Your pet isn't a dependent but may still impact your tax situation.
Pets can be integral parts of the families that love and care for them. A pet can also represent a major expense in terms of food, travel and veterinary care. The Internal Revenue Service administers the tax code, which allows taxpayers to deduct certain costs associated with pets. However, pets do not qualify for the same dependent exemptions that children and human family members do.
Dependent Status
The IRS provides several ways to check if someone who lives with you qualifies as a financial dependent. Dependents can be children or other relatives. Dependent children must be under age 19, or under age 24 for full-time students. Any dependent must be a person who lives with you and receives a significant portion of his financial support from you directly. When you claim a dependent on your tax return you must provide a valid Social Security number, which prohibits pets from qualifying as dependents.
Significance
For each dependent that you claim, the IRS allows you to take a larger tax exemption when you file a tax return. This means that taxpayers who are responsible for more dependents pay tax on a smaller amount of their incomes, while those without dependents pay tax on more of their incomes. If you claim someone as a dependent who is actually financially independent, or if you claim a pet, or a person who does not exist, you will likely incur a fine and be liable for the additional taxes you owe without the dependent.
Pet Businesses
If you own or work for a pet-related business, your pets might have a significant impact on your tax situation. Many business expenses that you pay for yourself are tax deductible. This may include pet care costs if you maintain one or more animals for business purposes, including service animals and animals for breeding purposes. To claim a tax deduction for pet-related business expenses, itemize your deductions rather than taking the standard deduction on your tax return. Deductions are subject to maximum limits but can reduce your taxable income substantially.
Pet Trusts
Another situation where a pet can affect your income taxes is if you are the trustor, trustee or beneficiary of a pet trust. A pet owner can set up a pet trust to ensure that whoever takes possession of a pet after his death or incapacity will receive income to pay for the pet's expenses. Trusts that rely on investments are taxable, and the beneficiary may need to pay taxes on the trust income. However, pet owners can work with their attorneys to structure a pet trust in such a way as to pay the taxes from the trust itself without adding to the beneficiary's tax liability.
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