Whether pet insurance is deductible depends on your business.
Pet insurance helps you face unexpected veterinary bills and ensures that your pet will receive the care it needs when the situation calls for it. Depending on the insurance plan, pet insurance may cover vaccinations, infections, injuries and even life-threatening conditions such as cancer. If you want to deduct this expense from business tax calculations, you will need to prove that your pet is common and helpful for the type of business you run.
Definition
According to the Internal Revenue Service (IRS), tax deductions can be made on the cost of carrying on a trade or business. A deductible business expense has to be both ordinary and necessary. In other words, it has to be common in your trade or business, and it has to be helpful and appropriate for your trade or business. The expense does not have to be indispensable for it to be considered necessary and therefore deductible.
Identification
Expenses used to pay for personal, living or family purposes cannot be deducted against business tax. However, if an expense is used partly for business and partly for other purposes, you can deduct the tax on the business part. For example, if you have a home office, you may be able to deduct taxes on your mortgage interest, insurance, utilities, repairs and depreciation.
Insurance Expenses
Generally, cost of insurance can be deducted if it is ordinary and necessary for your trade or business. Common deductible insurance premiums include fire insurance, employee medical insurance, liability insurance, malpractice insurance and vehicle insurance. Some insurance premiums that cannot be deducted include loss of earnings insurance, loan insurance and life insurance covering employees that name you as the beneficiary.
Deducting Pet Insurance Expense
Taking into consideration the criteria for deductible business expenses, a pet insurance would normally not be deductible because a pet is usually not common and necessary to most businesses. However, you may be able to deduct the expense if you can prove that pet insurance is a common expense in your business, and that pet insurance is helpful and appropriate to your business. For example, if your business is breeding animals, you may be able to claim their insurance expenses against your business tax. Consult your accountant for personalized advice that is appropriate for your business.
The Future of Pet-Related Expenses
In 2009, a proposal was introduced into the Congress to allow pet owners to deduct up to $3,500 for pet-care expenses. The proposed legislation was designed to ensure adequate care for pets and encourage responsible pet ownership. Unfortunately, the proposal, known as the Humanity and Pets Partnered Through the Years (HAPPY), is not popular. According to the Rasmussen Reports, only 25 percent of U.S. voters favor the proposal, while 71 percent oppose it and 4 percent are undecided.
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