According to the common saying attributed to Benjamin Franklin, "only two things are certain" in life: "death and taxes." But in our world, we like to think it's "pets and taxes."
It’s estimated that over 68% of American households have a pet, and there are a variety of ways to either make money with your pet, use it in a small business, or even for a charitable or medical reason. Bottomline, there are legitimate tax strategies buried in the tax code that millions of Americans take advantage of, and others know nothing about.
However, before you pop the champagne, keep in mind that the possibility doesn’t apply to everyone. There is limited availability to deduct pet expenses. Only in a few circumstances, you are able to deduct limited pet expenses.
After the economic fallout from the COVID-19 pandemic, everyone could use a break on their taxes. Even though pet parenting might feel like a full-time job, you can’t claim pets as dependents on taxes — but you can write off certain pet expenses if you meet certain criteria, helping to keep more of your hard-earned money in your pocket.
Below are six reasons you may be able to write off your dog or cat:
1. You’re a Foster or Rescue Volunteer
When you foster a pet, it opens up space in local shelters and animal rescue organizations for even more animals in need to be cared for. We can’t recommend it enough. It’s a selfless act that saves lives, and it can also save you money. If you foster a pet for a nonprofit adoption organization, you may be able to write off any unreimbursed expenses.
These write-offs could include pet food, cleaning products, medicine, grooming supplies, crates, or vet bills. Driving expenses may even be applicable to certain situations, especially when volunteering for animal organizations.
You can also deduct 14 cents per mile on any charity-related driving, excluding commuting expenses though. Of course, it wouldn’t be taxes if there wasn’t a vague caveat to temper the excitement. Be sure to note that only pets fostered from IRS-qualified 501(c)(3) organizations are eligible for these write-offs.
Always be sure to align yourself with a valid charity that has the proper status with the IRS, which means that they are recognized as a tax-exempt organization.
2. Your Pet is Part of the Family Business
Though the IRS doesn’t consider pets to be our children (can you tell we’re a little bitter about it?), some pets are able to contribute to the family trade. Individuals with pets who help run operations may be entitled to various tax breaks.
For business owners, pet expenses are deductible if they provide a service for the business. This would include farm dogs who protect livestock from prey. In this scenario, the expenses needed to maintain the life of the dog would qualify as tax write-offs because they’re recognized as necessary for the continued operations of the business in pursuit of income and growth.
Working animals can play an important role in many different types of businesses. For example, dogs can be used for herding livestock on a ranch or farm. These animals are essential to the operation of the business and their care can be costly.
Here is a list of a variety examples of working animals:
- Search and rescue dog at the ski resort
- Police-type dog in a security business
- Drug sniffing dog at the entrance for an event business
- Doves in a wedding business
- Therapy animals at a physical therapy office or nursing home
- Horses that are used for transportation, riding, and in some cases, farm work
- Chickens can be used for insect control in some industries
- Falcons that are used for bird abatement, to scare away pest birds from crops and public spaces
- Even goats in a yoga business – yes, seriously!
The list of animals that can be used for work is extensive, if your ‘working animal’ serves a legitimate business purpose the following expenses related to the operations of the business will be deductible:
- The purchase of the animal
- Food
- Bedding
- Boarding
- Grooming supplies
- Veterinary care
- Medication
Other examples would include cats who conduct pest control for a business location or pets who are used in advertising on the company’s social media. In regard to advertising, you must be able to prove that they directly produced related income.
For example, if your animal is a key central token to your TikTok channel that generates income for your business, it’s known as a ‘performance’ animal to the IRS as it is directly tied to producing income for the business so the stated expenses would qualify as write-offs.
3. Your Pet is an Influencer
If your dog is anything like my dog, it's also possible that they may be the breadwinner in the family. Also known as a paid influencer. If your dog or cat is the type of animal to have their own Instagram page or YouTube account, you may also qualify for a pet tax deduction because they still perform in a way that earns you income. As a result, you could potentially write off their expenses. This would include pets who have worked on a movie set or have competed in events that offered cash prizes.
However, the most likely scenario here is if your dog or cat is one of the 10,000-ish pet influencers I follow on Instagram. This would all fall under that performance animal designation. Just be sure to keep your books in order come tax season and keep track of all of their expenses and income.
If you have a ‘performance animal,’ make sure you keep records of all the related expenses. The records you keep will determine what you are able to claim and how much you are ultimately able to lower your tax liability.
