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

[qwerty53]

So you buy a 1.1 adults. You are not selling them but you are selling the babies that they are going to produce.
Can these snakes be declared as expenses for the business, like the racks, the rats, the paper..... or just because your commodity is snakes (even though you are not selling these and they are just expenses to get the commodity, you cannot right them off as expenses?

How you guys do it?

[cchardwick]

I write off everything I buy for the business including new snakes. Keep in mind that if you do set it up as a small business in your taxes and deduct everything you will get hit big time if you actually make a profit. I cleaned fish tanks for awhile and made about $10,000 profit per year with virtually no expenses. At the end of the year the IRS wanted nearly half of that so I had to be ready to fork out about five grand. And I was penalized by not paying quarterly taxes, they assume that they can gain interest on it as they go through the year so basically you are paying them the interest they missed out on (or just file quarterly taxes).

The best way to run the business is to reinvest all of the money back into the business. I worked in a chemistry lab for eight years and we took a loss every year. But the lab grew and expanded, they used all of their profit to put back into the business, I assume to avoid taxes. Plus they were a corporation with investors so it didn't really matter that much, it's slightly different.

It's kind of risky though not having a nest egg to fall back on, I think it's better to show a little profit every year and build up a nest egg for the bad years just in case. Last year I showed a loss of $22,000. Instead of paying $3,000 in taxes I got a refund of $8,000. Of course last year my wife and I both had full time jobs and paid a lot into income taxes, it wouldn't work that way if you just had the business, you would get zero return for showing a loss.

My company is called 'Chris Hardwick Reptiles' but I blanket everything into that business name, my Angus Cattle, Dogs, Ducks, Fish, Reptiles, etc... Every animal on the farm will eventually show a profit and there will come a time where my business will be large enough to stop growing it and I'll make a bunch of money on everything. Then I'll have a major tax problem LOL. At that point I'll start investing in tax deductible retirement options. And some of the big time reptile guys fly all over the world and travel to reptile shows burning up all their profit and having fun doing it! Since you save 50% in paying taxes it's like everything is 50% off (assuming it's tax deductible). I think the government sets it up that way to grow businesses and to make the economy grow in general, bigger businesses means more people will be employed.

Also keep in mind that everything resets at the end of the year. So if you take a loss this year it won't affect the profit you make next year. So if you make a ton of money in three years you'll get hit with all the taxes on that profit. It's better to spread things out over a year to even it out, if you make a lot of money invest in something else to avoid taxes. I couldn't imagine making $100,000 and having to pay the IRS $50,000 at the end of the year OUCH.

[Craiga 01453]

This is just a guess since I've got no experience...

If you're claiming them on your taxes you'll probably be expected to include the sales of the babies when they are sold.

Again, just a guess...

[qwerty53]

Thanks guys. And yes I would report selling babies.
So far the conclusion is that I CAN right off snakes from my income. Say I make 50K at my every day job and I bought snakes for 10K so my declared income is 40K. Correct?

[KevinK]

This would totally be a question for an accountant, I don't trust armchair quarterback opinions (this would include myself) when dealing with the IRS....LOL.

I think Craig is leaning on the right idea, I'm sure you can write them off....but then you better be sure to include any sales. Personally, this is why I avoid classifying anything as a business and just call it a hobby. I'm pretty sure if you have a declared business for tax purposes, that falls in a completely separate boat as far as filing goes as you're subject to a different tax rate for the business.

[qwerty53]

I am doing it with CPA. But he is not sure. He never had clients that have commodity produce another commodity...

[qwerty53]

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

[bcr229]

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

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

[Spicey]

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.

[larryd23]

Thanks guys. And yes I would report selling babies.
So far the conclusion is that I CAN right off snakes from my income. Say I make 50K at my every day job and I bought snakes for 10K so my declared income is 40K. Correct?

Personal taxes and business taxes can be different or the same. It depends on how the business is set up. This might help or confuse you even more: https://ttlc.intuit.com/questions/29...ersonal-return

As others have said, the best advice is to consult an accountant who is experienced in this area.