In general, deducting pet expenses on your tax return can get you into hot water with the Internal Revenue Service (IRS). Usually pet expenses will not hold up should the IRS audit you. However, specific cases exist that allow you to take legitimate tax deductions for spending on your pet.
Regardless of how you justify your pet deductions, make sure that you have receipts and documentation for all expenses you claim on your tax return or they will be disallowed.
Guard Pets
Guard animals could pass muster for a deduction for your business. If you consider deducting your pet as a guard animal, make sure that they actually perform guard duties. Your pet’s breed should be one that is often considered that of a typical guard animal. For instance, a pit bull could be considered a guard dog while a Chihuahua probably would not.
It would be beneficial if you could prove your pet had additional guard training. Make sure to keep documentation showing how your pet guards your business property and how long they guard it for each day. The more evidence you have to substantiate your claims, the more likely the deduction will hold up if it is indeed a legitimate business expense.
Guide Animals or Medical Necessity Animals
Whether you require a service animal to help you with post-traumatic stress syndrome or a service dog to warn you of pending seizures, your pet costs could potentially qualify as a medical expense. Make sure to get a prescription from your doctor, or some other documentation that shows your medical necessity, prior to obtaining any pet that you claim, or the IRS may conclude that your pet does not meet the requirements to deduct these pet expenses. Keep any documentation that shows how the animal was specially trained to help you with your medical condition, too.
These expenses will only be deductible if you itemize deductions rather than use the standard deduction. Additionally, the deduction only kicks in when your medical expenses exceed the required percentage of your adjusted gross income (AGI), which is 7.5 percent for those under the age of 65 in the 2017 tax year (filing in 2018). The TCJA lowered this threshold from 10% for tax years 2017 and 2018, but it goes back up to 10%, effective tax year 2019.
Pets as Part of a Business
Your pet could easily inspire you to start a business that would allow you to deduct pet expenses. It is essential that you be careful when heading down this path. Your business must truly be a business, not just a hobby, to be able to claim expenses in excess of your business income. If your business is declared as a hobby by the IRS, you can only deduct expenses up to the amount of income that you earn from your hobby.
So what type of legitimate businesses could you start? You could start a pet-breeding business with almost any type of pet, ranging from birds to horses or dogs. You could make a business from pet competitions like horseracing or greyhound racing. Make sure your pet would actually be considered an expense of the business in these situations. If they are not involved in the business, you would have no basis to deduct expenses related to your pet.
Your Pets Are Not Dependents
Even though you may love your pets as members of your family, they do not qualify as dependents in the eyes of the IRS. Trying to take an exemption for a pet as a dependent will cause big problems when the IRS audits your return.
As always when it comes to taxes, the content of this article is informational and may or may not apply to your specific tax situation. The Tax Cuts and Jobs Act of 2017 did away with many miscellaneous deductions, so this may be the last filing season you can claim some of these pet deductions. The new law also raised the standard deduction from $6,350 in tax year 2017 to $12,000 in 2018 for single filers, and from $12,700 to $24,000 for married filing jointly. This reduces your future incentive to itemize deductions such as those for pets. Make sure to consult with a tax professional to determine whether your personal pet expenses are deductible.
