5 ways pets can pay off on your tax return
Monday, March 23, 2020
It's a rare day on the internet. Dogs are getting more attention than cat videos.
Actually, it's baby dogs who are the focus, since today, March 23, is National Puppy Day.
Personally, I'm a cat, not dog, person. But I know that regardless of your pet preference, animals bring a lot of good to our lives.
And in some very specific cases, they also might be able to help you reduce your federal tax bill.
Here are 5 potential ways that Fluffy, Fido or whatever you call your fur (or other) baby can provide their human parents some tax write-offs.
1. They provide a medical remedy: It's no secret that pets provide us comfort. That's being reinforced as many of us are hunkering down at home in an effort to slow the transmission of coronavirus.
While this unexpected extra time with our pets — which, as my #TaxTwitter pal @PaulasPicks notes below, could be a good or not-so-good thing — is the result of a medial crisis, it won't help us out as far as our taxes go.
Puppy parents: pls be extra kind to your pups, as they're likely to be overjoyed by your 24/7 presence.— PaulaTheSmall (@PaulasPicks) March 21, 2020
Kitty parents: pls be extra kind to your kittens, as they're likely to be annoyed by your 24/7 presence. And you may wind up missing. #FridayFun
But an animal's presence could pay off at tax time if you've been diagnosed with a physical or mental condition that benefits from the attention of a trained therapy animal. In these cases, the 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 (or watching COVID-19 updates). 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. They contribute to your business: 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 and separate business records. Track your animal's hours on the job as well as all related work expenses.
You also might want to keep copies of customer testimonials that, for example, say how happy folks are with those professional photos you took at your studio of them holding your python.
Also note that your guard dog or cat providing pest control at your warehouse 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. They work for themselves: Fans of the television show Friends, whether you watched when it originally aired on NBC or are now streaming the escapades of six Manhattan friends, know Marcel.
He (actually she; Marcel was played by a female primate named Katie) was Ross Geller's pet Capuchin monkey. Marcel and Ross eventually parted ways. If you haven't seen it, check out "The One After the Superbowl" for their touching final goodbye. But I digress.
Performing animals like Katie/Marcel have a lot of ways to make money, ranging from appearing in ads (print, online and TV), movies and television or the myriad other ways that the internet has opened up for cash collections. Yes, we're still looking at you, social media star Grumpy Cat.
Where your business is managing that critter's public appearances, you would report the money the animal earns for him/herself and you as self-employment income. That means legitimate associated expenses, such as taking your pet to film locations or photo shoots, as well as grooming, training and, of course, feeding and other care costs could count as business expenses.
Again, thorough substantiation and documentation are critical to these claims.
Also be careful here that your duties regarding your animal's stardom are a job, not just a hobby. If the IRS (specifically a tax examiner aka auditor) thinks that your pet-related activities are more for fun that business, your tax deduction claims could be disallowed.
And no, you can't claim hobby expenses against hobby income. That was part of the miscellaneous itemized expenses category that was eliminated by the Tax Cuts and Jobs Act (TCJA).
4. They move with you: 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 … with one major caveat.
Another TCJA change now limits relocation costs, including those for your pets to members of the U.S. military who relocate pursuant to military orders.
5. They are part of a charitable endeavor: 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 careful and accurate 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.
And just to ensure that cats aren't forgotten on this puppy day, here's a photo of the feline love of my life:
You also might find these items of interest:
- IRS says cats and dogs can't be corporate officers
- 7 tips to ensure your pets' safety during a disaster
- IRS says 'No' to tax-exempt status for pet care group offering heated spa,
massages and other animal amenities
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.
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