Are Pet Expenses Tax-Deductible?

Deductions for certain animals may be allowed in limited circumstances

Providing accurate tax information on social media is practically impossible because a taxpayer’s particular facts and circumstances are critical to obtaining any tax benefit. When distilling complex tax concepts into an image, a 30-second video, or a 150-character Tweet, important context will be omitted, leading to the public being misinformed and potentially harmed from taking inappropriate tax positions.

This image from Instagram is a perfect example:

Is a non-farm deduction allowed for animal expenses? Yes, depending on the facts and circumstances; however, it will be relatively uncommon.

Nondeductible Personal Expense

§262 disallows any expense for personal, family, or living expenses; therefore, any deduction for a pet or animal that is part of the household is generally nondeductible. See Treas. Reg. §1.262-1(b)(3).

The word “pet” implies that the animal is used for companionship, making their expenses nondeductible under §262; therefore, in this article, we will use the term “animal” when referring to potentially deductible expenses.

If the animal is not primarily for personal companionship, a taxpayer can potentially deduct certain animal expenses as a §162 business expense, a §170 charitable expense, or a §213 medical expense.

Business Deduction

Treas. Reg. §1.162-1(a) states that

Business expenses deductible from gross income include the ordinary and necessary expenditures directly connected with or pertaining to the taxpayer's trade or business…

It is clear that security expenses would be a §162 expense; for example, security costs for an exclusive-use business facility or a portion of an alarm system for a home office that the taxpayer exclusively uses in their business.

There are several cases in which the Tax Court or the IRS did not permit §162 deductions for animals because they were disguised personal expenses.

In Rodriguez v. Comm., T.C. Memo 2009-22, the Tax Court held that the taxpayer’s purported guard dog expenses were nondeductible personal expenses:

The 1998 and 1999 security expenses… are, we find, for the grooming and veterinary care of two dogs that Rodriguez kept on a piece of property where he stored his equipment and a trailer. Deductibility of such expenses depends on a showing that the expenses are "directly connected" with a trade or business… Rodriguez did not credibly testify that the dogs were primarily guarding business property, and we find that these expenses are just for his family dogs. They are not deductible…

In Stone v. Comm., T.C. Memo. 1998-437, the Tax Court disallowed expenses for animals mostly located at the taxpayer’s residence:

With regard to the balance of the disputed items, we have reviewed the record and sustain respondent's determinations. Deductions were claimed for petitioners' cats and dogs on the respective grounds that they were necessary to control the mouse populations and provide security at the shop. The animals, at least for the most part, were located at the residence. Deductions were also claimed for magazines such as People, Ladies Home Journal, and Family Circle. Petitioners did not explain the business purpose for these publications. These items speak for themselves.

In Graves v. Comm., 88 T.C. 22 (1987), even though both the IRS and the taxpayer agreed the dog was a “guard dog” in the pre-trial stipulation, the Tax Court did not have enough evidence before it to allow deductions related to that dog:

Petitioners contend they are entitled to deduct $96.72 paid in 1982 and $181.96 paid in 1983 for food and supplies for a German Shepherd guard dog. Petitioners have the burden of proving that these items constitute deductible expenses… They contend that they have satisfied their burden by the stipulation that the animal was a guard dog. They have not, however, presented any evidence as to the nature of the property being guarded, or whether the dog was guarding their persons as opposed to property. Thus, they have not proven that the expenses were deductible under section 162 or 212, rather than nondeductible personal, living, or family expenses… Statements in petitioners' brief with respect to the nature of the items are not evidence and are disregarded… Their statement that the tax returns show business property that was guarded is frivolous.

On the other hand. there are several cases in which either the IRS conceded the business deductibility of the animal expenses, or the Tax Court permitted it.

In Slawek v. Comm., T.C. Memo 1987-438, the taxpayer credibly testified that the dog was originally purchased for business use and then converted to a personal pet:

Enterprises claims as a business deduction for the fiscal year 1973 the sum of $125 which was a payment to one Morton Halprin for a white English sheep dog. At least throughout 1973 the dog was kenneled at the medical office and used as a watch dog. Ultimately the dog was taken to the Slaweks' home as a pet. We accept Dr. Slawek's description of the transaction and the use of the dog as a guard dog for the calendar year 1973 and for several years thereafter… Enterprises is entitled to investment tax credit and 6-months depreciation for its 1973 tax year and 12-months depreciation for its 1974 tax year with respect to the dog's purchase price.

In Seawright v. Comm., 117 T.C. 294 (2001), the IRS conceded deductions related to encouraging animals to live on the business premises:

On brief, respondent concedes that petitioners are entitled to a $300 business expense deduction for cat food that petitioners purchased and set out in their scrap yard for the purpose of attracting wild cats to deter snakes and rats.

