Pet Tax Deductions

Kerri Fivecoat-Campbell for Petside.com writes: The dreaded tax season is upon us if you live in the United States, and who among pet parents hasn’t wished that our four-legged and feathered kids were tax deductible.
Initiatives in Congress to get some sort of a deduction have always died a pretty quick death, but there may be hope for a small percentage of us who want to deduct some expenses associated with our pets.

Jeff Sklar, CPA and managing partner with Sklar, Heyman, Hirshfield & Kantor, a CPA firm in Bellmore, New York, says that some animals, in some instances, could be a tax deduction.
Here are the instances in which your pet may mean a deduction on your federal taxes:

1. Donations to 501(c)(3) Animal Rescues
Sklar says this does not typically include adoption fees, as you are receiving something for that fee. Sklar advises against even thinking about using it.
“There are costs associated with that pet, such as vaccines or doing a spay or neuter, so those are costs for the organization and the fee covers those costs and you then get the pet for that fee, so this is a slippery slope,” says Sklar.
For the amount of the deduction if you try to take that fee as a donation, Sklar says it just isn’t worth the risk. “I say don’t put yourself in a position to be questioned, if you’re going to make an error, I always advise my clients to make it on the side of conservatism,” he says. However, if your adoption fee is $50 and you give them $100, you may be able to deduct that additional $50 as a tax deductible donation.

2. Deducting the Cost of Your Pet as a Business Expense
If your furry or feathered baby is also a business for you – if it has made it big as a viral Internet sensation, for example – you may be able to deduct certain expenses related to your pet as a business expense. Sklar cautions that you must perform excellent record keeping. What is deductible depends on the type of business. If your cat is getting its picture taken every day, the cost of grooming it year-round might be deductible. If it appears in one commercial once a year, only one grooming may be deductible. The other trap people fall into, Sklar says, is claiming a hobby as business.
“Show dogs might be a business, but [they] very well could only be a hobby,” says Sklar. For example, if you’re only making $200 per year on an animal and losing $20,000, the IRS will see it as a hobby, Sklar says. Food, vet care and other expenses as related to the pet are also questionable, depending on the business and whether that animal would be a member of your household even if you didn’t have the business.

3. Service Animals
Sklar says this area is less gray.
“Their expenses are generally deductible if they are service animals for eye, hearing or physical disabilities, according to the IRS code,” says Sklar. That means, food, vet care and grooming are generally deductible as a medical expense, he says, because they’re always working. Sklar says he hasn’t dealt with clients and the issue of PTSD or other mental or emotional disabilities, but if the dog is a certified service dog needed to maintain a person’s lifestyle, he says he believes they would still be deductible.

Consult Professional Tax Help Before Making Any Deductions
Sklar says the biggest problem he sees with people and their taxes is that they think one size fits all. “Everyone talks to their friends and they think their situation should fit another person’s,” says Sklar. “They don’t know that person’s individual situation or their deductions.”
The bottom line is that before trying to take any deduction for yourself, you should consult your tax accountant and if you don’t have one and cannot afford one, there is help out there through non-profit organizations.
If you’re trying to take an unusual deduction, such as with your pets, it’s very important to consult your own professional. “Some of the canned home programs don’t address these issues,” says Sklar.