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What types of things can you write off on your taxes if you have a dog breeding business. I understand that you have to show that is it a business, not just a hobby, meaning you have to show some income and not just expenses. So what types of things can you legally deduct. For example, can you deduct the cost of a new cell phone and the monthly plans if you use it for the business at least part of the time?...what are other things besides cost of dog food, vet bills, training materials,...can you deduct?

Thanks,
Dan
 

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you need to talk to your tax person, but for us it is part of the office expenses (what you can document was used for the busineess), part of the computer expenses (100% of software purchased just for the business), utilities directly associated with the business. My kennel building and chain link, etc. are on depreciation schedules. You can also deduct dog-related mileage.

Purchased dogs can also be deducted on a depreciation schedule.

Meredith
 

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Talk to a good tax accountant. The business has to show a profit, or legitimate intent to make a profit, at least 2 (3?) out of 5 years or the IRS will deem it a hobby and disallow all deductions, retroactive. You can't just show income, you have to show profit.
 

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Talk to a good tax accountant. The business has to show a profit, or legitimate intent to make a profit, at least 2 (3?) out of 5 years or the IRS will deem it a hobby and disallow all deductions, retroactive. You can't just show income, you have to show profit.
4dogs is right, there are situations that might determine when the 5 year period actually begins for evaluation. Have a plan, seperate checking accounts, and the ability and intent to make a profit. Depending on what you may buy there are opportunities for Sec145 (believe right one) to write off certain assets instead of depreciating. Best way is to find a good tax accountant and let them do it. I'm a CPA and did my first year, but will use a tax accountant for a variety of reasons.

Probably your biggest write off will be mileage. There are certain rules regarding your management of the business, in a nutshell you need to perform at least 500 hours in the business, there are some other factors that could change this. Once again consult before you get started.

Hope this helps,
 

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Talk to a good tax accountant. The business has to show a profit, or legitimate intent to make a profit, at least 2 (3?) out of 5 years or the IRS will deem it a hobby and disallow all deductions, retroactive. You can't just show income, you have to show profit.
You have to show "Intent to make profit" Not profit. That said the IRS looks very closely at animals for business vs hobby..


Jeff posted while I composing my post... His advise is spot on.. Get a good CPA and keep good records.

Randy
 

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You also need to keep REALLY great records. I know several people that get audited regularly. Mileage logs, etc. This is one area that the IRS looks at ie; dog breeding... as a category to audit, it seems.
 

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Bad place to go for tax advice.

If your in business to make money, you can generally deduct the businesses expenses. People often mention the profit x out of y years deal, but Chrysler once went about 10 years without making a profit and they were not deemed to be a hobby.:p

Even with a hobby, you can offset hobby income with hobby expenses, but IRS rules restrict your ability to claim a loss from a hobby. Had a client with a daughter that played the horse games. She would provide her income, and then just look for enough expenses to offset the income so no tax would be owed.

Here is a link for some basic info.

http://taxguide.completetax.com/text/Q11_2116.asp

Get with a tax professional, the fees are probably deductible.:D
 

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2 things that quickly throw up red flags to the IRS are dogs and horses. Too many times a hobbyist tries to get the tax break by calling it a business, I'd have a good long tax with whomever prepares your taxes.
 

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2 things that quickly throw up red flags to the IRS are dogs and horses. Too many times a hobbyist tries to get the tax break by calling it a business, I'd have a good long tax with whomever prepares your taxes.
This is correct. If you have a full time outside job you will need lots of documentation that this is a business.They even look at your mileage and where you went and why and the receipt if it was say for eye exams. I survived an audit recently because they are targeting small businesses. I did my own taxes and was told in the future to get an accountant even though he could find nothing wrong because that's the criteria they are targeting.
 

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Depending on how large you expect the business to grow, it might be better to just offset hobby income with hobby losses and avoid the frustration. I too have thought about that.

By the way captain...just about every post says talk to a professional, so in this instance...good place to get advice.
 

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Rnd, you are correct. These is actually a list of factors to be considered in section 1.183-2(b) of the Treasury Regulations.

However, if you can show a profit in 3 of 5 years, you are entitled under section 183(d) to a presumption that you are engaging in business for profit, and the burden of proof shifts to the IRS to prove that you are not doing so. Since many cases turn on the burden of proof, this is always nice to have.

I would also say that having the purported business in a separate corporation or LLC will help with this, as well as protecting your personal assets from any liability generated from the business, if operated correctly. In addition to the tax accountant, a stop at your lawyer's office would probably be beneficial as well.
 
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