02 Sep Are your dog’s expenses deductible?

Q. I show my dog at dog shows, and sometimes he wins money. If I have to declare it as income, can I deduct things like dog food and vet bills?
— Owner

A. You have to prove that this is a business and not just a hobby.

If you are in a business of training dogs for dog shows, then any expenses related to the business would be tax deductible, said Ken Bagner, a certified public accountant with Sobel and Co. in Livingston.

He said the burden of proof falls on you to show the IRS that you are not conducting a hobby and are actually involved in a business.

Bagner said you may consider setting up a separate business entity, such as a Limited Liability Company (LLC) or an S Corp., to help demonstrate you are conducting a business.

“If it is deemed a hobby and not a business, the income will be taxable and expenses can only be deducted up to the amount of income for the year,” Bagner said. “In addition, the expenses would be have to be listed as miscellaneous itemized deductions on schedule A.”

These deductions have to be over 2 percent of your adjusted gross income before you can take a deduction, and if you are into the Alternative Minimum Tax, the itemized deductions will not be deductible, he said.

“If you can prove you are in a business, then you can deduct all ordinary and necessary expenses in the business under the IRS code,” he said. “This may include dog food, vet bills, travel expenses and any other expenditures related to the business.”

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This post was first published in September 2016.