Can You Write Off Pygmy Goats on Your Taxes?

Your goats can't earn you a tax deduction if they're pets.

Your goats can't earn you a tax deduction if they're pets.

If pygmy goats are your thing, rest assured that Uncle Sam will at least consider giving you a bit of a tax break for owning them. It depends on what you're doing with the goats and whether it's your hope that you'll eventually turn a profit by investing in them. If keeping them is just a hobby for you, tax perks are limited. If your goat is your pet, you're probably out of luck.

Goats as Pets

Pygmy goats have a reputation for being reasonably clean, friendly and trainable – if you're patient. If you purchase a few as companion animals, however, you can't write them off. Pets and their expenses aren't tax deductible. Exceptions exist for guard dogs or service animals, but you'd have to somehow prove to the Internal Revenue Service that your goats are protecting your business assets or that they assist you with a disability.

Hobby Expenses

If you buy goats with the intention of possibly making some money off them, the IRS may allow you to take a hobby deduction for their costs. Your goats must generate at least some income in order for you to do this, although you don't actually have to show a profit. For example, you might buy two goats for $700, spend $1,500 on an enclosure for the male and another $3,000 on their food and care. You've invested $5,200. You might then breed them, sell the female's milk at $5 a gallon, and sell two babies for $350 each. If your total profit is $1,000, you can still deduct some – but not all – of your $4,200 loss. You have to itemize in order to do this, and hobby expenses fall into the category of miscellaneous deductions. This means you can only deduct your costs that exceed 2 percent of your adjusted gross income.

Goats as a Business

If you can convince the IRS that your goats are a business, this will improve your tax picture considerably – but it's no easy task. The IRS will want to know just how knowledgeable you are about breeding and selling pygmy goats, and if you don't possess a wealth of knowledge, you'll need access to an advisor who does. You'll have to devote some time to making your goat business profitable, and this could be difficult if you also hold down a full-time job. Uncle Sam might also want to know that you're not enjoying yourself too much – if so, you've got a hobby, not a business. Eventually, you'll have to show a profit. The rule is that your goats must make you money – they bring in more than you spend on them – in at least three out of five tax years. It also helps if you can prove that you and your household depend on the money your goats earn.

Hobby Vs. Business

The distinction between a hobby and a business is a big one at tax time. If your goats are a hobby, you can't take a deduction for more than the amount of money they earned, and this is in addition to the 2-percent rule for miscellaneous deductions. For example, if your goats only brought in $1,000, this is the maximum deduction you can take, and only to the extent that if exceeds 2 percent of your AGI. By contrast, if your goats are a business enterprise, you can deduct their costs dollar for dollar when you file Schedule C with your return as a sole proprietor. In the years you suffer losses, the losses can offset some of the regular income you might earn from another job. This isn’t the case with hobby losses, however.

 

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