Owning a pet can be emotionally rewarding. However, having a pet comes with additional expenses. Can you get any deductions for owning a pet? While the Internal Revenue Service (IRS) does not allow taxpayers to claim pets as dependents, you may be able to claim a few pet tax deductions, subject to specific conditions. In this guide, we will discuss what deductions are available and how you can claim them.
Can You Deduct Pet Expenses on Your Taxes?
One of the most common misunderstandings is tax deductions for pets and their expenses. Many social media users have discussed pet deductions in recent times, which have added to the confusion. Let us understand the IRS’s stance in this regard.
Understanding the IRS’s Stance on Pet Deductions
The IRS does not see pets as dependents. Rather, pets are viewed as personal property, similar to a car or a piece of furniture, from a taxation standpoint. This is why no deductions are allowed for keeping pets. Any money spent on pets, including food, medicines, and grooming, is seen as a personal expense and is hence non-deductible from your taxes.
However, in specific circumstances, where pets serve a medical, charitable, or business purpose, some expenses can be claimed as deductions. Each qualifying case must meet the strict conditions of the IRS in order to qualify.
When Pet Expenses are Personal and Non-Deductible
Pet expenses are personal by default. Though some taxpayers may argue that pets offer emotional companionship, it is not seen as a valid ground to deem pets as dependents. This means, buying and maintaining a pet alone is not sufficient grounds to claim a tax deduction.
Situations Where Pet Expenses May Be Deductible
As mentioned before, there are specific situations when a pet owner can claim deductions on pet-related expenses. These specific scenarios are described below.
Service Animals and Medical Expense Deductions
If you have a medical condition that requires you to depend on service animals, you may be eligible for pet tax deductions. For example, if a person is visually impaired and requires the help of a service dog to move around, the expenses are deductible. Similarly, dogs that are trained to sense seizures and provide advance warning or assistance during a seizure are termed service animals.
Other scenarios where a dog is considered a service animal are:
- Pulling a wheelchair.
- Carrying or picking up things for people with mobility issues.
- Reminding a person with a mental illness to take medications.
- Calming a person with Post Traumatic Stress Disorder (PTSD) during an anxiety attack.
- Performing other duties that allow people with disabilities to carry on with their everyday living.
In all the above scenarios, the pets should be harnessed, leashed, or tethered. If that is not possible due to the nature of help performed by the animal, then the owner must be in complete control of the animal at all times through signal, voice, or other control mechanisms.
If the animal meets the above conditions, the expenses incurred for buying and maintaining the pet are treated as medical expenses and come under Section 213 of the IRS Code. These costs must be itemized on Schedule A (Form 1040) and are deductible only to the extent that total medical expenses exceed 7.5% of your adjusted gross income (AGI).
Pets Used for Business Purposes
When pets are used for business purposes, the expenses related to them can be claimed as deductions. For example, a dog that guards a business property or the livestock on a farm is regarded as being used for business purposes. Similarly, if a dog is used in an advertisement, entertainment, or any other promotional activities that bring direct revenue to the business, it is considered used for business purposes. However, the IRS requires strict documentation for this claim, and the onus is on the taxpayer to prove the dog’s role in business.
If a pet is used for both business and personal reasons, then the amount that is directly attributable to the business alone will qualify for exemption. For example, a pet that is used for a YouTube video that generates money will qualify for a deduction for the duration it was used in the video-making process. This income must also be reported, and the corresponding documentation must be maintained.
Fostering Pets for 501(c)(3) Organizations
Another scenario when pet tax deductions are allowed is when an individual fosters pets for any charitable institution recognized under Section 501(c)(3). In such a case, the individual can claim the pet expenses as charitable contributions. However, the individual must get a written letter from the organization and keep receipts of all expenses. Note that the deductions are available only for the financial expenses paid, including food, supplies, and veterinary care. It does not allow deduction for the individual’s labor.
Additionally, transportation costs incurred for the charity’s benefit, such as mileage to and from veterinary clinics or adoption events, can also be deducted as pet-related expenses, since they are associated with the care and upkeep of the pets.
How to Claim Pet-Related Deductions
Claiming pet-related deductions is not easy, as the IRS requires accurate and extensive documentation and records of expenses. The IRS closely examines these claims to identify any misrepresentations.
Itemizing Deductions on Schedule A
Any pet-related expense must be itemized on Schedule A (Form 1040). There is no standard deduction, and every expense must be listed and supported by proof. Service animal costs fall under medical deductions, while fostering expenses come under charitable contributions.
When a pet is used for business, all related pet expenses must be filed under Schedule C if the pet owner is self-employed. Partnerships and LLCs must list the expenses in Form 1065, S-Corporations in Form 1120-S, and C-Corporations in Form 1120, respectively.
Keeping Detailed Records of Expenses
A key aspect of claiming pet-related deductions is detailed records of expenses. If you are claiming them, make sure to furnish receipts, invoices, veterinary records, and bills for the upkeep of the pet. Additionally, make a note of how the pet is used for medical reasons, in businesses, and for charitable institutions, including video documentation and pictures, if the IRS conducts an audit. Make sure to also get written letters from medical professionals and charitable institutions to help prove that the pet was used for the mentioned purposes.
