In this article, I will break down 10 ways to write-off your pet on your taxes.
If you’re a pet owner, you know the joy and companionship a pet can bring to your life. But did you know that you may be able to write-off some of the expenses associated with owning a pet on your taxes?
It’s estimated that over 68% of American households have a pet, and there are a variety of ways to either make money with your pet, use it in a small business, or even for a charitable or medical reason. Bottomline, there are legitimate tax strategies buried in the tax code that millions of Americans take advantage of, and others no nothing about.
After reading this article my hope is you will find a way that your special pet can not only put love in your heart but also some extra money or tax savings in your pocket.
The Breakdown of the 10 Strategies
I’ve broken these 10 tax-deductible options into three categories:
Pets integrated into your business as an expense (5)
Pets that make money and are their own business (3)
Charitable and medical (2)
Check out this video that provides additional details on each of these ten strategies for Writing-Off Your Pet
Pets Integrated Into Your Business – Category 1
#1 – Write-Off Your Pet: Guard Dogs
As a business owner, keeping your property and employees safe is a top priority. One effective security measure is the use of a security dog, trained or otherwise. Simply having a dog that makes noise and has a loud bark can do the job and be as important as a dog that looks intimidating.
Not only can they detect intruders or potential threats, but their mere presence can be a deterrent to criminal activity. As such, the IRS recognizes the use of security dogs as a valid business expense.
The dog’s abilities can be utilized in a variety of businesses. They can protect inventory at a warehouse or retail store, and even ensure the safety of the property, employees, or patrons.
EXAMPLE: I had a fellow CPA write-off his dog for security at his home office for the purpose of protecting client files at his personal residence. He was audited, explained his position and the IRS quickly accepted the reasoning. Now that’s not always going to be the case (every IRS agent can approach things differently), but it was interesting to see such an expense fly thru an audit without a problem.
Additionally, the use of a security dog can potentially reduce insurance premiums and liability risks. Insurance companies often view the use of a trained security dog as a proactive step towards minimizing risks and may offer discounts on insurance premiums accordingly.
If your dog legitimately serves this purpose, expenses related to the purchase of the animal, and ongoing expenses such as food, bedding, boarding, and grooming supplies, including veterinary care and medication will be deductible.
Make sure that you can indicate how the dog is being used for security, whether it’s during the day or night, and why it’s justified. Finally, make sure you indicated on the tax return the expense as a ‘security expense’, not writing it off as ‘dog expense’. Keep good records and be able to defend your position if the IRS has questions.
#2 – Write-Off Your Pet: Cats for Pest Control
Maintaining a pest-free environment is crucial for many businesses, particularly those in the food service and hospitality industries. One effective method of pest control is the use of cats as they are natural hunters of rodents and other pests. The IRS recognizes the use of cats as a valid business expense for pest control purposes.
In the case of Commissioner v. Tellier, the court ruled that the costs of caring for cats used to control vermin in a junkyard were deductible as a business expense.
EXAMPLE: Disneyland’s use of cats for pest control in their park is a well-known example of how cats can be effectively utilized for this purpose in a business setting.
To qualify for a business expense deduction, the cat must be used primarily for business purposes and the expenses must be ordinary and necessary for the business. In case of an audit, it’s important to have evidence to support why the cat is needed for addressing pest concerns at your business location and the potential risk to your product or inventory. Make sure you can explain and provide documentation to substantiate the use of the cat for business purposes.
It’s important to note that not all cats are suitable for pest control purposes and to make sure the cat is a legitimate predator. Maybe watch the Hollywood movie Mouse Hunt for some good ideas on breeds of feline. ☺
Again, if your cat serves a legitimate business purpose expenses related to the operations of the business, the following purchases, and ongoing expenses will be deductible:
- grooming supplies
- veterinary care
Finally, it’s important to keep detailed records of all expenses related to the cat and consult with a tax professional to ensure compliance with all IRS regulations regarding business expenses.
#3 – Write-Off Your Pet: A “Working Animal” in Your Business
Working animals can play an important role in many different types of businesses. For example, dogs can be used for herding livestock on a ranch or farm. These animals are essential to the operation of the business and their care can be costly.
Here is a list of a variety examples of working animals:
- Rescue dog at the ski resort
- Police-type dog in a security business
- Drug sniffing dog at the entrance for an event business
- Doves in a wedding business
- Therapy animals at a physical therapy office or nursing home
- Horses that are used for transportation, riding, and in some cases, farm work
- Chickens can be used for insect control in some industries
- Falcons that are used for bird abatement, to scare away pest birds from crops and public spaces
- Even goats in a yoga business – yes, seriously!
The list of animals that can be used for work is extensive, if your ‘working animal’ serves a legitimate business purpose the following expenses related to the operations of the business will be deductible:
- The purchase of the animal
- Grooming supplies
- Veterinary care
#4 – Write-Off Your Pet: Pets in a Business as an Advertising Expense
Pets are a great way to attract attention and promote your business. If you’re a business owner and have a pet that you use as part of your advertising strategy, you may be able to write-off some of the expenses associated with owning a pet on your taxes.
