Every day, pet owners leave town for vacations and business trips, or emergencies take them to hospitals or other long-term medical facilities. Someone must take care of Fido and Fluffy, and that’s where professional pet sitters come in. As small business owners, pet sitters can take some of the same tax deductions available to other businesses.
Business Deductions on Schedule C
The IRS allows you to deduct certain work-related expenses, for which you use Schedule C. If your service has employees, whether salaried or independent contractors, you can deduct the pay they receive. For employees, put this information on Line 26 of Schedule C, and on Line 11 for independent contractors. Since your business requires insurance, that's a Schedule C deduction. If you supply pet food, cat litter and similar items, make sure to keep all receipts as these items are deductible if provided for your clients' pets. Other relevant Schedule C deductions include:
- Business-related travel
- Business-related meals - 50 percent deduction permitted
- Business publication
- Credit card fees for processing client transactions
- Membership in professional organizations
- Office supplies - if used specifically for business
- Legal fees
Car or truck depreciation expenses are deductible as long as you document every expense carefully. Many small business owners prefer to take the standard mileage deduction.
Some pet sitters watch their clients' dogs and cats in their own home in a boarding arrangement, but the majority travel back and forth to the pet owner’s premises. You can deduct your mileage back and forth to a client’s home, as well as any mileage bringing the client’s pets to the dog park, veterinarian, groomer or other pet service. If you have a home office as your primary base, every trip is tax deductible, including the first and last pet visits of the day. If you work from an outside office, you can’t deduct that first trip out or the last trip back because you then fall into non-deductible personal commuting. With your home office, you are going from one place of business to another place of business – your client’s house.
For 2017, the IRS permits a standard rate of 53.5 cents per mile for business miles driven. You may opt to use the actual cost of driving your vehicle rather than the standard rate, if you keep careful records and use the vehicle exclusively for business. However, if you use the vehicle for both personal and business purposes, you must divide the expenses based on the mileage. If it's a 50/50 use mix, that's your deductible percentage.
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Home Office Deduction
If you’re running your pet sitting business out of your home, you likely have a home office. The IRS allows you to deduct expenses for a home office if the space is used exclusively for business, whether you own your abode or rent it. In 2017, the IRS’ simplified option allows you to deduct $5.00 per square foot of the amount of space used for your home office, with a maximum of 300 square feet. The regular IRS option allows you to deduct the percentage of your home used for your business, and may take into consideration your mortgage, utility costs and other related expenses. Your accountant can tell you which option works best for your pet sitting business.
Pet sitters need a retirement plan, and just because you’re operating a small business doesn’t mean you can’t make retirement contributions and take allowed deductions. For example, a sole proprietor can make a contribution to a Simplified Employee Pension (SEP) IRA of up to 25 percent of compensation, with a 2017 limit of $54,000 to the SEP-IRA. You can deduct the amount you put into the SEP-IRA up to 25 percent of your compensation on your federal income taxes.
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