Social media platforms like Instagram and Facebook are great ways to show off your pet in your business. Create a profile for your pet and post pictures and updates related to your business. Use hashtags to increase the reach and engagement of your posts.
You could bring your pet to special events like trade shows or community events. This can be a great way to attract attention and promote your business.
4. Your Pet is a Service Animal
As previously mentioned, we can’t claim our animals as our actual children (how rude), but if you look hard enough, you can find a loophole for anything. And there’s one here.
As per the IRS tax code (see Topic No. 502, Medical and Dental Expenses on the IRS Website, seventh bullet point), individuals with disabilities may be able to write-off the expenses related to their service animals as a valid medical expense.
Service animal-related expenses may be eligible for a tax write-off because your pet is providing a medical service to you. This extends to emotional support animals in many cases, as well. You can write off any service animal medical expenses that exceed past 7.5 percent of your adjusted gross income. You’ll just need to prove that your pet provides a specific medical service to you.
One important step in claiming the deduction is obtaining a “Letter of Medical Necessity” from a licensed healthcare professional. This letter should include information about the individual’s disability and the ways in which the service animal assists with their daily activities. It’s important to keep this letter on file, as the IRS may request it as proof of the medical necessity of the service animal.
It’s also important to consider where you might write-off the medical expense. There are 4 primary options:
- Itemized Medical Expense
- Health Savings Account
- Flexible Spending Account
- Health Reimbursement Arrangement
Again, if your animal legitimately serves a medical purpose and need, the greatest expense will generally be that of the acquisition price and training, which can sometimes be very expensive. Consider the example of a seeing-eye dog.
If you can prove the medical ‘need’, of course, the following expenses will be deductible in the method from the four options listed above:
- The purchase of the animal
- Food
- Bedding
- Boarding
- Grooming supplies
- Veterinary care
- Medication
5. Your Run Pet Boarding, Grooming or Related Services
Running a pet boarding business can also be a rewarding and profitable venture. This includes not only animals in your care at your business/home location, but also caring for pets in the homes of their owners by grooming, walking, ‘animal sitting’, or training.
Obviously, the expenses related to the care and feeding of the animals in your care will be deductible in the operation of the business, but it may also include the ability to deduct your own animal in the process. Your pet could provide companionship and a calming effect for the boarded pets. Possibly even entertainment and socialization for the boarded animals. This implies that your pet becomes a necessary expense for the business operation.
According to the IRS, expenses must be ordinary and necessary for the operation of the business and must be incurred with the intent of making a profit. As a pet trainer, your expertise and reasoning for the purpose of your own pet in the operation will be important to justify the expense. Make sure you properly document your position in an effort to take such write-offs.
6. You Are A Reputable Pet Breeder
Breeding is technically a business and can be a very profitable one at that. While we prefer to "adopt, not shop" around here, we do work with many reputable and ethical dog breeders around the country. Well now it's a good time for existing breeders to make it legitimate and take the tax write-offs! Pet breeders are able to write-off related costs as valid business expenses. This includes expenses related to
- The care of the animal
- Feeding
- Breeding of animals
- The cost of acquiring breeding stock
- Any travel related to breeding the animal (for instance, to breed exotic or rare animals or to acquire delicate or fragile breeding materials such as horse semen).
To qualify for the deduction, the animal breeding operation must be a legitimate business and not just a hobby or underground operation. Thus, the breeding activity must be conducted with the intent of making a profit. But, with the proper documentation and information, animal breeders can receive the tax benefits they deserve while also ensuring the success of their business.
Exceptions: The Hobby Loss Rule
However, you have to be careful of the ‘hobby loss’ rules. The IRS distinguishes between hobbies and businesses. An individual can only deduct hobby expenses to the extent of hobby income, while they can deduct business expenses regardless of whether the business is profitable. The IRS defines hobbies as activities pursued for the purpose of enjoyment or pleasure and businesses as activities with a primary purpose of profit.
Essentially this means you get the ‘write-off’ in the business/hobby, but you can’t take the net loss as an ordinary expense against your other income. The loss must be carried forward and can be used against future income in the ‘hobby business’, even if you sold the animal, the losses are locked down until there is future income in the business that unlocks the losses.
To avoid being classified as a hobby and running afoul of the IRS hobby loss rules, individuals must demonstrate a profit motive. This can be done by showing that they have a reasonable expectation of making a profit from the activity and that they are actively working to achieve that goal.