Using your pet as an advertising expense can be a great way to stand out and attract customers. It could be on the print material, logo, signs, website, social media, or simply a huge part of the brand.
EXAMPLES: Consider the Taco Bell dog, a Chihuahua named Gidget, Dogecoin’s Shiba Inu dog, and I think I know of a gecko for an insurance company… but is there a real live gecko lizard somewhere on the Geico company campus? Probably for the artists to render the digital gecko… and if so, it would be a write-off!
Social media platforms like Instagram and Facebook are great ways to show off your pet in your business. Create a profile for your pet and post pictures and updates related to your business. Use hashtags to increase the reach and engagement of your posts.
You could bring your pet to special events like trade shows or community events. This can be a great way to attract attention and promote your business.
It can also be as simple as a dog in the ski or bike shop every day to greet customers and to promote sales or promotions with a vest they wear around the store. It would certainly help with sales and also provide a calming atmosphere for the customers.
There are endless ways to incorporate your pet into your business’ brand and experience for your customers. Just legitimize it and keep good records. If it’s legit the following expenses related to the operations of the business will be deductible
- The purchase of the animal
- Grooming supplies
- Veterinary care
#5 – Write-Off Your Pet #5: Fish as Décor in the Office
As per the IRS tax code, expenses related to the decor of a business may be deductible as valid business expenses. This includes expenses related to aquariums and fish used as decorative elements in a business.
An aquarium can provide a calming and visually appealing atmosphere for customers and employees and can also serve as a unique branding opportunity. The cost of the aquarium itself, including the cost of maintenance, cleaning, feeding, care for the aquarium, and of course the cost of the fish themselves may be deductible as a business expense.
It’s important to note that the expenses must be ordinary and necessary for the business, and the use of the aquarium must be at a location where customers frequent or employees work. A home office isn’t going to cut it.
Making Money with Pets – Category 2
Making money with your pet transforms your pet into a business in and of itself. No longer are we trying to deduct the pet as a necessary expense in your business, the pet IS the business.
When your animals are making money for you, all of the expenses related to the operation are going to be deductible against the income. At the very least, you would be reporting the income and operations on a Schedule C on your 1040. Again, all expenses related to the purchase, and ongoing expenses such as food, bedding, boarding, and grooming supplies, including veterinary care and medication will be deductible.
The Hobby Loss Rule
However, you have to be careful of the ‘hobby loss’ rules. The IRS distinguishes between hobbies and businesses. An individual can only deduct hobby expenses to the extent of hobby income, while they can deduct business expenses regardless of whether the business is profitable. The IRS defines hobbies as activities pursued for the purpose of enjoyment or pleasure and businesses as activities with a primary purpose of profit.
Essentially this means you get the ‘write-off’ in the business/hobby, but you can’t take the net loss as an ordinary expense against your other income. The loss must be carried forward and can be used against future income in the ‘hobby business’, even if you sold the animal, the losses are locked down until there is future income in the business that unlocks the losses.
See the example image to better understand this concept:
To avoid being classified as a hobby and running afoul of the IRS hobby loss rules, individuals must demonstrate a profit motive. This can be done by showing that they have a reasonable expectation of making a profit from the activity and that they are actively working to achieve that goal.
Typically this means generating profit in at least two out of five consecutive years. It’s important to note that this rule is not an absolute test, and the IRS will consider other factors when determining whether an activity is a hobby or a business. (For more information about the Hobby Loss rule, see IRS Code IRC § 183)
Bottom line, claim the income, don’t just take cash under the table in your pet business. The 1099s will come to you (not your pet obviously), claim it all whether you get a 1099 or not, write-off all the expenses related directly to your pet, and more. Remember it’s a small business. Then make some money!
#6 – Write-Off Your Pet: – Pet Breeder
Breeding is a business and can be a very profitable one at that. Make it legitimate and take the write-offs! Pet breeders are able to write-off related costs as valid business expenses. This includes expenses related to
- The care of the animal
- Breeding of animals
- The cost of acquiring breeding stock
- Any travel related to breeding the animal (for instance, to breed exotic or rare animals or to acquire delicate or fragile breeding materials such as horse semen).
To qualify for the deduction, the animal breeding operation must be a legitimate business and not a hobby (see above). Thus, the breeding activity must be conducted with the intent of making a profit. But, with the proper documentation and information, animal breeders can receive the tax benefits they deserve while also ensuring the success of their business.
#7 – Write-Off Your Pet: – Pet Boarding, Grooming, and Related Services
Running a pet boarding business can also be a rewarding and profitable venture. This includes not only animals in your care at your business/home location, but also caring for pets in the homes of their owners by grooming, walking, ‘animal sitting’, or training.
