Dogs have long been referred to as “man’s best friend,” but many farm dogs are more than animal companions, they are working members of the agricultural enterprise, and as such may qualify for certain operation-related tax deductions.
“The challenge becomes proving the dog is used for business purposes as well as the business-use percentage,” said J.C. Hobbs, Oklahoma State University Cooperative Extension tax education and farm management specialist. “You have to be able to prove the dog is more than just a pet.”
In addition, a farm dog’s depreciable life is effectively seven years. Hobbs explains there is a tax statute that deals with what qualifies as seven-year property, and working farm dogs fall in that group.
If the dog’s business use is more than 50 percent, the animal qualifies for the Code Section 179 deduction, which allows his or her business use of the purchase price to be deducted in the year the animal was bought and placed in service. If the dog’s work use is less than 50 percent, the CS-179 rules do not apply and the animal can only be depreciated using the 7-year property statute.
“Even if a farm dog is not 100 percent business use, the business use percentage of his or her costs does qualify for depreciation, plus the owner can deduct food, veterinary costs and other supplies related to ownership of the dog,” Hobbs said. “Food is purchased dog food and not table scraps. Basically, you need a receipt and be able to prove your expense.”
Working horses likewise qualify for certain deductions. The equine’s depreciable life is dictated by age of the animal when placed in service. If the horse’s age is 12 years or less, then it is seven-year property under tax law. If the horse is older than 12 years when placed in service, then it is three-year property.
Hobbs said horses qualify for Code Section 179 deductions if their business use is more than 50 percent. As with farm dogs, if the horse’s work use is less than 50 percent, the CS-179 rules do not apply and the animal can only be depreciated using the seven-year property statute. Only the portion of the purchase cost of the horse that is business related is deductible using the CS-179 or depreciation rules.
“Again, the owner can deduct food, veterinary costs and other supplies similar to what is done with working dogs,” Hobbs said.
Anyone seeking additional information about tax deductions for farm animals should consult the Farmer’s Tax Guide, Publication 225, available online through the Internal Revenue Service website at http://irs.gov.