Knowing Your Industy Matters

If you run your own equine business, you don’t always have the time to research
every possible tax deduction under the sun. All you can do is trust your tax
professional to suggest potential ways to save every year.
Well, if your accountant does not understand the equine industry, how
do they know what will be relevant for you and your business? With a specific focus on equine professionals, I have put together a detailed list of both
commonly missed and commonly used tax-deductible items for your
business.

Tax Deductions


Employee Expenses – For small businesses, salaries, wages,
commissions, and bonuses are tax-deductible as long as they are
ordinary and necessary for business, a reasonable amount, for
services provided and paid or incurred in the current year.
Additionally, if you use a form of an accountability plan
(reimbursement or per diem) other expenses can be wholly or partially
deductible when an employee incurs expenses while working for the
business. These include costs such as meals, travel, education, and
entertainment.


Depreciation – When you make any large capital investment for your
business whether its property or equipment (fencing, paneling,
buildings, etc.), be sure to create a depreciation chart and deduct the
depreciation expense.


Land Maintenance and Improvement – Many equine businesses have
extensive costs with regard to pasture creation and maintenance, hay
Legit Ledgers, LLC. www.legitledgersllc.com kristina.vaughn.bk@gmail.com
harvest and storage, waste removal, etc. If you purchase pasture
supplies, fertilize your fields, use fuel for churning compost piles, etc.
these are all items you should be recorded in order to save on taxes.


Licensing Fees – If you pay any licensing expenses for your business
to continue practicing or examination fees to keep your professional
credentials, this is listed as a deduction.


Foster Animals – Do you host foster animals for a registered nonprofit organization? As of 2011, you can deduct ALL the expenses
related to caring for the animal. These include things like vet bills,
feed, and any other necessary costs. You should record these as
charitable-gift deductions.


Subscription and Professional Fees – If you are serious about
continuing education and constantly growing your knowledge base for
your business, there are plenty of expenses you incur for access to
professional publications and collaboration with other equine
professionals via membership fees.


Horses – If your horses are a “necessary and ordinary” cost of
maintaining your business, then of course all the necessary expenses
of keeping them are tax deductions! Costs include but are not limited
to feed, training, grooming, veterinarian, supplements, farrier,
deworming, dentistry, vaccinations/immunizations, breeding,
boarding, etc.


Service Animals – Are you keeping or training a horse (maybe a mini)
or any other animal to be used for the support of a disabled individual
(visual, hearing, physically impaired)? You can claim your vet
expenses for this animal! Do not forget… for IRS proof, obtain
paperwork from a medical professional or if you are simply the
trainer, keep a training log and test records.

Health Insurance Premiums – If you run your own business and pay
for your own health insurance, you can deduct the premiums paid
from your income before taxes.

Travel Expenses – If you often travel for your business (buying
horses, going to shows/rodeos, networking events, etc.) you can
claim all of these expenses as tax-deductible items.


Ordinary Operational Expenses – Do not forget that the little things
add up! Make sure you claim everyday expenses including, but not
limited to:
-Work clothing -Business Software -Internet and Utilities
-Facility Maintenance -Office Supplies -Tack
-Patient Refunds -Administrative costs -Feed Buckets/Supply
-Medical Supplies/Equipment -Grooming Supplies


Charitable Contributions – This can be a tricky area. Only if you
itemize for your taxes instead of taking the Standard IRS Deduction,
are you able to claim charitable contributions. However, itemizing may be
the way to go for your business especially if you do donate to many
charitable funds.


Farm Insurance – We spend a ton of money on protecting our
physical property and assets. The good news is that these premiums for
farm insurance is completely tax-deductible.


Merchant Fees – These deductions are commonly overlooked.
Anything from PayPal, Square / Stripe, Care Credit, Scratch Pay, etc.
If you pay fees for merchant services that help facilitate payments
and money movement between your business, bank, and customers,
it is deductible.


Guard Dogs – If your furry friend is largely used to protect your horse
barns from potential intruders, you can claim his vet expenses as tax deductions.


Retirement Savings – Do you contribute to an eligible 401(k) or other retirement funds? You can claim deductions for your contributions to these accounts every year up to a limit set by the IRS. For 2021, the
the
limit will remain at $19,500 with an additional “catch-up’ amount of $6,500 for those over fifty.


Registered Agent Services – If you have an LLC and hired a company
to perform registered agent services for you (mail collections, etc.)
then both the basic service fee as well as any supplemental items are
tax-deductible!


Small Business Marketing and Advertising – This includes the cost of
providing meals, entertainment, or recreational facilities to the public
as a means of advertising or promoting goodwill in the community.

Important Notes


1) Always consult your financial professionals for allowable amounts on
tax-deductible items. For example, if you have expenses such as
utility bills, vehicle repairs/maintenance, water, fuel, etc. where part
of these are used for personal purposes rather than just business.
You must properly allocate the appropriate portion to your business.


2) Be sure to note the difference between tax-deductible items that are
“current expenses” and those that are “capitalized expenses.” Current
expenses can be claimed all in one year as their useful life is
expected to be less than a year. Capitalized expenses are those
whose useful life can be estimated to last longer than a year. These
capitalized expenses must be claimed over a period of years (usually
their useful life). Many rules and exceptions exist for capitalized
expenses.


3) If you would like to have a bookkeeper that understands the business
of equine professionals and can properly convey your business’s tax eligibility to your tax professional, please feel free to contact me at kristina.vaughn.bk@gmail.com
or visit our Contact page to schedule a FREE consultation.


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