When T.S. Eliot wrote “April is the cruelest month” in his poem The Waste Land, he was referring to something else, but the phrase resonates with all Americans for one simple reason.
I don’t even need to tell you what that is. You either filed your taxes back in January and already got your refund or are waiting to the very last minute to slip your return and signed check into the mail slot because you owe money.
There’s really not a middle ground, but there is a very important question: Did your pet pay their taxes this year? Or did you remember to deduct them if they’re dependents?
Parents, pets, kids, and taxes
The first question is only half facetious, but the second one, on its face, does seem like a valid question.
After all, we raise kids and pets in the same way, in the same household, and they can have most of the same expenses: Food, shelter, medication, doctor visits, education, and more.
And yet... when parents file their taxes, they get to take deductions and exemptions for each human child, while they get none for their fur-babies.
Why is that? Well, the simple answer is that the IRS doesn’t consider pets to actually be dependents, instead considering them to be luxuries.
Some could argue that kids are luxuries, too, but look at it from the IRS’ point of view. When you raise human kids, what you’re actually doing is growing and nurturing future taxpayers. Ergo, you’re investing in government, hence the kickbacks.
An exception to every rule
Of course, it wouldn’t be the tax code if it didn’t have fifty-thousand arcane and wordy exceptions, and the tax status of pets is no exception to the exception to the rule. Generally, Fifi or Fido is out of luck when it comes to you writing off their kibble, litter, beds, vet visits, or cutesy photos.
You know. All those photos you took for fun and slapped up on social media, and never asked to monetize and such. But then you kind of got some traction, and that photo of your kitty doing a fake Kung Fu paws up pose that made your chocolate Lab’s eyes go wider than an Airbus went totally viral, and you suddenly have 250,000 followers on IG.
So your hobby kind of turns into a business, and it’s all about your cat and/or dog. Now what?
It all depends on what the meaning of “work” is
It really is that simple. If your pet works and earns money, then they owe taxes if it profits you. However, since they can’t legally enter contracts or have bank accounts, then you are their de facto guardian, parent, and power of attorney (POA).
Ccan you even imagine how your dog or cat would deal with a 1040 form, other than gleefully tearing it to pieces?
But, again... if you’re lucky enough to wind up with a phenomenon like Grumpy Cat, and you make a lot of money from it... well, then, we’re back to the original question: Did your pet pay their taxes?
If you do manage to turn your pet-photo hobby into a business, then you do owe taxes based on what your pet earned for you. But the upside is that you also get to deduct all the expenses associated with the care and well-being of your pet, from food and medical care to advertising to a portion of your internet and photographic expenses.
Making it legit
One thing to keep in mind, though. The IRS expects you to make a profit during your first five years, but if you don’t succeed in that for three out of the five, there are things you can document to show that you actually are trying to create a business. Keeping good records is the key.
Do research on profit-making opportunities and log your sources. It also helps if you have expertise in the area you’re focusing on, e.g. you’re a licensed vet tech and are doing a site centered on pet care using your own pets as examples. If you’re not an expert, hire one.
You should also expect to spend enough time at the day-to-day tasks necessary to justify it as a business activity, and it helps if you can show past success in other independent business ventures.
You should aim to be profitable, but losses due to unusual events will work in your favor if the IRS questions anything. For example, let’s say that your TikTok videos of your cat and dog made you a lot of money in 2019, but then you ran a loss in 2020. Clearly, COVID-19 would be a qualifying “unusual event.”
To itemize or not to itemize
In an ideal world, our fur kids would bring us the same tax credits and deductions as our human kids. After all, we’re taking on responsibility for another living creature for its entire lifetime, and that should count for something.
On the other hand, anyone who decides to have kids or pets just for the tax benefits deserves to have neither, and would be better off just sticking with houseplants. Just keep in mind that our beloved pets, like our children, are worth far more to us than any amount in the world that we could ever save on our taxes.
Disclaimer: The above is not intended as tax advice, but as a general guide on the possibilities, Please consult a tax professional for assistance on matters related to deducting pet expenses, as well as any other tax questions you might have.
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