Consulting a Tax Professional
Claiming pet tax deductions is tricky because including the wrong items can warrant IRS audits and even possible fines. This is why it helps to consult a tax professional like Manay CPA, who is well-versed in helping you claim the maximum amount of deductions with the right supporting documentation. Also, experienced CPAs can properly classify expenses and file them using the correct forms to minimize errors and maximize deductions.
Common Misconceptions About Pet Tax Deductions
There are many questions and confusion surrounding pet tax deductions, especially regarding what is allowed and what is not. Clearing up these misconceptions can help you get the deductions while minimizing the chances of penalties. Some misconceptions are:
Do Pets Count as Dependents?
One of the most common questions is whether pets count as dependents. This misconception stems from the fact that kids are deemed as dependents until the age of 17, and parents can claim child tax credit, child and dependent care credit, and more, provided the children meet certain conditions like relationship, residency, etc.
However, the IRS does not accept pets as dependents, and hence, there are no pet tax credits.
Emotional Support Animals
Emotional Support Animals (ESAs) are a gray area in taxation laws. While they are, in a way, medical assistants, the IRS does not categorize them as medically prescribed service animals. The only exception is when these pets are prescribed by a licensed medical professional to treat a diagnosed mental health condition. Also, it must meet the criteria for a service animal under the IRS regulations, as outlined in IRS Publication 502.
Pet Trusts
Pet trusts are legal agreements that allow pet owners to set aside a certain amount of money that will be used for taking care of their pets, in case of their death or disability. These pet trusts are established as a part of estate planning. From a tax perspective, there is no tax deduction. That said, certain administrative deductions that are available for trusts may also apply to pet trusts.
How Manay CPA Can Assist with Pet Tax Deductions?
Pet tax deductions are complex, given that there are many conditions and specific scenarios associated with them. To help you through this maze, you need the help of Manay CPA, an experienced firm that specializes in handling taxes for individuals, partnerships, LLCs, C-Corps, and S-Corps. Regardless of your business structure and size, Manay CPA will work with you to maximize your deductions while ensuring that you are within the IRS rules and regulations.
Evaluating Your Eligibility for Deductions
Manay CPA’s team of experts works with you to better understand your business and taxation. These CPAs carefully examine how you use the pets and whether your relationship makes you eligible for deductions. These experienced tax handlers have seen thousands of taxation scenarios and know exactly what will attract the attention of the IRS. Accordingly, they will work with you to ensure compliance with IRS regulations.
Maximizing Your Tax Savings
The primary goal of Manay CPA is to maximize your tax savings. In this sense, they identify all possible deductions, including pet tax deductions, to help you save more. Moreover, they can provide strategies for managing and accounting pet-related expenses efficiently while keeping you compliant with tax laws.
Schedule a Free Consultation
If you are unsure whether your pet expenses qualify as tax deductions, reach out to Manay CPA right away. The team will review your records and scenario, explain the applicable tax rules, and guide you through the process of filing your taxes.
FAQs
Can I Deduct Veterinary Bills for My Pet?
Routine veterinary bills cannot be deducted. However, if you use the pet for qualified medical reasons or to run your business, then you can deduct them. Also, if you offer fostering services for charitable institutions, you are eligible to deduct the veterinary bills for your pet.
Are Pet-Related Expenses Deductible If I Don’t Itemize?
No. You must itemize the pet-related expenses and back them with the necessary documentation and bills. Pet-related expenses do not come under the standard deduction.
What Expenses Can I Deduct for A Service Animal?
If your pet meets the criteria of a service animal, as laid down by the IRS regulations, you can claim deductions. In general, you can claim the cost of buying the pet, any money you spend on training, food, supplies, and veterinary care. You must have bills for each of these expenses. More importantly, you must have a document from a registered medical practitioner stating that your medical condition requires you to have a pet. If you use a pet for business, only those expenses that are directly attributed to your business can be claimed as a deduction.
How Do Pet Tax Deductions Impact My Taxes?
A pet tax deduction is similar to any deduction you make on your income. When claimed properly, it brings down your overall tax liability, leading to potential savings. For example, you own a warehouse where you store items for your business and use a trained guard dog to protect that warehouse. In this scenario, the cost of the dog plus its expenses, like food, supplies, training, and veterinary care, may be partially claimed as business deductions.
Can I Claim Pet Expenses If I’m Self-Employed?
Yes, but only if the pet serves a specific business function. It can be guarding your property, promoting your business, featuring in advertisements, and any other activity that directly contributes to your business revenue. Note that you will have to claim deductions in appropriate forms. For individuals and single-member LLCs, use Schedule C (Form 1040) and itemize all your deductions. If the pet is used in a business related to a farm, use Schedule F (Form 1040) to record your expenses. Make sure to maintain bills in case of IRS audits.