Obviously, the expenses related to the care and feeding of the animals in your care will be deductible in the operation of the business, but it may also include the ability to deduct your own animal in the process. Your pet could provide companionship and a calming effect for the boarded pets. Possibly even entertainment and socialization for the boarded animals. This implies that your pet becomes a necessary expense for the business operation.
According to the IRS, expenses must be ordinary and necessary for the operation of the business and must be incurred with the intent of making a profit. As a pet trainer, your expertise and reasoning for the purpose of your own pet in the operation will be important to justify the expense. Make sure you properly document your position in an effort to take such write-offs.
Again, if your personal pet legitimately serves a business purpose the expenses related to the operations of the business will be deductible such as:
- The purchase of your animal
- Grooming supplies
- Veterinary care
#8 – Write-Off Your Pet – Performing Animals
If you have a performance animal that makes you money, that is a business. These could be horses or even dogs in shows or sporting events. As such you are allowed to deduct expenses related to their care as a business expense on your taxes. This also will include transportation to and from events, which is oftentimes a significant cost in a business like this.
Performing animals can be invaluable and essential to the success of a business. Keep detailed records of all expenses related to your performing animal including necessary equipment and care. This includes receipts, invoices, and any other documentation related to the care and training of your animal.
Again, be wary of the ‘hobby loss rules’ (see above). Claim the income, track the expenses, report them both and at the very least you can zero out the income. Even in a ‘hobby business’ the expenses are a write-off; but, you can’t take the net loss as an ordinary expense against your other income.
If your business IS a performance animal, it’s critical you understand the write-offs associated with this type of business and track everything!
#9 – Write-Off Your Pet: Foster and Rescue
If you’re involved in fostering or rescuing pets, you know the importance of providing them with love and care until they find their forever homes. You may be able to write-off some of the expenses associated with your foster and rescue operation as charitable expenses on your taxes!
Here is the list of steps to capture the maximum write-off:
- Ensure you’re working with a valid 501(c)3 organization that has the charitable purpose of fostering or rescuing pets. You can’t simply “say” I’m doing charitable work and write it off on the Schedule A of your 1040.
- Align yourself with a valid charity that has the proper status with the IRS, which means that they are recognized as a tax-exempt organization.
- Work with your tax professional and the charity to capture the write-offs and take the deduction. For example, in some instances, you may have to ‘donate’ to the charity and have them pay for some of your supplies and equipment rather than paying for it directly. This ensures the proper method for the charitable deduction.
Obviously, in an operation of pet rescue the costs of medical bills, medication, adoption fees, and transportation expenses (such as gas or mileage), including kennels and equipment will generally all be deductible.
Don’t stress too much about the process of coordinating with a charity. Oftentimes, when you start to work with a charity that believes in what you are doing, coordinating your services and expenses you’re incurring may open up unseen opportunities, a network for support, and result in a more successful operation. This also means you won’t have to go and ‘open up your own charity’, which can be costly compared to the scope of what you’re trying to accomplish.
If you are planning on organizing 501(c)3, my law firm, KKOS, can assist you. To learn more visit KKOS’ Non-Profit Set-Up Page.
#10 – Write-Off Your Pet: Service Animals
As per the IRS tax code (see Topic No. 502, Medical and Dental Expenses on the IRS Website, seventh bullet point), individuals with disabilities may be able to write-off the expenses related to their service animals as a valid medical expense.
One important step in claiming the deduction is obtaining a “Letter of Medical Necessity” from a licensed healthcare professional. This letter should include information about the individual’s disability and the ways in which the service animal assists with their daily activities. It’s important to keep this letter on file, as the IRS may request it as proof of the medical necessity of the service animal.
It’s also important to consider where you might write-off the medical expense. There are 4 primary options:
- Itemized Medical Expense
- Health Savings Account
- Flexible Spending Account
- Health Reimbursement Arrangement
Again, if your animal legitimately serves a medical purpose and need, the greatest expense will generally be that of the acquisition price and training, which can sometimes be very expensive. Consider the example of a seeing-eye dog.
If you can prove the medical ‘need’, of course, the following expenses will be deductible in the method from the four options listed above:
- The purchase of the animal
- Grooming supplies
- Veterinary care
The Conclusion to Writing-Off Your Pet
Enjoy your pet and make it profitable
Bottom line, having a pet doesn’t have to be a ‘sunk cost’. Yes, I’m sure they bring joy and happiness to your life, at least I hope that is the case… but don’t forget the potential to integrate them into your business as a valid write-off, or turn your pet ownership into a money-making operation, a charitable act, or even a valid medical expense.
And of course, with all of the options above it almost goes without saying, but it is extremely important to consult with a tax professional to ensure you’re following all the rules and regulations with the strategy you’re using to write-off your pet expenses. For a list of tax professionals certified in ALL of my strategies, check out my Tax Advisor Network.
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