10 Ways to Write-Off Your Pet on Your Taxes

Welcome, everybody. Coming with a unique topic. Pets.

You know, 68% of Americans have a pet. It is more likely that a U.S. household is going to have a pet than a child.

Okay, well, let's dive into it. We're going to make this a quick show, hit some items. 68% of you are going to enjoy this show because you have a pet. For your other 22%, you know, whatever.

Yeah, the CPN on the podcast.

Yes, I'm the resident CPA there. Sorry. Okay, well, here's what we're going to cover. And Matt, hit an important one for everybody that is going to affect every one of you. Do you have your pet in your estate plan? And we're going to wrap up with the legal issue here after we go through some tax strategies. But who's going to take care of your pet if something happened to you? Are you going to leave them a little money? Are you going to have a plan of where they go? Who's the guardian? How's that play out? And a lot of pets are euthanized every year because they get dropped off at the shelter because the family's like, I don't want a little Fido. Who's going to take them? And there wasn't a. With maybe a financial string that would help make that happen. So we'll come to that in a minute. All right, we got dogs, cats, service animals. We're going to talk about working animals, performance animals, fostering, breeding, advertising. When you find a business, medical or charitable reason, we're going to go through a variety of reasons why you might be able to write off your animal slash pet. What we're looking at is acquisition cost, vet bills, food training, leashes, equipment, supplies, dog bowls, boarding, Frisbee. Oh, a Frisbee.

Frisbee, you know, fetch.

You got to entertain the dog. It's true. I like that. A Frisbee.

You know, they got to be fit if they're going to chase down, you know, wet bandits coming in, breaking in at night.

This is such a fun topic. So think of all the expenses related to the pet. That's our beta. That's what we're trying to write off, is that beta factor of all those expenses. Dogs number one, write off for dogs. Matt, you nailed it earlier this morning. What do we have for dogs?

Well, I like the security dog. And you don't have to have, you know, the. The Rottweiler or the Doberman or whatever, you know, aggressive dog there. You don't have to have, I don't know, a warehouse or something.

What? I want to comment on the security dog too. Two little things. It doesn't have to be a killer. It might just be a very noisy dog. And you would write it off under the security line. You're not going to put dog welcome audit. Bring it on, cats. Oh man, I like this one.

Why get, you know, chemicals and stuff all over your property or your business when you could just do it the old fashioned way and get a cat pest control. It's like the old school pest control that God intended.

All right, just get a cat. Disney has, I think somewhere between 10 to 15 cats on property on purpose.

I like this. And I think, remember this has got to be a business use. So we're not talking about pest control writing this off for your house. You don't get to write that off if I have ABC Pest control company coming. But if this is a business location where you do business and you have a pest problem, you could be using a cat for that purpose and writing off the cost of fish.

It's kind of funny there. Some of you might have an aquarium in your business. Many of you might have been to a doctor's office, a dental office and they have a cool kick butt aquarium. Yeah, that's going to be a write off. It's part of the decorations. I'm just thinking now all of a sudden, a koi pond. Maybe you've got a pond and you're

maybe a little decor at the office. Yeah.

Which now, okay, which gets us into an animal business. You might be a breeder and you're selling off cats dogs and you're, you're required. Some of you are like, well, I take that money under the table, don't get audited. So if you're a breeder and some of these dogs are terribly, I mean expensive, 1500, $2000, a paper AKC dog or all these different acronyms for different classes of animals. You get audited, you're gonna be busted. You gotta claim that on a schedule C, but the N, you get to claim all of the food, vets and expenses of that animal during the year even before they give birth, maybe the following year. So track all those expenses which you get to take as a deduction against your breeding. And if you're somebody like, well, I already own the dog and I'm going to contribute them to the business. You might be doing a journal entry. So you might have acquisition, breeding or trading costs that you've already incurred. And now you're bringing the pet into the business. It's almost like you Had a car that you've owned for years. Now you started a business and you bring the car into the business, you get to write that car off. If you go under the actual method here, there's, there's not a mileage method for animals. Stick with actual. So which brings me back to the koi pond. Some of you might be raising fish and selling those or other types of fish, you know, that are game fish and selling them for profit. And so that's going to be a business based on a breeding. It sounds a little morbid. You're breeding fish to be eaten. But that's what fish do. So sorry. Some people like to look at them.

No comments on this advertising.

I like what you were talking about, Matt, with that bike shop. Some people have logos with their animal in it. Think Taco Bell dog. Think, you know, Geico lizard.

I like it.

