If you run your own equine business, you do not have the time to research every possible tax deduction under the sun. All you can do is trust your tax professional to suggest potential ways to save every year.
Well, if your accountant does not understand the equine industry, how can they know what will be relevant for you and your business? With a specific focus for equine professionals, I have put together a detailed list of both commonly missed and commonly used tax-deductible items for your business specifically.
Tax Deductions
- Employee Expenses – For small businesses, salaries, wages, commissions, and bonuses are tax-deductible as long as they are ordinary and necessary for business, a reasonable amount, for services provided, and paid or incurred in the current year. Additionally, if you use a form of an accountability plan (reimbursement or per diem) other expenses can be whole or partially deductible when an employee incurs expenses while working for the business. These include costs such as meals, travel, education, and entertainment.
- Depreciation – When you make any large capital investment for your business, whether it’s property or equipment (fencing, paneling, buildings, etc.), be sure to create a depreciation chart and deduct the depreciation expense.
- Land Maintenance and Improvement – Many equine businesses have extensive costs with regard to pasture creation and maintenance, hay harvest and storage, waste removal, etc. If you purchase pasture supplies, fertilize your fields, use fuel for churning compost piles, etc. these are all items you should be recording in order to save on taxes.
- Licensing Fees – If you pay any licensing expenses for your business to continue practicing or examination fees to keep your professional credentials, this is listed as a deduction.
- Foster Animals – Do you host foster animals for a registered non profit organization? As of 2011, you can deduct ALL the expenses related to caring for the animal. These include things like vet bills, feed, and any other necessary costs. You should record these as charitable-gift deductions.
- Subscription and Professional Fees – If you are serious about continuing education and constantly growing your knowledge base for your business, there are plenty of expenses you incur for access to professional publications and collaboration with other equine professionals via membership fees.
- Horses – If your horses are a “necessary and ordinary” cost of maintaining your business, then of course all the necessary expenses of keeping them are tax deductions! Costs include but are not limited to feed, training, grooming, veterinarian, supplements, farrier, deworming, dentistry, vaccinations/immunizations, breeding, boarding, etc.
- Service Animals – Are you keeping or training a horse (maybe a mini) or any other animal to be used for the support of a disabled individual (visual, hearing, physically impaired)? You can claim your vet expenses for this animal! Do not forget… for IRS proof, obtain paperwork from a medical professional or if you are simply the trainer, keep a training log and test records.
- Health Insurance Premiums – If you run your own business and pay for your own health insurance, you can deduct the premiums paid from your income before you have to pay taxes on it.
- Travel Expenses – If you often travel for your business (buying horses, going to shows/rodeos, networking events, etc.) you can claim all of these expenses as tax deductible items.
- Ordinary Operational Expenses – Do not forget that the little things add up! Make sure you claim everyday expenses including, but not limited to work clothing, business software, internet and utilities, facility maintenance, office supplies, tack, patient refunds, administrative costs, feed buckets/supply, medical supplies/equipment, and grooming supplies.
- Charitable Contributions – This can be a tricky area. Only if you itemize for your taxes instead of taking the Standard IRS Deduction, can you claim charitable contributions. However, itemizing may be the way to go for your business especially if you do donate to many charitable funds.
- Farm Insurance – We spend a ton of money on protecting our physical property and assets. The good news is these premiums for farm insurance are completely tax deductible.
- Merchant Fees – These deductions are commonly overlooked. Anything from PayPal, Square / Stripe, Care Credit, Scratch Pay, etc. If you pay fees for merchant services that help facilitate payments and money movement between your business, bank, and customers, it is deductible.
- Guard Dogs – If your furry friend is largely used to protect your horse barns from potential intruders, you can claim his vet expenses as tax deductions.
- Retirement Savings – Do you contribute to an eligible 401(k) or other retirement fund? You can claim deductions for your contributions to these accounts every year up to a limit set by the IRS. For 2021, the limit will remain at $19,500 with an additional “catch-up’ amount of $6,500 for those over fifty.
- Registered Agent Services – If you have an LLC and hired a company to perform registered agent services for you (mail collections, etc.) then both the basic service fee as well as any supplemental items are tax deductible!
- Small Business Marketing and Advertising – This includes the cost of providing meals, entertainment, or recreational facilities to the public as a means of advertising or promoting goodwill in the community.
Last but not least:
- Always consult your financial professionals for allowable amounts on tax deductible items. For example, if you have expenses such as utility bills, vehicle repairs/maintenance, water, fuel, etc. in which part of these are used for personal purposes rather than just business. You must properly allocate the appropriate portion to your business.
- Be sure to note the difference between tax-deductible items that are “current expenses” and those that are “capitalized expenses.” Current expenses can be claimed all in one year as their useful life is expected to be less than a year. Capitalized expenses are those whose useful life can be estimated to last longer than a year. These capitalized expenses must be claimed over a period of years (usually their useful life). Many rules and exceptions exist for capitalized expenses.
- If you would like to have a bookkeeper that understands the business of equine professionals, please feel free to contact me at kristina.vaughn.bk@gmail.com.
Kristina is the owner of Legit Ledgers, LLC., a 100% virtual bookkeeping and financial services business that specializes in the equine and veterinarian industries. As a Master in Accounting and Financial Management and Certified Quickbooks Online ProAdvisor, she has combined professional knowledge with the passion for her own horses/furry friends to provide expert bookkeeping for these specific industries.
Website: Legit Ledgers, LLC. – Professional Bookkeeping and Financial Services (legitledgersllc.com)
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