It really is too bad they never passed the HAPPY Act. That Act, proposed in 2009, would have provided for an above-the-line deduction per taxpayer for up to $3,500 in “qualified pet care expenses.” (Note: with actual dependents – close “family” members and children who rely on you for support – the exemption is $3,900 per dependent. The trick with actual dependents is that they need to be human.
Anyway, the HAPPY act did not pass, so the question is – are there ever any situations where the cost of owning a pet can be properly deducted on a tax return? Yes. But most of these situations are uncommon.
Some speculate that before the IRS started requiring taxpayers to list the social security numbers of the dependents that they claimed, that taxpayers made a habit out of claiming their pets as if they were their actual children. While it is true that roughly 7 million children “disappeared” in 1987, the year this requirement was implemented, the likelihood is that those claims were simply fraudulent. The truth is that there was never a legitimate argument to be made that owning a pet entitled a taxpayer to an additional exemption.
However, there are some situations where expenses incurred in the connection with owning a pet might be tax deductible.
When your pets are your business.
If you own a show dog (or cat), it is possible that you may be able to deduct the expenses associated with that animal as business expenses. Of course, to take deductions here you will need to establish and document that the pet is actually being used in an attempt to make income. This doesn’t mean that you have to actually make a net profit every year, but you will need to show that entering your pet in competitions is a serious endeavor and not merely a “hobby.”
In addition, it is possible if you own a junkyard or another business where you make use of guard dogs, those expenses may be deductible as ordinary business expenses. (In fact, the IRS has even conceded that the cost of food left out to attract feral cats to a junkyard “for the purpose of attracting wild cats to deter snakes and rats” was a legitimate business expense).
However, you cannot deduct the cost of your puppy simply because you bring him to work with you, he needs to serve a more substantive role in your business.
Pets as healthcare expenses
Seeing eye dogs and other service animals can be deducted as medical expenses (but claiming fluffy is needed for your “mental health” is probably not going to fly.)
If you run a cat or dog-rescue, the costs directly associated with the foster care of these animals can be taken as a deduction. For example – vet bills, food, leases, toys, can litter, and the cost of boarding (if you use a specified area of your home exclusively for fostering) – can all be claimed as a deduction.
Because pets are technically personal property, the cost of moving your pets if you are relocating can be taken as a deduction in certain circumstances.
As with any area involving taxes, if you are unsure whether or not a deduction is proper you should discuss the matter with a tax professional.