Typically this means generating profit in at least two out of five consecutive years. It’s important to note that this rule is not an absolute test, and the IRS will consider other factors when determining whether an activity is a hobby or a business. (For more information about the Hobby Loss rule, see IRS Code IRC § 183)
The bottom line here is basically "claim the income, don’t just take cash under the table in your pet business." The 1099s will come to you (not your pet obviously), claim it all whether you get a 1099 or not, write-off all the expenses related directly to your pet, and more.
Tax-Deductible Moving Expenses For Pets
You may be able to claim pets on taxes if you spent money transferring them when moving to a new home. However, you can only write off pet expenses related to moves that meet certain conditions established by the IRS:
- The move must closely relate to the start of work.
- Your new primary job location must be at least 50 miles farther from your old home than your previous job location.
- After the move, you must work full-time at your new job for at least 39 weeks the first year.
The Conclusion to Writing-Off Your Pet
While there are certainly many ways to both enjoy your one-of-a-kind pet and make it profitable, it should never be the ultimate reason why you get a pet in the first place.
Having a pet doesn’t have to be a ‘sunk cost’. Pets bring unlimited and unmeasurable joy and happiness to our lives, but it is nice to see the potential to integrate them into your business as a valid write-off, or turn your pet ownership into a money-making operation, a charitable act, or even a valid medical expense.
And of course, with all of the options above it almost goes without saying, but it is extremely important to consult with a licensed tax professional to ensure you’re following all the rules and regulations with the strategy you’re using to write-off your pet expenses.
Questions & Answers
Is a pet a dependent?
No, pets are not considered dependents for tax purposes.
What are common pet expenses you can write off on a tax return?
Veterinary bills, pet insurance, food, supplies, training, grooming, boarding, and transportation costs are all examples of pet expenses you can write off on taxes. However, you can only claim pets on taxes if they meet certain criteria, such as contributing to income or serving a medical need. Talk to a professional to see if you can file your dog or cat on your taxes.
Are pet medical expenses tax-deductible?
Yes, pet medical expenses are tax-deductible for pets that are classified as service animals or working animals. You might also be able to claim vet bills on taxes for pets you foster, provided that the nonprofit organization you work for is registered with the IRS and has not reimbursed you for the service.
If you’re looking for a way to get reimbursed for your family pet’s medical expenses, pet insurance is a great tool that can help reduce veterinary expenses in the future.
Are there any pet deductions people are surprised to hear that they can't take?
Most of the pet deductions people typically think of — such as claiming vet bills on taxes or writing off pet insurance — are actually eligible write-offs for those that qualify.
However, many taxpayers are surprised to find they can’t claim a pet on a tax return due to the classification of the animal or lack of sufficient proof required to support the pet deduction. Others are surprised to learn that you can’t claim pets as dependents on taxes.
What kind of proof do people need to show that they have a service animal or a working animal?
For services animals, the The IRS explains that the animal will likely have to be trained and/or certified to help treat a diagnosed illness or condition — and you may need a doctor's note describing the medical necessity. For a working animal, you'll likely have to prove that the animal is "ordinary and necessary" in your line of business.
Does a "pet influencer" count under any of those categories?
Always check with a tax professional, but it looks like if your dog or cat is the star of a monetized YouTube channel, for example, they might be classified as a performance animal. In which case expenses related to your pet and the activity that earns income could be eligible for influencer tax write-offs.
When might people want to write off pet expenses as itemized tax deductions?
Always consult a tax professional, but generally, people determine if their itemized deductions exceed the standard deduction amount before deciding to itemize.
What kind of pet-related moving expenses would be tax-deductible?
If you had to move for work, those moving expenses (including any involved in transporting your pet) could be eligible for a deduction, such as professional carrier services, transportable crates, lodging fees, etc.
What are other tips for how a pet owner might save money on pet-related expenses?
Two big ones. (1) Preventive/routine care appointments play a major role in helping health issues before they get too expensive, so please schedule regular vet appointments. (2) Pet insurance is a great way to hedge the financial risk of unexpected accidents, illnesses, and emergencies — and there are no health networks to worry about.
Pet insurance can reimburse you for up to 100% or more of the vet bill after your annual deductible is met, which can be a literal life (and wallet) saver, as serious health issues can easily cost thousands to treat.
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