I think too, if you're in the business of producing online or selling online or storefront for pets, you might be doing dog sitting, dog petting. And so you've got different supplies that you pay for in your business. That's going to be a great write off. Fostering. The problem with fostering pets, if you're not selling the pets that you're rescuing, it's going to be more of a charitable deduction. Deduction. So we went from business to medical, bounce back to business. Now we're over on charitable. Because if you're going to run an operation to foster and rescue pets, if you're itemizing, that's going to be a charitable deduction on schedule A.

Yes. And you got to be itemizing. If you're taking the standard deduction, that ain't going to help you. So make sure you're. You'd have to be itemizing for that to work. And I think a lot of those are working with the nonprofit. Right. Most of those are rescues and those rescues are nonprofits. Typically you're kind of serving as a function of that nonprofit incurring costs for the benefit of taking care of dogs there. So see, a good way to write, write that off as charitable, man. Some of these I didn't even think of. Mark, you're like, I'm like, isn't this great? Of Americans that have a pet.

Yeah. Okay, I got another one. This brings up your Frisbee performance animals. So, you know, on espn, the jumping dogs for the over the water, you've got the Frisbee dogs. There's actual competitions for this. And so I've thought about Winnie. They're going to do Some training with her on Frisbee. Well, I had.

Funny, I had a contractor to help him remodel a house for me. And his daughter rides horses in like performance shows, you know, like, you know, equestrian events, I think would be the word, but. But does all the things like the jumping and all the little things. And he heard I was a tax lawyer. Oh, he was throwing questions at me about how to write off this and that. And I'm like, does she make money? Oh, yes, she's made like, she's made tens of thousands of dollars in prize money from these things. She's apparently very good. But that is like a very exp. Sport, whatever you want to call it. So that is a business. You're making prize money. That's income to which you can write off those expenses. The one thing you got to be careful about with those is that you don't. That doesn't run into a hobby. So if those types of businesses where you have a horse or a pet that's competitive or competing or you're involved with them competing, you're getting the income. It's not going to Glue Stick, whatever your horse's name is.

Who names their horse Glue Stick?

It's on a movie. I forget they got like, now everybody gets their horse. I forget which one. And maybe it's on Three Amigos, I don't know. And then this guy gets like the leftover horse and he's like, ah, thanks. I got Glue Stick, this old hack horse. But those costs of that animal, that's part of earning the income is going to be. Is going to be expensive, that business. But it can't be a hobby. You can't just be losing money at that every year. Otherwise those expenses in that business is not going to be legit. So. So you got to be careful writing off too much expense on those animals if the, if the income is pretty minimal.

Now, the reason why some of you are like, well, I'm not even going to go down this route because many of you want the write off but don't want to claim the income. But in a lot of instances, you might be getting a 1099. If you're doing Rover, you're going to get a 1099 from Rover. If you're doing competitions, hunter, jumper, equestrian, you're rodeo, you're going to get a 1099 with prize winnings. Then you got to claim it and you're like, oh, I didn't track all those expenses. We had a client that did show horses and they rode off the rv. Because the only time they used the RV was for the, the shows and the rodeos and the equestrian events.

Well, I was gonna say one other thing on that, just another on, on the horses is, you know, we've had clients invest their Roth IRA or other retirement account to own a share of a racehorse that's in the Kentucky Derby and that could potentially didn't win, but could have won the big prize money from some of these, you know, racehorse events, where those are definite businesses. I mean, the money and investment into those horses and the riders and jockeys and all, all that is, that's a business. There's sponsorship dollars for them and all those things. And so we had, we've had clients invest in actual racehorses, which you can do in a tax deferred or tax free manner with your traditional IRA or Roth ira, which we're doing a directed IRA every day. Just throw a little plug in there.

I love it. Okay, I've got a couple more. I'm not even done yet.

Okay. I was, I was, thought I was doing good for digging in that one. Keep going.

That was great. I love that one. That was a good one. Clients will breed dogs inside their IRAs. You can't run the breeding operation in your own home, but you might participate in an LLC with someone that's going to help the breeding. Okay. Working animals. Now if you've watched the Westminster Dog show on Thanksgiving Day, they have the working animal class. And then those ladies with their, their leggings and their long dress or skirts come running out and they run totally level with their dog. They're like, you know, it's kind of funny. And all the handlers look like a trot.

They like trot.

And they go, now it's time for the working class. Okay, so the working class is you have think of maybe Lassie ran in this, I don't know. But a lot of farmers have a dog with their herd. That dog is a write off because it's a working animal. So that dog is helping out on the operations of the farm and the business. And some of you may have a dog. Again, this might border up against advertising. They might be helping out. And you'd think back to the cat that's doing pest control, that's a working animal. You've got a dog doing security, that's a working animal or working class. So you want to be thinking about those. Okay. And then we, so we have performance animals, working animals. And the last one is law enforcement, dog handler. So some of you might be a trainer so if you're a trainer, not a breeder, but a trainer, and you're. Matt, what have we said about training hunting dogs?

