While only California has begun a movement to treat pets as dependents, there are a number of deductions already available within the federal tax code that can be applicable to pets in certain situations. Do any of these scenarios apply to you and your pet?
Thanks to Van Dusen v. Commissioner, the expenses of fostering a pet from a qualified charity are deductible. The deduction may include the pet’s food, veterinary, and maintenance expenses (crates, litter, bedding, etc.), your mileage relating to the pet, cleaning supplies, and a portion of expenses for utilities if there is a measurable area of your home dedicated to caring for the pet. Of course, to the extent any of these qualifying items are provided by the charity, the foster may not deduct those costs. Records are also extremely important when claiming an expense where the relation to pet care is not obvious, and if you have foster pets in addition to your own pets, you need to be able to separate which expenses relate to which animals. Finally, if your fostering expenses for the year are more than $250, be sure to request a letter from the qualified organization formalizing your status as a foster or volunteer.
If you adopt a pet from a qualified charity and the adoption fee is considered a donation, then the adoption fee can be considered a charitable deduction. However, if the adoption fee is instead considered payment for the pet, it is not deductible. Check your adoption agreement and invoice to find out whether the fee is listed as a donation.
If you move across country and need to have your pet fly on a plane to get to your new home, the expenses are considered to be normal moving expenses of the household on Form 3903. Be sure to check the other requirements for a household moving expense deduction to be sure that you qualify. There are several requirements relating to distance, purpose, and frequency of moving.
If you have a working dog, the cost of buying, training, and maintaining the dog is deductible. For these purposes, dogs who qualify are: (1) seeing-eye dogs, (2) dogs trained to find bed bugs, (3) medical alert dogs who require special training, such as dogs trained to detect impending seizures or low blood sugar and dogs trained to aid the hearing impaired, and (4) security dogs used for a place of business. If you believe you might qualify for a working dog deduction, be sure to consult your tax preparer. There are special licensing and documentation requirements for medical alert dogs, and special breed and business record requirements for business security dogs.
Therapy dogs are not technically service animals under the Internal Revenue Service Code, so they fall into a different category than working dogs. If the dog’s group or therapy team is a registered non-profit, you may be able to write off mileage related to the therapy visits as a charitable contribution.
Show Dogs (Hobby):
Show dogs, or performance dogs, are dogs who are entered into competitions where prize money can be earned. Such competitions may include dog shows, agility trials, and nose work trials. These all may be considered a hobby, and hobby losses are deductible to the extent of any hobby winnings. That is, if your dog wins $1,000 in prize money for winning a competition, you can deduct up to $1,000 of the cost of training and showing your dog. In order to take this deduction, you must be able to file Schedule A on your tax return.
Breeding and Show Dogs (Business):
If breeding and/or showing dogs is your business, and not just a hobby, the expenses are likely deductible. Because businesses have a goal of making a profit, losses may be deducted beyond the point of profit, but meticulous record keeping is important to show that the breeding or showing activities are truly a business and not a hobby.
Sales Tax for Pet Items:
If you choose to deduct state and local sales tax in lieu of state and local income tax on Schedule A, the sales tax paid on pet items, including food, may be deductible.
If you think you might qualify for a pet related tax deduction, be sure to talk to your tax preparer. For more information, contact Mammel Law at 248-644-6326.