One question that our tax attorneys in San Francisco get asked frequently is “Can I deduct pet expenses from my taxes?”. As is the case with most issues relating to your taxes, the answer is more complicated than a simple yes or no.
The new tax laws have changed many assumptions that formerly governed how people arranged their business and personal affairs in order to take maximum advantage of the previous tax regime. One of the relatively unknown parts of the code deals with the potential tax consequences of our animal companions. So, first off, calling them pets is likely to kill any chance of actually gaining some deduction for the expense of your fur friends.
It is therefore necessary to approach the current tax code provisions with the idea in mind that these living creatures perform some sort of necessary medical or professional function which renders the cost of their upkeep deductible. Anyone who owns a junkyard is most likely going to be able to deduct the cost of a large, vicious hound without getting too much flak from the tax examiners. Someone who operates a babysitting service out of their apartment will probably need a lot of paperwork to justify taking the same deduction for their own business.
Of course context is really what this is all about. A medical office or restaurant that keeps a fish tank can probably write off some of the costs, whereas keeping a tank full of exotic tropical fish in your home is likely to be adjudicated as a hobby. The biggest gray area, and one which is likely to see a big uptick in activity, is in the field of service animals.
In the past, a service animal was something along the lines of a Seeing Eye Dog- an obvious medical necessity and easily deductible. Nowadays, however, the designation of Service Animal is increasingly being applied in the field of mental health. This is creating an intrusive explosion of animals into areas once largely out-of-bounds for them, such as the cabins of passenger airplanes and a host of retail outlets. It should also be mentioned that the designation is not restricted to the usual household pets. Incidents have been reported of people insisting that pigs, chickens, and other barnyard or even semi-feral creatures are their service animals and thus exempt to the usual proscriptions against entry into formerly-restricted public spaces.
While there are undoubtedly a great many people who truly require the solace of their service animals, the need to replace formerly-valid-but-now-verboten deductions with something else is clearly leading up to the point where millions of pets are soon going to be declared as essential service animals and claimed as legitimate write-offs. This, in turn, is going to lead to a massive IRS tightening of the rules once the trickle of pet exemptions turns into a tidal wave of revenue loss to the government.
Eventually, of course, a body of legal precedent and agency guidance will be built up on the subject. Things will settle down once the obvious fakers are disallowed, and some form of official licensing is introduced to control the remainder of the process. There are, of course, other areas of tax law that involve animal expenses, but the big struggle is clearly going to be fought on the ground of pet owners attempting to claim the four-legged members of their family as Service Animal expenses on their taxes.
The most likely outcome of this collision is that the IRS will allow some form of pet deductions provided there is a legitimate paper trail to support the claim. In other words, it is going to be made sufficiently cumbersome that the benefits will not be worth the amount of meticulousness required to achieve the deduction on your taxes.
Our tax lawyers hope that you’ve found this article informative. If you have a tax related question you would like us to cover in a future blog post, reach out to us at firstname.lastname@example.org
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