Posted by KLSM CPA Firm PLLC

Pet Related Tax Write-offs to Consider

Pet Related Tax Write-offs to Consider

Many pet owners consider their domesticated part as part of the family.

Uncle Sam, however, disagrees with this claim, which explains why you cannot claim your beloved cat, dog, hamster as a dependent.

Every year, however, Americans spend a lot of money on their pet, which goes to the vet, feeding and others but sadly, Uncle Sam doesn't allow for such a deduction when it's tax time. 

However, the silver lining is that there are few instances when you can deduct some expenses related to costs. For example, a pet that works for you might qualify for business deductions, but here are four different pet-related deductions you can get from pet ownership.


  1. Medical deduction

When you consider the high standard deduction made by the 2017 TCJA, it is not difficult to claim medical expenses. As a result, the cost of your health care needs to be more than 10% of your AGI for the 2019 tax year. 

What a good thing if you could add the vet charges of your pet, but sadly, you cannot. Uncle Sam, however, specified that if you used a guard dog because you couldn't see or hear well, you could add the cost of training, buying, and maintaining such a dog with your medical expenses. 

As a result, things like foods, vet care, grooming, and other items ensure the pet is healthy enough to discharge its duties can be deducted. The animal must be certified and approved for treatment before Uncle Sam can authorize the deduction.

 

  1. Business Animals

For animals that help guard your home, it is possible to deduct some cost associated with them as Uncle Sam considers this as business deductions of the work-related expenses of such animals.

Standard business deductions rules will apply, meaning that any expense associated with keeping such animals for work is considered ordinary and necessary in your business line. Provided you can prove it, every fund that goes into maintaining the animal's guard condition (training, feeding, and vet care), can be deducted as business claims. 

Ensure to have a complete and accurate record of your animals' hours while working, like all deductions. It will make your claim credible when you can show how such a pet contributed to your protection.

 

  1. Switch your Hobby to For-Profit Business

You had some incredible pet videos on YouTube, which helped you generate huge fans and ad revenues. This could be a hobby even though TCJA doesn't allow for the deduction of hobby expenses. 

Before 2017 TCJA, you could deduct any expense from your hobby to help offset your earnings. However, such payments were considered miscellaneous deductions that only apply provided they exceed 22% of the AGI. Since miscellaneous deduction disappeared, one can no longer deduct hobby expenses.

Converting this hobby to a for-profit business can allow you to deduct qualified business expenses, even if you are not making money. However, you want to make sure you don't get under the IRS radar, making it essential to ensure that your earnings from the business are not more than your expense for three or five years. However, if you couldn't achieve this, you can prove that you are trying to make your business profitable by:

  • Having good records

  • Going after opportunities to make profits 

  • Hire an expert or get knowledge in the area

  • Dedicate enough time to make it a business activity

  • Demonstrate a record of success in similar ventures


  1. Pet Trusts 

It is not uncommon for pets to outlive their owners. While many people include such pets in their wills, others set up a trust for the care of such pets. 

In all states, there are laws permitting pet trust, making it a completely legal activity.

It does not take excessive riches to establish a pet trust. However, you will be better off working with an attorney with expertise in such. 

Also, a trust does not mean you are spared from any tax issue. Depending on the organization of such trust, a living trust makes the pet owner, the trust beneficiary, or the caregiver of the trust responsible for the tax.

With trust, you can ensure that your pet gets the needed care even when you are long gone.


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