Published June 14, 2012
In many households, the pet has become an integral part of the family, but the IRS isn’t allowing you to write them off as dependents, even if the amount spent on four-legged members is equivalent to the kids.
However, there are some situations in which you can take a deduction for man’s best friend.
Medical. If you require the help of a service dog in order to meet your daily needs, you may write off the care and feeding of the animal. This includes vet bills, food, play toys, even clothing – pretty much anything that will ensure the health and vitality of the service animal. The cost and training of the dog is also deductible.
And it does not necessarily have to be a dog--other service animals also qualify. This brings to mind a favorite episode of the television series, “Malcolm in the Middle,” in which a neighbor, temporarily disabled by a fall from the roof, engages a service monkey. It all goes sideways with hilarious results, but the point is, any service animal is a write off.
Be sure to have a prescription or a letter recommending the use of a service animal from your doctor, the IRS will want this to confirm the validity of the deduction.
Security. Writing off an animal for security purposes can be hard to prove. First of all, personal security is not deductible, so there goes any attempt to write off your vicious little Chihuahua as homeland security. An auditor will just roll her eyes and begin wondering what other creativeness you’ve been up to with your Form 1040.
So that leaves the business deduction. A 15-year-old deaf spaniel that sleeps under the cash register in your shop is not a valid security deduction. The auditor will know that you are bringing your family pet to work. Don’t even try it.
But your typical junk yard dog, which is so feral and mean that the owner can barely pet it without losing a hand is a different story. Animals that remain on the premises once you vacate to protect capital assets and inventory is deductible. These animals would be considered an “ordinary and necessary” business expense. Expenses incurred for the cost of the animal, the training, vet bills, maintenance and feeding would all be deductible as business expenses. Be ready to convince an auditor that your dog, who is not at all a pet, is a more practical choice than alarm systems, cameras or other forms of security.
Dog breeding, showing and racing. For taxpayers involved in the business of breeding, showing, or racing dogs, there are deductions allowed. Or maybe you are a street artist with a little circus dog who is an integral part of your act. Follow the rules for breeding and racing horses on this one.
Here again, all expenses relating to the care and vitality of the animals are deductible. Hobby loss rules apply as well so if you do not show a profit year after year, it’s possible the IRS will disallow the deductions that create the loss. Make sure you show business intent by keeping good books and records, keep copies of business licenses, advertising, anything to prove that you are treating the enterprise as a bona fide business activity in order to prevent the reclassification to hobby.
Employee business expense. Perhaps you are a fireman with a Dalmatian, or a policeman with a canine companion and you must provide for the care of the animal out of your own pocket. Usually your department will cover the costs, but most employees will end up shelling out a few bucks every year without being reimbursed. If this dog has an actual job – sniffing out drug dealers perhaps - then you may take a deduction on Schedule A of your tax return under employee business expenses for any unreimbursed costs.
Whatever category your deductible dog falls into, be ready to prove business intent. And keep all receipts.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know.” Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.