In Cox v. Comm., T.C. Memo. 2005-288, Judge Holmes, in his usual style, noted the IRS conceded that the taxpayer could deduct his guard dog expenses:

Tax records are the ancient Egyptians of the modern age--plagued not by boils, frogs, flies, and lice but by fire, flood, mold, and theft. The cursed tax records in this case belonged to Raleigh Cox, who owned a business that fixed used cars and then resold them. When audited, Cox failed to produce the records that would have supported many of his claimed business deductions, and blamed their absence on a thieving former employee. The parties have since settled most of these issues, but the Commissioner hardened his heart against Cox's deductions for cash purchases of used cars.

We must decide whether to let them go.

Raleigh Cox grew up in Houston. He is a talented mechanic, and started a small business, Washington Car Care, in 1986. He made the better part of his living by buying used cars - often cars that were nowhere near working order - from local wholesalers. He then fixed them up, and cleaned them up, and resold them to other dealers. The business was not in the most desirable section of Houston; as Cox pointedly testified, the IRS did not contest his deduction for the cost of a guard dog.

The taxpayer must have a bona fide business purpose for using the animal in their business in order to deduct the expenses under §162. Consider the following four factors when advising taxpayers in this area:

1. Business purpose. Is the animal for security? For pest removal and deterrence? For another bona fide business purposes? Does the business purpose for the animal comport with the taxpayer’s type of business?

2. Location of business. Is the business located in a rural area? Is the business housed in a large building? Is the business outdoors or have limited physical barriers? Is the business located in a dangerous area?

3. Type of animal. Is the type of animal appropriate for the purported activity (such as a large, assertive dog breed as a guard dog versus a “guard” cat)?

4. Animal training. Is the animal specifically trained for the function it is serving (and does it need to be)?

Charitable Deduction

In Van Dusen v. Comm, 136 T.C. 515 (2011), the Tax Court held that the taxpayer’s foster cat expenses qualified as unreimbursed expenditures incident to the rendition of services to a charitable organization and were deductible under Treas. Reg. §1.170A-1(g) as a charitable contribution.

The Tax Court also held that the Treas. Reg. §1.170A-13(a) money contribution recordkeeping requirements applied to these expenses and denied a deduction for expenses of $250 or more because the taxpayer did not obtain the contemporaneous written acknowledgment from the charitable organization.

Medical Deduction

Publication 502 (2023), p. 7 states the following with respect to animal deductions:

You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties.

While this is a useful summary of the IRS's current position, it is not authoritative.

Treas. Reg. §1.213-1(e)(1)(iii) states that

…a capital expenditure which is related only to the sick person and is not related to permanent improvement or betterment of property, if it otherwise qualifies as an expenditure for medical care, shall be deductible; for example, an expenditure for eye glasses, a seeing eye dog, artificial teeth and limbs, a wheel chair, crutches, an inclinator or an air conditioner which is detachable from the property and purchased only for the use of a sick person, etc

In addition to the acquisition cost, the costs of training and maintaining a guide dog are deductible medical expenses. See Rev. Rul. 55-261 and Rev. Rul. 68-295.

In Havey v. Comm.; 12 T.C. 409 (1949), the Tax Court analyzed personal expenses that can have a purported indirect relationship to health and their deductibility:

…Many expenses, such as the cost of vacations, though undoubtedly highly and directly beneficial to the general health, or athletic club expenses by means of which an individual keeps physically fit, are not deductible because they fall within the category of personal or living expenses. To be deductible as medical expense, there must be a direct or proximate relation between the expense and the diagnosis, cure, mitigation, treatment, or prevention of disease or the expense must have been incurred for the purpose of affecting some structure or function of the body.

In determining allowability, many factors must be considered. Consideration should be accorded the motive or purpose of the taxpayer, but such factor is not alone determinative. To accord it conclusive weight would make nugatory the prohibition against allowing personal, living, or family expenses. Thus also it is important to inquire as to the origin of the expense. Was it incurred at the direction or suggestion of a physician; did the treatment bear directly on the physical condition in question; did the treatment bear such a direct or proximate therapeutic relation to the bodily condition as to justify a reasonable belief the same would be efficacious; was the treatment so proximate in time to the onset or recurrence of the disease or condition as to make one the true occasion of the other, thus eliminating expense incurred for general, as contrasted with some specific, physical improvement?

A general health benefit from having an animal would not be sufficient to permit a medical expense deduction for that animal. It must be for the direct treatment of a specific disease as indicated by a physician or restoration of a bodily function.

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