Tax Write-Offs for Farm Animals
Whether you're farming animals for breeding or for livestock, you have many tax breaks available. For example, you may be able to depreciate the costs associated with your animals, property and equipment. You may also be able to write off the entire cost of your animals along with the expenses you incur as part of your farming operation.
Under certain circumstances, you may be able to depreciate the purchase cost of your farm animals. In order for your animals to be eligible for depreciation, they must be used for breeding purposes. If your livestock is used for slaughter, they are considered produced goods and are not eligible for depreciation. Breeding animals are considered fixed assets and can be depreciated over several years. How long you can depreciate your breeding animals depends upon that species' average fertile years.
The value of property, buildings, fencing and equipment may also be eligible for depreciation. The rate of depreciation can vary anywhere between three and 40 years, and will depend on what's considered the useful life of the asset. For example, a barn that's expected to be useful for over 50 years will need to be depreciated slowly over the span of 40 years, as this is the maximum. Similarly, a piece of machinery that has a lifespan of 10 years will need to be depreciated over that same span.
In some situations, the entire cost of the animal can be written off during the current tax year. For example, according to CNBC, people who purchase alpacas for business purposes are able to write off the entire purchase price. This can amount to a substantial write-off because alpacas average from $5,000 to $10,000 each, and prize-winning animals can go upwards of $100,000. You may also be able to write off the value of your animal if it is stolen or dies, as long as you use the cash method of accounting for your business.
If you're itemizing your deductions for your business, you may be able to deduct the costs associated with caring for your animals and operating your farm. For the animals, you can deduct food, veterinary bills, medications, bedding and breeding fees. As for the farm, you can deduct your labor costs, equipment rentals, farm supplies, marketing expenses, transportation costs and membership fees. In order to deduct these expenses, you must file Schedule F with your taxes.