mobile dog grooming services or pet sitting services.
If that's the case, then make sure to keep daily travel records or claim a flat rate per mile. When your vehicle is your company car, for example, and it’s modified for transporting dogs, you can deduct some of the actual ownership and driving costs too.
If you’re volunteering with dogs, your travel expenses might be a charitable donation too. Jobs like this are becoming more popular, as part of the new sharing economy. There's even pet apps to connect clients with service providers and facilitate transactions.
Since nothing is deducted from regular paychecks, some of your profits need to go to the government, so make sure you put at least 30 percent aside to pay those taxes.
11. Deducting Sales Tax Instead of Income Tax
Is your dog a business expense? Do you deduct state and local sales tax instead of state and local income tax on your Schedule A form? If that’s the case, you might be able to deduct the sales tax paid on all of the dog food you buy for your pet separately. Some other similar expenses apply here too.
12. Liability Insurance for Dog Businesses
Every business can claim insurance as expense on their taxes, and the same applies to pet business insurance costs when you're filing your Schedule C. However, dog trainers and other pet related businesses might need coverage for extra liability in case of injury or dog bites. That means extra deductions too.
13. Modifications to Your Home or Office
Do you need office space or other business-related facilities in your home? If part of your house is only used for business, and it’s your principal workplace, you can claim your operating costs, as well as a pro-rate share of household expenses.
If you communicate with your clients from home as part of your business, you can claim some tax deductions as “Home Office” as well. Special building modifications and equipment can be written off too. Just remember that they depreciate over time.
14. Advertising for Your Dog Business
Running a pet related business is no different than any other business in many ways, and there's a lot of spending. Advertising and marketing are important expenses for a lot of small businesses, including those in the pet service industry.
All business promotion related expenses and their deductions include things like ads, special business events, and sponsorships that list your business. Deduct those!
15. Fostering for an IRS Qualified Adoption Organization
Do you volunteer for an IRS qualified 501(c)(3) adoption organization?
If you do, your expenses can be deducted with any other donations on the charity section of Schedule A. Make sure to get documentation that proves you are a recognized part of the organization and that fostering a dog falls under those guidelines.
16. Running Your Own Shelter
People who launched their own dog rescue businesses last year or are running any type of their own animal shelters should not be left behind, either.
You can deduct your animal shelter expenses, but it might be tricky to prove which expenses are personal, and which are for foster animals when owners have both in their homes. That can be even harder if you aren’t volunteering for a larger organization.
Fortunately, it has been done. As with all volunteer expenses, keep your related receipts.
17. Trust Fund for the Animal
You may be able to claim a deduction while a deceased loved one’s estate is settled if there’s a trust for the animal. This is a tricky one, but it's worth looking into anyway. Ask your CPA about it.
Pets are a growing concern in estate planning. Sometimes, it can take awhile for everything to be settled. In the meantime, pet expenses may be deductible.