Most people dread tax season, full of paperwork and potential money owed. While the majority of pet costs (veterinary, food, grooming, or boarding bills) are not eligible for tax deductions, there are a few exceptions for qualified dog owners. We’ve broken out several IRS-approved dog expenses, which may be considered eligible tax deductions. Keep the following tax-friendly dog scenarios in mind for next year’s filing!
1. Moving Costs
If you’re moving residences and unable to take your dog with you, consider using a professional transportation company to handle the hassle of shipping your dog cross-country. Pet relocation costs are considered above-the-line deductions. The IRS simply requires a filled out worksheet and Forms 1040 and 3903 to complete the claim. The extra work is sure to be worth the savings.
2. Guide, Service or Therapy Dogs
The IRS says that if a guide dog is needed to assist the hearing or visually-impaired, you can write off all costs-associated with the dog’s care, such as the dog’s actual purchase, training, food, grooming and of course, medical expenses. A good rule of thumb is that any expense necessary to keeping the dog healthy enough to perform his service-related responsibilities, may be written off. Similarly, if you have a therapy dog trained or certified to help with treatment of a physical or mental health condition, all costs associated with the dog are approved as medical-related expenses.
3. Working Guard Dogs
If your dog is necessary to your line of work (for example, your Rottweiler or German Shepherd guards your storefront or warehouse inventory), then you may write off the dog’s expenses related to the job. Standard business deduction rules such as keeping track of the hours your dog spends on the job would apply to this scenario. However, as long as you can prove that the money spent on your dog (e.g., food, medical, training) is required to keep him up to guard dog condition and that his presence is necessary to maintaining your livelihood, these costs would qualify as business expenses.
4. Dog Breeders
As an animal breeder, your breeding stock is an essential part of your business and thus you’re allowed to deduct all necessary animal-related expenses from your taxes. The IRS allows you to claim animals held for breeding of at least 12 months as either capital assets or as a part of your regular inventory. By claiming your breeding stock as capital gains, this allows you to depreciate them and ultimately reduces your taxable income. Make sure to use all of the right forms when filing your income taxes and reporting all sales to get all the breaks you’re entitled to.
5. Charitable Donations, Fostering Animals or Regular Volunteer Work
If your love for dogs involves continuous and regular philanthropic work, you could be eligible for related tax write-offs. Perhaps you routinely donate to an animal rescue organization or volunteer at a local shelter. Or, you foster pets for a temporary period of time until they are adopted into permanent homes. Be sure to retain all receipts and records associated with pro-social work and foster pets and be sure to itemize deductions under the charity section of Schedule A.
6. Canine Sports Leaders
Does your dog compete in professional dog shows? If you participate in dog competitions, agility meets or a canine-related income-generating hobby, such as selling portraits of your dog, or lecturing on dog-related topics, unfortunately the income is taxable. However, you may use the hobby’s expenses as write-offs, to offset the hobby’s earnings. Hobby expenses can be itemized under Schedule A, but the total must exceed 2% of your adjusted gross income before it can be deductible. Note that if the pet-related hobby starts to generate income on a regular basis, you should consider turning it into a business, where you could write off even more expenses.
7. Pet Trusts
Not surprisingly to most dog lovers, it’s become accepted practice to include beloved animals in wills and trusts to ensure that whomever takes possession of the pet after death will receive adequate income to pay for the pet’s expenses. Depending on the structure of the trust, dog owners can work with their attorneys to make sure taxes are paid from the trust itself without adding to the beneficiary’s tax liability.