Profit From
Cat Breeding -
Hobby Or
Business?
 Most
breeders will say there's no profit from cat
breeding. But you still want to try your hand in it. The question is,
is it just a
hobby or do you intend to make some profit from it?
This
is a very tricky question that borders intent with reality. If you are
breeding purebred cats it pays to be aware of the possible
ramifications with the IRS. Generally any money you make over a set
amount must be reported. This generally means if you have three litters
of kittens and sell a few kittens for $1500 total then you must claim
this as income.
However, with that you can also deduct the
expenses that you have proof of. This can include cat food, veterinary
costs and cleaning expenses related to the cats as a business expense.
You must keep receipts and documentation.
Others interpret the
definition to be intent. Do you intend to make a profit from cat
breeding? Few people
intend to seriously make money with purebred anything as the costs
normally add up to make profit little more than a dream. Many breeders
are happy to cover their expenses. However just because you don’t
*intend* to make a profit doesn’t mean on some years you won’t and that
must be claimed according to IRS regulations.
Unfortunately
with this comes other potential issues including the wrath of those who
say anyone who profits from breeding is a mill and should be turned in
for legal action! What’s a breeder to do?
To add to the
confusion some states or counties define what is and is not a business
on volume of animals sold. This would put someone selling 30 kittens
for $50 a business while the breeder selling one for $700 not required
to have licensing.
There is an IRS provision called the “hobby
loss rule” that requires a motive
of profit in order to deduct losses.
When intent to make a profit is there they will look at professional
appearance – business name, invoices, separate bank account and
records, daily log or journal and other indications of intention of
profit.
However, if there is not an intention to make a
profit,
section 183 of the IRS code provides deductions are not allowed. In one
case involving horses terminology of “babies” vs “foals” showed a lack
of professionalism and therefore deductions were disallowed. Under long
standing IRS rule if you make a profit in 3 of 5 years you are a
business.
From the IRS standpoint they just want a part of
the
income no matter where it comes from. However from the standpoint of
other agencies it can be far more sinister. Your use of legal advice on
a local level would be money well spent and, if warranted, an
accountant.
For the person with just a few cats this isn’t
likely to be
a life altering designation but legal eagles have a different view of
the law and sometimes the perception of the law. If it's just a hobby
and you truly don’t intend to make any profit from cat breeding you can
simply list the
funds as extra income if it happens. Keep in mind once you designate it
as a business of breeding it can change perceptions considerably.
Hobby or business, you should play it safe and
know where you stand!
Return
From Profit From Cat Breeding to The
Truth About Cat Breeding
Return to Homepage
©breeding-cats.com.
All Rights Reserved. The materials in this website are for educational
purpose only, not to replace any veterinarian advice.
|
