TAXES :-) Can we right off snakes we bought?

Find a CPA who has other animal breeders as clients. The IRS is going to care less about the differences between dogs and snakes than we do. :)

As for keeping your breeding as a hobby, that does NOT get you off the hook come tax-time! You (general-you) have to report income and pay taxes on income from a “hobby” as well as from a business.

The hobby/business divide is driven primarily by profit - if the IRS (and by extension your state department of revenue) think that you aren’t tying to be profitable/sufficiently profitable, a business can be classified as a hobby, which means you don’t get to write off certain things. When I started my business 20-mumble years ago the simple formula was that you had to show a profit X out of the first Y years, and then A out of every B years thereafter.

And note that the IRS’s definition of profit may not be the same as yours - profit is *not* purchases minus all purchases and expenses for the year. In my case it’s cost of goods sold minus certain tools, hardware, and certain limited expenses like cost of booth space at shows.

So leather, thread, and needles (because needles wear out/break in a fairly short time period) only come into the profit equation when figuring my cost of goods sold. If I buy a new widget of under $Some I can write it off completely that year, but if I buy a big thing over $Lots, it must be depreciated over a number of years determined by the IRS.

I am not a lawyer or an accountant, point yourself at the IRS and state department of revenue website for all the facts and details.


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Originally Posted by Prognathodon

Find a CPA who has other animal breeders as clients. The IRS is going to care less about the differences between dogs and snakes than we do. :)

As for keeping your breeding as a hobby, that does NOT get you off the hook come tax-time! You (general-you) have to report income and pay taxes on income from a “hobby” as well as from a business.

The hobby/business divide is driven primarily by profit - if the IRS (and by extension your state department of revenue) think that you aren’t tying to be profitable/sufficiently profitable, a business can be classified as a hobby, which means you don’t get to write off certain things. When I started my business 20-mumble years ago the simple formula was that you had to show a profit X out of the first Y years, and then A out of every B years thereafter.

And note that the IRS’s definition of profit may not be the same as yours - profit is *not* purchases minus all purchases and expenses for the year. In my case it’s cost of goods sold minus certain tools, hardware, and certain limited expenses like cost of booth space at shows.

So leather, thread, and needles (because needles wear out/break in a fairly short time period) only come into the profit equation when figuring my cost of goods sold. If I buy a new widget of under $Some I can write it off completely that year, but if I buy a big thing over $Lots, it must be depreciated over a number of years determined by the IRS.

I am not a lawyer or an accountant, point yourself at the IRS and state department of revenue website for all the facts and details.


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Thank you. "In my case it’s cost of goods sold minus certain tools," So my question is are the breeding snakes that I bought tools. Thats exactly my question

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Originally Posted by qwerty53

Thank you. "In my case it’s cost of goods sold minus certain tools," So my question is are the breeding snakes that I bought tools. Thats exactly my question

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First line of my response - you need a different CPA.

If my husband buys his own semi and becomes an owner/operator, the first thing I’ll be asking a CPA is if they have appropriate experience. When I needed a complex concrete footing designed I hired another civil engineer to design it - yeah, I’m a civil and have my P.E., but I know what I do and don’t know..


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Guys I do not need CPA advice. What I am asking is if anyone wrote off the breeding snakes as tools to produce the product I am going to be selling

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Originally Posted by qwerty53

Guys I do not need CPA advice. What I am asking is if anyone wrote off the breeding snakes as tools to produce the product I am going to be selling

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Your question is a simple one. Unfortunately, the answer is complicated because you are talking about the IRS and our tax code.

Theoretically, could you write off your livestock expenses? I'm pretty sure you could under the proper set of circumstances. But that doesn't mean that you should. And it definitely means you shouldn't take my advice on the subject because if you are audited and your write off is not legitimate, not only will you lose your write off, you will likely end up paying interest and penalties on top of it.

Again, simple question... complicated answer... and it is the reason that God invented CPAs.

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Originally Posted by qwerty53

It is not registered business. As I said just looking to reduce my main job income.

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You can only show a loss if you have a legit business; the tax code simply does not permit "hobby losses" though you must declare hobby income.

Also there are much easier ways to reduce your income and/or tax owed than breeding ball pythons:
- 401k contributions
- IRA contributions
- HSA contributions (these also reduce your FICA income)
- 529 plan contributions
- Investment losses, these are capped annually though they can be carried forward into future years

Its a legitimate business
I am not asking for tax advice. I asked if anyone is doing it

If it's a legitimate business then yes you can write it off as a loss. I do it and I don't have a CPA. I use H&R Block tax software, it will walk you through all the steps and ask you question by question of what you can and can't deduct and will put everything you enter on the appropriate forms automatically. And it has links to YouTube videos if you get stuck. And every year they update with the new laws and new links to the videos explaining them in detail. I've been to tax preparers and they never ask me that many questions in that much detail and tell me what the new laws are.

For me the best way to do it is to run it through your tax software the first year when you are starting out and then make a spreadsheet in Excel with all the items you can deduct and track them the following years and save all your receipts. It's amazing how many deductions you can take if you keep track of them all. You can even deduct some meals, lets go to Red Lobster and talk about our snake business! 8) It's also good to talk to other business owners to see what they are taking as deductions.

However, you can't deduct expenses if you don't have it set up as a business in your taxes.

I also like to set up a business bank account with your business name attached (doing business as '...') That way if someone writes a check to your business name instead of your personal name you can actually cash it.

Personally I don't like retirement accounts like 401K, etc. Just too long term for me. It's like saying give me a hundred thousand dollars and if you make it to 65 or 70 years old you may or may not get all of your money back LOL. I'd rather have complete control of that money, I can double it in a few years easily. Or I'd rather use that money to pay off my debt. Maybe if I were debt free and didn't want to expand my business and was making a ton of money and had a tax problem because I was making huge profits then yes, I'd consider investing in the market. I would much rather invest that money in a business I know will be profitable than risk it in the market. Either way it's tax deductible.

I know this thread is a little old, but the information is still relevant.

1). Anything related to your breeding business that has a single use: e.g. rats that are purchased for food, travel, utilities, bedding, vet care, garbage bags, medicine, and so on, is an expense that can be written off in that year.

2). Anything that you can use long-term: e.g. the snake itself (if purchased), racks, snake hooks and other tools, carts, garbage cans, and so on, can be depreciated.....over several years. If you're writing these off in a single year, you're going to get yourself in trouble eventually.

So, you can't make $20,000 selling snakes, then go buy $6,000 worth of racks and $14,000 worth of snakes and claim you made $0.

It's worth paying an expert to do your taxes for one year. Then you can at least see how it should be done going forward.

FYI, I'm not an accountant, but I've hired many over the years.

You should make sure you pay quarterly taxes if you are using your snakes as an income. The IRS will not let you know right away that they don't like the way you're handling things, and at the end of two years (the usual lag, because it takes time for stuff to get flagged and go through Exam) they'll whack you with all kinds of penalties and interest. As long as you itemize your deductions on your return, you should be able to write off the cost of the parent snakes, as well as the food you feed them, and your setups as long as they are specifically set aside for the business. I was a tax examiner for 10 years so I know a little bit about it. And yes, there are flags and limits. I'm not familiar with most of them any more because it's been 15 years since I retired.
Hope that was helpful and not too confusing.