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How Your Pet Can Save You Taxes

In honor(?) of tax reporting season, here are some ways you might be able to use your pet to save money on your income taxes.  Thanks to Emily Zulz of ThinkAdvisor.com for having compiled the original list.

  1. Hire your pet for your small business. You heard that right! If you are a small business owner, consider utilizing your dog for security or your cat for rodent control.  Expenses such as food, veterinary care, and training for the animal could qualify for a business deduction.  And you wouldn’t even have to pay them a salary!  If your pets don’t actually live full-time on the business premises, you might still be able to pro-rate their expenses during the times they are faithfully executing their business duties.
  2. Turn your pet into a service animal. According to IRS Publication 502, service dog and guide dog expenses are tax deductible. However, such expenses are considered medical expenses, which are only deductible to the extent that they exceed 7.5% of your adjusted gross income.  In addition, with the new higher standard deduction under the new tax law, it may now be harder to exceed the deductibility threshold.  In any case, be sure not to try to claim a snake or a peacock as a service animal, as some airline passengers had attempted recently.  The IRS does not have much of a sense of humor.
  3. Adopt a foster pet. There are numerous qualified charitable organizations needing volunteers to take care of animals at shelters or to train animals (typically dogs) to be used as guide dogs or as rescue animals. Unreimbursed expenses for food, supplies, veterinary bills, and even trips made to further the organization’s work are all tax-deductible.
  4. Put your pet to work as a performer. Performing animals are used in commercials, in movies and television, and in other media and related industries.  When you use your pet directly to generate income, expenses related to its care are legitimate tax deductions.

Keep in mind, though, that most expenses related to your pets are not deductible.  Here are a couple of commonly misunderstood ones:

  • Adoption fees paid to a rescue organization or local shelter are not deductible. You can make deductible contributions to such organizations as long as you do not receive any consequent benefits (such as taking home a new pet).
  • The costs of using your pet for a hobby, such as for competing in dog, cat or horse shows, used to be deductible to the extent of any earnings you received from the activity. But hobby deductions also went away under the new tax law.

Even if your pet won’t qualify for a tax deduction this year, don’t fret.  After all, you didn’t acquire him or her solely for the purpose of reducing your taxes.  Consider any tax benefit that the IRS offers as a bonus.

 



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