Don't Mess With Taxes

This pup looks like he's asking it it's time to open gifts. (Photo by Unsplash+ in collaboration with Getty Images)

Next Monday morning, Dec. 25, many families will welcome a new member. I'm talking, of course, about a pet.

A puppy, kitten, or other pet of any type of age can be a wonderful addition to a home.

Pros and cons of pets as presents: But many animal groups and veterinarians warn against giving a pet, especially as a surprise, during the holidays.

This already is a stressful time for many, and if everyone who will be involved in the animal's life is not fully onboard, the gift can backfire.

If you're still considering a pet as a gift, Anderson Humane in Elgin, Illinois, has some do's and don'ts of giving pets as Christmas gifts.

Of course, if you already have a pet, by all means make sure it has a present (or two or three or …) under the tree.

And don't be embarrassed. Eighty-one percent of pet owners spend, sometimes a lot, on their animals' holiday gift(s).

Beware pet scams: One definite pet don't during the holidays or any time of year is falling for a pet scam.

The good news, according to the Better Business Bureau (BBB), is that animal related scams in North America appear to be on the decline. The peak, as you've probably already guessed, was during the COVID-19 pandemic during 2020-2021. The bad news is that in 2022, even with fewer pet ploy victims, the losses neared $2 million.

BBB has tracked this swindle since 2017, when it issued an in-depth study Puppy Scams: How Fake Online Pet Sellers Steal from Unsuspecting Pet Buyers.

Pet scams typically are online schemes where the site operator fraudulent posts about a new litter up for adoption. The real goal is to steal either a potential purchaser's money, identity, or both.

The advertised pets usually aren't real. In fact, many pet scammers steal photos of real dogs from a reputable site and use those images to generate their fake postings. You can do a Google photo search to learn the images' source.

Here are some other pet scam red flags from Michigan State University College of Law's Animal Law Legal Center:

• The pet seller has very specific communication rules. If the seller prefers to handle all correspondence via email, it is worth pushing for a phone call or video conference. The most ideal situation would be to meet in person.
• The site is in an unusual location. A vast number of these scams come from overseas. The overseas parties may explicitly state where they are located, such as looking to sell an English bulldog from England, or may hide their location. Check to see where the website is posted from or use available Google software to see the domain address.
• The seller has questionable payment requests. Like other online scams, fake pet sellers often request payment via unsecure wire transfers or gift cards, rather than personal check or through official banking channels.
• The pet's price is "great." A majority of scam pet postings create a too good to be true price point to lure in potential buyers who may not be able to afford the higher prices reputable breeders charge. If the price is significantly lower, or the only costs to the purchaser is certain shipping or other costs, that could be scam sign.
• Added costs add up. That seeming low pet price often is offset by unusual charges in place of an adoption fee. Thing that could signal a scam include extra shipping charges; a (not really) refundable deposit or, in rare cases of honesty, a non-refundable deposit; special travel crates and accessories; and insurance.

Do look into pet tax breaks: Most pet owners will tell you that it's that animal who owns them, and that the pet is really a family member. See the part about Christmas presents earlier.

Uncle Sam might agree, but when it comes to taxes, your pet is not a legitimate dependent that can be used to claim a variety of tax breaks.

However, some pets do provide a handful of tax benefits. The key is to know the special circumstances that apply.

Here are five animal-related tax breaks.

1. The animal serves a medical purpose. 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. The animal works for you. 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 is overly protective of you and does yap all the time.

3. The animal has another job. Some of my favorite (not-tax) accounts on the social media site formerly known as Twitter are those that feature cats with jobs. Yes, they are fake.

But in situations where your pet's performances earn you money, the animal's expenses could be claimed as a business expense.

This could be a legitimate tax consideration when your amazingly cute (or Grumpy Cat) pet is paid to appear in commercials, television programs, movies, or print advertisements.

OK, there are only so many Eddies (from the original Frasier) or Marcels (from Friends; check out "The One After the Superbowl" for the touching final goodbye). But many people find that their pet is the real star, and money-making audience driver, of their YouTube channel.

In all performing animal cases, keep accurate records of the activity that earns income and every expense related to ensuring your pet performs optimally.

4. The animal's costs are related to a charity. 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 usual expenses, 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.

5. You and your pet moved. 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, but only if you are an active member of the military who relocates pursuant to military orders.

This above-the-line tax deduction used to be available to all whose work-related moves met IRS requirements. But the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated it for all but military personnel who relocate pursuant to military orders.

I know, your pet is much more to you than a tax break. But I'm sure your devoted animal companion 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.

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