Ever wonder what is and what isn’t a tax deduction for your dog business?
While there are certainly some black and white rules about deductions, there are gray areas in which the facts and circumstances of the situation are the determining factors.
Let’s take a look at some examples:
- You buy a dozen flat buckle collars for students in your class who may come unprepared.
- You go to the grocery store and buy liver to make dog treats for your students.
- You take your dog to the vet for his annual checkup and shots.
- You take your dog to the groomer before a scheduled public service event in which dog safety is the topic.
- Your dog business sponsors a local high school’s purchase of T-shirts as a fund raiser.
- You travel to an agility trial with your dog.
You buy a dozen flat buckle collars for students in your class who may come unprepared.
In most cases, this would be considered a deductible expense. However, if you hold these and other items primarily for resale, they would be considered inventory and special rules would apply to the manner in which they’re deducted.
You go to the grocery store and buy liver to make dog treats for your students.
The cost of the liver would be considered a business expense and could be categorized as Supplies.
You take your dog to the vet for his annual checkup and shots.
This is a tricky one as it really is dependent on how and how often you use your dog in your business. Let’s look at this a little more closely:
If we assume your dog is primarily your pet and used occasionally as a demo dog in class, then the cost of veterinary care would generally be considered a personal expense and not deductible.
If, however, you use your dog as a tool in your business, this is where it gets tricky and isn’t as clear.
To illustrate this point let’s look at 3 different scenarios. First, let’s assume you’re a dog breeder. In this case, vet bills for maintaining your stud dog would likely be deductible. Next, let’s say you’re engaged in security or law enforcement and your dog is employed for bomb detection. Then the cost of maintaining that dog would clearly be a business expense. But finally, as a dog trainer, you use your dog as a demo dog in class. In this instance it’s less clear whether the cost of maintaining your dog is a business expense. Why? Because often the percentage of time the dog is used in your business versus being your pet is the determining factor. As a dog pro, you really have to evaluate how much and for what purpose your dog is used in your business before you can consider taking a business deduction for what otherwise would be considered a personal expense.
From my own experience running a dog training business and being a CPA I can share with you that I used my dogs as demo dogs and for socialization purposes. But their primary function as tools in my business couldn’t be justified because they were my pets first, and hence the cost of maintaining them, whether it be veterinary care or buying their food, was not considered a business expense.
You take your dog to the groomer before a scheduled public service event in which dog safety is the topic.
As a dog pro, you want to spend time advertising or showcasing your skills. In this scenario, as a professional dog trainer, you want to educate the public about handling dogs in public situations. Preparing for that event, you might design and prepare printed flyers which would be considered a business expenses. You also prepare your dog for the presentation. A trip to the groomer for this business purpose would be considered a business expense. However, when the dog needs to be groomed again next month and he isn’t being used for some other business purpose, that cost would not be deductible.
I once had a client who was hired to be Santa Claus during the month of December. The cost of trimming his beard while employed as Santa was a deductible expense, but the cost of maintaining his beard the other 11 months out of the year was not. Same analogy here.
Your dog business sponsors a local T-Ball team by buying them T-Shirts.
Advertising comes in many different forms. Sponsoring local sports teams with T-shirts and having your business name printed on the back of them is a legitimate business expense and a wonderful way to support your community while advertising your business at the same time. Go Huskies!
You travel to an agility trial with your dog.
Again, this is situation dependent. If you’re an agility instructor, taking your dog to a trial is a way to showcase your talents. The cost of travel would be a deductible business expense. If, however, you’re a doggie day care owner and you want to enter your own dog into agility trials because you think it would be fun, it would be hard to justify this as a business purpose and so the cost of travel would not be deductible.
Remember… Expenses generally fall into one of two categories– personal or business. There are rules that establish how these expenses are categorized, but they are very much dependent upon the facts and circumstances of every situation. Working with your accountant will help sort fact from fiction about what can legitimately be deducted as a dog pro’s business expense.
IRS Circular 230 Tax Advice Disclaimer: Pursuant to requirements related to practice before the Internal Revenue Service, you are hereby advised that any written or electronic tax advice contained herein (including any attachments, enclosures, or other accompanying materials) was not written or intended to be used, and cannot be used, by any taxpayer for the purposes of (i) avoiding penalties that may be imposed under the U.S. Internal Revenue Service Code or any other taxing authority or (ii) promoting, marketing or recommending to another person any tax related matter.