When starting a new self-employed business such as dog breeding, it is difficult to know which legal aspects affect you. You may wonder how they influence you and how to deal with it. Researching tax write-offs for dog breeders can be a complicated procedure to understand specific cases.
Dog breeding can quickly become a profitable business. Therefore, it can benefit from tax deductions and write-offs, even with the ongoing costs. Let’s look further into why dog breeders can perform tax write-offs and how to implement them.
What Sort of Tax Write-Offs do Dog Breeders Get
In order to make sure a tax write-off is accepted, you need to be aware of all the affecting elements. You want to make sure you are receiving as much tax-free income as you can. Here we have composed a list of all of the types of the dog breeder tax write-offs.
The Intent Of Creating Profit
The Internal Revenue Service (IRS) will only consider tax deductions if you can prove you have the intention of creating profit. Furthermore, you must be running a true business and not a hobby. The IRS do not allow any tax deductions from hobby-based income. Therefore, you need to show that this is your career. The best way to do so is by keeping a paper trail. Some workers recommend keeping all financial interactions saved for three years. However, we recommend doing so for seven to make sure your business is fully traceable. This also ensures there are no complications when receiving tax write-offs as a dog breeder.
If you can display that your income from breeding is either your only income or your main income, then this can prove your intent of creating profit. Furthermore, you can send your monthly or yearly bills. This shows validity in the income you are earning and using through dog breeding alone.
Nearly every business requires equipment to achieve its goal and dog breeding is no different. All equipment purchased for use in these businesses can be deducted from taxable income. You may be wondering if this is limited to direct breeding equipment. For example, a whelping box for your pregnant bitch or new mother and pups, but this is not the case.
There are many pieces of equipment that are used for your dog’s health and well being. Many of these can also be used in tax write-offs for dog breeders. For example, dog food and leashes can also be considered. This is because these materials are required to run your business effectively and up to the desired standard of kennel clubs. Dog food is needed for the care of the mothers, sires, and pups in your possession. Leads are needed for training and walking which also adds to their quality of life. With justification, many pieces of equipment can be eligible for tax write-offs.
The cost of care for all of the dogs in your possession can be tax write-offs for dog breeders. This is because the on-going care implements high standards of animal welfare. Furthermore, it can help attribute towards your eventual selling costs of puppies; puppies that are already neutered, spayed, or vaccinated can be sold for higher costs. Even the costs of vaccinating sires and dams can be considered. This is because they are going towards the costs of implementing good health in your business.
Evidence of vaccinations or of puppies being spayed or neutered must be kept to use towards tax deductions. Furthermore, you must make sure that the evidence is dated and has your name, proof of payment, and the name of each animal involved on it. That way, each puppy’s procedures can be used in tax deductions directed towards your business. Health procedures in mature dogs can be considered as well, such as C-sections.
Pet Delivery and Transport Costs
Whether it be the costs towards picking up a sire for mating or dropping off a puppy to their new home, these are all potential tax write-offs for dog breeders. You can also consider pet pick up costs. Such as picking up a sire or a dam for temporary or permanent care and use. You can also consider transport costs for vet visits or for puppy introduction sessions. Sometimes, potential owners may want to ask for a puppy to visit their home and family. This is to see their temperament and reaction before purchasing them. These travel costs can also be considered for tax deductions.
Drop off costs are the final considerations that can be used for tax write-offs for dog breeders. These can be driving costs to drop off sires after mating or the costs towards dropping off a puppy to their new home.
Home Office Deduction
A home office deduction is where you are able to deduct this from your tax. This is due to using a certain amount of home space for your business. This can be applied towards your home rent, costs on expanding buildings, and even repairs. Therefore this can make a huge difference towards the tax amount you are paying.
You are able to calculate your home office deduction simply by choosing the $5 deduction per square foot of your home option when paying taxes. This is applicable for up to 300 square feet. The more complicated method can often be more accurate and beneficial. Add up your total home office costs including repairs, find out the percentage of your home used for the business and then multiply these two figures together. For example, if your total costs equal $4,000 and the percentage of your home used is 15%, you may be eligible for $600 for your total home office deduction.
Depreciation of Dogs as an Asset
Although you cannot write-off the total costs of a dog, you can gain tax depreciation over time that leads to a yearly tax reduction for that dog. But how does this work and how is it applied? There are two methods to do so.
Firstly, note down the initial buying price for each owned dog, then use the IRS depreciation system (MARCS) to work out the depreciation value. The basic summary of how this work is that a dog can be recorded as an asset in your inventory and its depreciation value will spread out the dog’s initial cost over seven years. If you bought a dog for $1500, then yearly their depreciation value would be $214 using this method. The second method is to claim larger percentages in a shorter amount of time, for example, the whole dog cost in the first year, but if the dog is not used across the seven years, then you will have to repay the tax deduction.
Tax Write-Offs for Dog Breeders – FAQs
To make sure you fully understand this topic, we have compiled FAQs regarding tax write-offs for dog breeders.
Do you have to Pay Taxes on Dog Breeding?
Whether dog breeding is pursued as a career or a hobby, you do have to pay taxes towards them. This is because a reasonable income is being brought in and therefore it will have to be registered to allow for tax to be taken out. There is no tax exemption for any kind of dog breeding, regardless of the number of litters you are producing. All profit made from breeding and selling dogs must be recorded in either a business form or filed in a schedule C form to the IRS. Consult our article on taxing dog breeding income.
Can Dog Breeders Write-Off Pet Expenses?
Pet expenses such as equipment, vet costs, and travel can all be considered in tax write-offs for dog breeders. But how can you be sure that something can contribute towards tax deductions? Consider whether the costs and expenses are benefiting your business and whether they are necessary for gaining you your income. If you ever have any queries, you can get in contact with the IRS to check what expenses are applicable.
Can Breeders Write-Off Dog Food?
Dog food can be considered in dog breeders tax write-offs as long as there is evidence to back up the claims, such as date and time-stamped receipts and the correct forms are filled in to present to the tax workers. If you purchase dog food online, you can print off the confirmation email or page as proof of purchase. Just be sure that on any evidence of proof, that there are the correct dates and times labeled.
Is Hobby Dog Breeding Taxable?
Any income made from selling dogs is taxable, which is why it is so important for a breeder to find any tax write-offs for dog breeders. Keep all the receipts as proof of purchase for anything and everything relating to your dog breeding so you can keep the maximum income. From vet bills to food, make sure to check everything that you are buying and using.
Now that you know what expenses can be used for tax write-offs for dog breeders, you can implement them to make sure you are receiving the most income possible to pursue the business you love. Furthermore, you can feel comfort in knowing you are following all the legal protocols required to achieve your dog breeding goal as a reputable business.
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