Is Pet Insurance Tax Deductible? Pet insurance and most pet-related expenses are not eligible for tax deductions, keep reading to get more information.
Taking care of pets can come with significant expenses, including food, toys, and especially unexpected veterinary bills. Many pet owners wonder if pet insurance can be claimed as a tax deduction to alleviate some of these costs.
Is Pet Insurance Tax Deductible?
In general, pet insurance and most pet-related expenses are not eligible for tax deductions, as pet ownership is considered a personal and non-deductible pleasure expense. However, there are exceptions, such as certain cases involving service animals, working animals, or fostering animals, which may qualify for tax deductions.
While our pets are cherished members of our families, the IRS does not classify them as dependents for tax purposes. Thus, even though we provide for our pets financially, we cannot list them as dependents on our tax returns.
Even though pet insurance is not tax-deductible, it remains a valuable tool for managing future veterinary costs. When obtaining pet insurance, it is advisable to compare different plans to find the one that best suits your needs.
This implies that, expenses related to pets, such as pet insurance and veterinary bills, cannot be deducted on your taxes. However, some specific situations might allow for tax deductions.
Top 5 Tax Deductions for Pet Owners in 2023
The information provided in this article is based on research and should not be considered as legal, tax, or accounting advice. It is advisable to consult with your legal and/or tax advisors before making any financial decisions.
In the aftermath of the economic challenges brought about by the COVID-19 pandemic, many individuals are seeking opportunities to reduce their tax burdens. There are specific circumstances in which you might be able to deduct certain pet-related expenses, allowing you to retain more of your hard-earned money.
These deductions apply to service animals and situations involving business income. There are various tax deductions related to pets that you may qualify for, enabling you to deduct expenses like:
- Veterinary bills
- Medical treatments
- Costs for food and supplies
- Fees for training classes
- Expenses incurred for grooming services
- Transportation costs related to pet care
- Fees for pet boarding services
- Costs associated with pet insurance
Outlined below are the five most frequently pet-related tax deductions that may be applicable to your situation in 2023, for the tax year 2022. It is recommended that you consult with a qualified accountant to receive personalized guidance on how to claim deductions related to your pets for tax purposes.
- Tax Deduction for Service & Emotional Support Animals: While most individuals are unable to claim their pet’s medical expenses on their tax returns, there is a general provision that allows anyone to deduct medical expenses paid in a given tax year if they exceed 7.5% of their adjusted gross income (AGI) in 2022. Consequently, it might be possible to include pets in your tax deductions if they serve a medical purpose or perform specific services.
For instance, individuals with disabilities who rely on service animals for assistance may deduct a dog’s expenses as qualified medical expenses. This deduction applies exclusively to dogs that perform distinct services, such as:
- Guiding visually impaired individuals
- Alerting individuals with hearing impairments
- Assisting with mobility or movement
- Protecting individuals during epileptic seizures
In some instances, you may also claim a tax deduction for an emotional support animal (ESA). However, it is important to note that not all pets qualify as ESAs or therapy animals, despite offering emotional support. To claim your pet on your tax return as an emotional support animal, you must provide evidence that your animal plays a role in addressing a diagnosed mental or physical condition. This involves providing a medical note from your physician as proof of your need for a service or support animal.
- Tax Deductions for Working Animals: If you are a business owner, you might be eligible for a tax deduction related to pets that fulfill a service role within your business operations. In this scenario, you would be claiming a business expense deduction, necessitating evidence that the pet’s presence is essential to your business activities.
For example, you could deduct expenses associated with keeping a cat that protects your business premises from pests, or you might claim deductions for dogs that work on your farm to protect livestock from predators.
To claim pets as a business expense, it is important to retain all receipts pertaining to their care. Also, maintaining a record of the amount of time the animal spends at your business can be helpful.
