Taxpayer asks:
If you run a home office, can you claim animal costs for your “guard dog” if so does it have to be a dog?
Taxgirl says:
Funny, I’ve gotten a couple of variations on this question. Here are my thoughts.
It is clear that you can pro-rate the cost of a security system in your house if you otherwise qualify to claim a home office deduction (see Pub 587 which downloads as a PDF). The question is, then, whether a “guard dog” or other animal qualifies as a security system.
The IRS considers most pet-related expenses routinely personal and therefore, not deductible (exceptions apply, however, such as for service animals). To even consider it as a deductible expense, you’d have to prove that a guard dog or other animal – though I can’t even imagine what else you’d use for a home office – is just that, and not a pet.
Obviously, having a certified guard dog at your home office would allow you to document the actual use for tax purposes. Outside of being certified, you’d have to think scary, though it’s not a certainty that the IRS would allow it. You would have the burden of proof to show the use as a guard dog. I’m not sure that the potential tax benefit is worth the risk without certification. We often have our dog at our office but I feel much more comfortable claiming my alarm system on my tax return.
Clearly, this question is very facts and circumstances specific. In addition to the type of dog (or other animal), you need to consider the type and location of business. I think it would be easier to write off expenses for a non-certified guard dog at a junkyard (where the use is obvious) than at your public relations home office. Similarly, using a guard dog to protect your inventory of valuables is easier to understand than one to protect a ream or two of paper. Use your common sense – if it’s laughable to you, just think how the IRS would respond.
Assuming that you feel that the deduction is legitimate (and remember, the IRS would have to agree), the same rules apply with respect to the amount of your deduction. That means you could only deduct the expenses attributable to the portion of time that the animal is used as a guard animal (again, if the animal is solely for use as a guard animal, such as at a junkyard, this is an easier calculation than occasional use at a home office).
Like any good lawyer, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.
The IRS did not contest the deduction of a guard dog in the Tax Court case Cox T.C. Memo. 2005-288 http://ustaxcourt.gov/InOpHistoric/Coxraleigh.TCM.WPD.pdf
The business was a used car lot. The Tax Court stated:
“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.”
Thanks Hal! Exactly my point about purpose, location and type of business…
Hay I was thinking about Riding off my dogs for a home business but reading your material pretty much changed my mind
Ohhhhhh this was really good. Thank you. I was curious about this as we are building our business plan for a beginner farm and want to include livestock guardians in the venture.