3.5 (for now) pet-related tax breaks
Tuesday, February 20, 2018
UPDATE, April 11, 2019 #NationalPetDay: As noted in this post from 2018, the Tax Cuts and Jobs Act (TCJA) makes changes to two of the five pet-related tax breaks noted when this post was published in 2018. For the 2019 tax season, during which tax year 2018 returns are filed, the miscellaneous expenses itemized deduction is gone and the moving expenses above-the-line deduction applies only to active military personnel. So for now, the headline is 3.5 pet-related (I'm counting the moving tax deduction as one-half since it's still partially in effect) breaks. However, these altered/expired pet tax breaks, like all of the TCJA's individual provisions, are temporary. They expire at the end of 2025, unless Congress and the White House act to keep them. So there's a chance all five will be back in the tax code come 2026. Stay tuned!
Today, Feb. 20, is Love Your Pet Day, which has its own trending hashtag on Twitter (here's my contribution).
This is the most unnecessary special day ever. Ask any pet owner and they'll tell you that every day is love your furry family member day.
In fact, a National Retail Federation poll projected that just last week folks would spend $751 million on Valentine's Day gifts for their pets this year.
As a cat fancier myself, I'm sure those same folks had already shelled out for pet Christmas presents, although my cats always seemed to enjoy the boxes more than the gifts.
So it's pretty safe to assume that pet owners are spending a lot not just today, but throughout the year on their cats, dogs or whatever critters capture their hearts.
And in some specific cases, those pets may provide their devoted owners a bit of tax savings.
Here are 5 potential pet-related tax write-offs. (Full disclosure, some of this was covered in an earlier tax breaks for pets post.)
1. Medical expenses: It's no secret that pets provide us comfort. If you've been diagnosed with a physical or mental condition that benefits from the attention of a trained therapy animal, that pet's costs could count as an itemized medical expense.
Note that this is beyond just your animal's knowing when you need some extra snuggling after a tough day at work. A physician's diagnosis and recommendation are required.
Animals that help you deal with a physical disability are more obvious and easier to claim tax breaks.
Internal Revenue Service Publication 502 says that if you need a guide dog, either to compensate for your reduced vision or hearing, you can include the costs of buying, training and maintaining that animal in your overall deductible medical expenses tally.
This generally includes such things as the animal's food, grooming and veterinary care to keep it healthy enough to help you.
2. Working animal costs: If you have a guard dog to keep your business safe after regular retail hours, that animal's work-related costs could be claimed as business deductions.
The tax code's standard business deduction rules still apply, notably that the animal's costs are ordinary and necessary in your line of business.
Once you show that your pet is indeed helping your business succeed, then the money you spend — food, vet bills and training -- are deductible as a business expense.
To do that, be sure to follow the cardinal tax rule of keeping good records. Track your animal's hours on the job as well as all related work expenses. Also note that your guard dog will be treated as business property, meaning his or her value must be depreciated.
Finally, you have a better chance of not raising IRS eyebrows if you choose an animal that fits the job. So you probably shouldn't claim your Yorkshire Terrier is your warehouse's guard dog, even though she does yap all the time.
3. Moving costs: Of course you took your pets with you when you moved. But the big dogs needed special transport for the cross-country trip. Your pet's transportation is a deductible moving expense.
Note, however, this above-the-line tax deduction is allowable for most of us only on our 2017 taxes that we're working on now. The moving cost deduction, for humans and animals, is not allowed in most cases beginning with the 2018 tax year.
It was mostly eliminated as part of the Tax Cuts and Jobs Act (TCJA). The only exception is for active members of the military who relocate pursuant to military orders.
4. Hobby expenses: Your dog might not win the Westminster Kennel Club title, but she's been best in show at local pet events. In addition to a nice trophy, the $25 top prize was definitely welcome.
And as the model for your painting pastime, your pet has no peer. In fact, your artworks are among the best sellers at community art shows.
Were your pet is an integral part of your hobby and you make some money from that hobby, the animal can help reduce the taxable amount of that money.
There are two issues here.
First, while all your hobby earnings are taxable, the amount of expenses you can claim to reduce that amount is limited. Hobby expenses are itemized with other miscellaneous deductions on Schedule A and that total must exceed 2 percent of your adjusted gross income before it can be claimed.
Second, the miscellaneous expenses deduction for hobby and any other allowable costs is available only through the 2017 tax year. As with the moving expenses write-off, the itemized miscellaneous deduction was axed by the TCJA.
5. Charitable deductions: If you foster animals while your local nonprofit shelter works to get them new homes, you costs could be deductible as an itemized charitable expense.
Costs that count are the usuals, like pet food, supplies and veterinary bills. But you also can deduct 14 cents per mile for trips made to further the shelter's work.
Be sure to keep track of your pet protection expenses. A California woman lost some of her cat care deductions because she didn't have all the IRS-required receipts, specifically for pet-care items costing $250 or more. She also failed to get a letter from the 501(c)(3) charity acknowledging her volunteer work.
I know, your pet is much more to you than a tax break. But I'm sure your devoted animal wouldn't mind if you were able to also get some tax benefit because he or she is a part of your life.
It's just another way for them to show us their unconditional love.
You also might find these items of interest:
- Tax deductible taxidermy
- IRS says cats and dogs can't be corporate officers
- IRS says 'No' to tax-exempt status for pet care group offering
heated spa, massages and other animal amenities
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