- Tax Deductions for Performance Animals: If your pets play a role in generating income due to their performances, you may be eligible to claim them (along with their associated costs) as a business expense. For instance, individuals who engage in horseback riding as a hobby might find that the IRS considers the expenses incurred in caring for their horses as legitimate business expenses if they derive income from their activities.
Similarly, if your dog appears in commercials, television programs, movies, or print advertisements, they could be regarded as part of a business endeavor. The same principle applies if your cat serves as the central figure in a monetized YouTube channel, potentially making them eligible for tax deductions as influencers.
It is important to maintain organized records of all expenses related to your pets and their involvement in income-generating activities. This should include expenditures like monthly pet insurance premiums, which serve to insure your business investment.
- Tax-Deductible Pet Relocation Expenses: It may be possible to include pet-related expenses in your tax deductions if you incurred costs while relocating them to a new residence in 2022. However, these pet expenses can only be written off if they meet specific criteria outlined by the IRS:
- The move must have a direct connection to commencing employment.
- Your new primary workplace location must be at least 50 miles farther from your previous residence than your prior job location.
- Following the move, you must work full-time at your new job for a minimum of 39 weeks during the first year.
- Tax-Deductible Contributions to Pet Charities: If you engage in fostering animals, you may be eligible for a reduction in your income tax liability. Any expenses incurred in caring for foster animals can be deducted as charitable donations, provided these animals come from a qualified tax-exempt organization.
While most non-profit organizations cover the expenses for food and veterinary care for the animals you foster, any out-of-pocket expenditures you make can be considered tax-deductible pet-related expenses.
If you volunteer at animal shelters or rescue organizations and incur fuel costs during your service, it is advisable to maintain a record of your journey. However, please note that this tax deduction for pet-related activities pertains solely to travel undertaken in support of the organization’s mission and not to your regular commute.
The IRS clarifies that charitable contributions claimed on itemized tax returns cannot exceed 60% of your Adjusted Gross Income (AGI) in 2022. However, in specific situations, lower limits of 20%, 30%, or 50% may apply. For the most accurate guidance, consulting with a certified accountant is recommended.
How to Report Pets on Your Tax Return
To include your dog or cat in your tax return, as opposed to opting for the standard deduction, you will need to itemize pet-related expenses as deductions.
Standard Deduction vs. Itemized Deduction: when individuals file their taxes, they choose the standard deduction—a fixed amount (adjusted annually) that the IRS permits as a deduction from their taxable income without requiring any detailed breakdown. The standard deduction amounts for different filing statuses in 2022 are as follows:
- Married filing jointly – $25,100
- Married filing separately – $12,950
- Single – $12,950
- Head of household – $19,400
If you opt for the standard deduction, you cannot claim pets on your tax return.
Alternatively, you can lower your taxable income by itemizing the total sum of your deductible expenses for 2022. This option becomes more advantageous when the total exceeds the standard deduction allocated for your filing status. By tabulating expenses such as vet bills, pet insurance, and pet supplies, eligible taxpayers can report their dog or cat on their income tax return.
Always retain receipts as evidence for every pet expense you claim, as well as proof that your pet qualifies for tax deductions in case of an IRS audit.
However, if the combined value of all your itemized deductions for the 2022 tax year is relatively modest, you might consider going for the standard deduction rather than reporting your pet on your return.
If you believe that the total sum of your deductible pet expenses (in addition to any other eligible tax deductions) exceeds the standard deduction amount, it is advisable to calculate the exact figure to maximize your tax savings. Seeking professional guidance is always recommended.
When filing your income tax return for 2022 in 2023, be aware of a few key changes:
- To account for inflation, the standard deduction has been adjusted to $19,400 for head of household filers and $12,950 for single and married-filing-separately filers.
- During the COVID-19 pandemic, all taxpayers were eligible for an above-the-line deduction of up to $600 for charitable contributions. However, you must now file an itemized tax return to claim deductions for gifts to public charities.
- The Child Tax Credit returned to $2,000 in 2022, but this applies exclusively to dependent children up to 16 years old, and pets or “fur babies” are not eligible.