Yeah, well, how you train lawyers, you know, how do you teach? How do you train new lawyers? Get them out with the other lawyers. It's like, how do you teach? That's Mark told me. I'm like, how are we going to train these lawyers? How do you teach a hunting dog how to hunt? You get them out with the other dogs. Okay, we're going to do it. Yeah, true.

And so if you're a trainer, your own personal dog is going to probably be part of that training program, and you're going to collect the revenue from training. And you may not think, oh, I should be riding off my own dog at the same time, because they're helping train the other dogs. That's a key part in training, is having the dog around other dogs. I learned that partners. Winnie, been going through that. I got one more on the working dogs. I'm going to go hunting. We have a lot of clients that run hunting operations, hunting ranches, hunting preserves, hunting clubs. And the dogs are a working dog on the hunting property. For the clients that come and want to shoot pheasants, dove, or even go up in this area up in Idaho right now, they're gearing up wolves. Wolves. They're going to have hounds going after mountain lions, cougars and wolves soon. That with deprivation permits that because these predator animals go after the livestock, elk and deer that are having newborns in the spring. And for some of you that are environmentalists, you hate to hear this, but they can get out of control. So these permits are given out to different guides, and those guides need dogs. A lot of times they're hounds and other dogs that help track these predator animals, and so they're able to write those off. So working dogs could be in a hunting preserve or hunting club as well. Well, all right, well, estate planning, Matt, Bring us. Bring us home.

Yeah. I mean, with so many people that have a pet, you know, you need to think of who's getting your pet upon your passing. And you got to have a plan for that. You're planning for your kids, you know, you're planning for what's going to happen to your assets and such. But, you know, many families have a. A pet that they love, that they want to make sure is cared for. They want to make sure the right person takes care of it, and also that there's money set aside for them. So you want to indicate in your estate plan who you Want to care for your pet upon your passing and allocate some money and funds for them. Whether it's a one time amount or it's amount coming out, if your trust is continuing on. Sometimes I just recommend a one time amount. You know, hopefully you've got someone you can trust with that, with that amount of money to take care of that pet, depending on how old they are and life expectancy left. But, but think of allocating funds and who's going to take care of that pet upon your passing. Include it in your estate plan. We do it at KQS lawyers on the estate plans we're doing. It's a question we have that when we go through the process with you is do you have a pet? What's your plan? Your pet upon your passing.

Now if some of you don't even have a will or you did your estate plan and didn't include your dog or cat or whatever your pets are, it's a simple one page amendment. You may say, guys, I need to trifecta. I want you to look at my tax returns. I want to talk about some write offs. And by the way, can you amend my trust? We can do it. All of our tax lawyers have that skill set. So our contact information is down below in the description and get with one of the lawyers. I think this is just such a fun topic and there's so much here. I'm going to disagree with Matt just a little bit. I'm nervous about the one lump sum. You know, you die and you leave that five grand to your brother in law or classic for this I'm going to leave my dog or whoever to my brother in law and five grand. And then mysteriously a few weeks later that poor dog is out on, you know, off his leash on i95 and the worst could happen. Yeah, because they already got his money and you're up in heaven. And the sad part is you're going to be up there. It could be just within days, weeks, who knows? You're up going through the pearly gates and here comes Fido running up behind you. You're like what the hell happened to you? Goes I don't know. I was just running around without a leash. This was great. Brother in law's five grand richer and at least you have Fido up with you in heaven. I don't know. So yeah,

brother's law is gonna, you know, do you dirty like that on five grand at one time. He's gonna do it for 500 bucks a month or 100 bucks a month or whatever it is. And that's also going to be a pain to administer for your trustee of doing that money out every month. Oh, okay. Really? I gotta do all this out? So hopefully choose your, you know, caretaker of your pet wisely.

Now here's the thing. Give your trustee five grand to dole out $1,000 a year upon a pet inspection. And you want to make sure that that pet, that cat has not been spray painted, as in Robert De Niro had to deal with a spray painted cat in that movie. So you, you know, just, you might a thousand a year, then you're not administrating it monthly. Could be easy. But you want to put some teeth on this thing, you know.

Okay.

No pun intended. So

some canines on it.

Take us out.

Thanks guys. Well, hope you enjoyed this episode of the Main Street Business podcast. We love talking about this stuff. Saving taxes, pets come into this. We all have them. Hopefully you enjoyed that. Maybe some of you got a little write off in or some information on how to make sure your pet's taken care of in your state. So yeah, we do this every week. So make sure you're subscribed to the podcast, subscribed on YouTube. Give us five stars. If you you liked it, help share it, get the word out. Thanks for being here. We'll be back next week.

Thanks everyone.