Tax Questions

To the those of you out there who buisiness breeders. I have two tax related questions.

1. How do you claim a new snake purchase to your expences?

2. What buisiness catagory do you use for your breeding buisiness?

I may have more as I go through my taxes but I figured I would ask the experts

You need to talk to a tax professional (CPA). A new snake purchase could have multiple implications depending on how you look at it. Adding an animal to the breeding collection increases the value of the business. Males will initially appreciate, but depreciate with time, but a female could actually appreciate even more over time. I would think it would fall under agriculture, but again talk to a CPA.

Tax publication 523 deals with business expenses.

Have a CPA take care of it for you, that way if you get audited you know your not going to end up owing big bucks. We have use a CPA every year to make sure everything is kept above board. You also get tax right offs on a percentage of your internet connection if you have a web site, racks that are purchased, purchased food or food for food purchases, and percentage of home used by the business. On another note you have to be careful how everything is done, if it doesn't look above board your business may get reclassified as a hobby.

I agree with the above but will add a few things.
1) You have to be able to show a profit I want to say 3 out of 5 years. Otherwise the burden is on you to prove it's a business and not a hobby to the IRS. With a hobby, you can only deduct expenses up to the amount of revenues (basically can't have a loss)

2) Snakes are probably going to be classified as a capital asset, not an expense. It goes back to the matching theory of accounting. You have to match expenses with revenue. Since a snake will produce revenue for more than a year (much like a building), you typically amortize it over a period of time. The amount of time is where it gets tricky and this is where you need a CPA.

Actually snakes purchased as breeders can and would be considered 'livestock' by the IRS and can be expensed under Section 197 of the IRC (100% depreciaton in the year that they are purchased), and as they are not specifically classified under the depreciation tables of the IRS, the timetable for depreciation over time would be 7 years.


I highly recommed getting the book "Home Business Tax Deductions" (Nolo), as it has a ton of good information concerning home business rules and deductions.

I have a couple of questions to add. Yes, I will be using a CPA, but I still want to know what is going on (and that he isn't ignorantly screwing me) before I sign those tax forms next year.


1. Write offs. I know you can write off a percentage of the utilities, mortgage, and other expenses, but what about food? It would be easy, I think, to write off rats purchased from a store because you have a receipt showing value. But how do you show value for rats that you have bred yourself? Do you just estimate that a large ASF costs $5 to raise, and Snake ABC took 1 per week over the last year?

2. Wouldn't classifying the snakes as livestock give some office the authority to come in to my home at random times to do an inspection or something? I keep a very clean snake room and rat room (garage), but there are issues that I don't want some outside "authority" knowing about, like the few hundred feet of heat tape that I have rigged up in a 10X12 room with my "livestock".

1. If you are breeding the rats yourself, for your own use, then there would be no deduction for them, but there would be deductions for the supplies you use to produce them.

2. In this instance, you are only using the livestock classification for tax purposes, it isn't related to any local ordinances that may or may not be in effect for your area.