“Horses do not care how much you know until they know how much you care.” - Unknown

If you spend day in and day out caring for the animals who come to you for help, you don’t have the time to waste researching all the ways you can save on taxes for the year. All you can do is hope that your bookkeeper categorized your expenses correctly so that your tax professional might have a chance at catching everything that can save you money on taxes.

Well, if your bookkeeper/accountant/tax pro does not understand the veterinary industry, how can they know what will be relevant for you and your business? With a specific focus for veterinary professionals, I have put together a detailed list of both commonly missed and commonly used tax-deductible items for your business specifically.

Tax-Deductible Items

● Self-Employed Veterinarian – 2018 Tax Cuts and Jobs Act has created the opportunity for veterinarians that report their business income on their personal taxes to receive a pass-through deduction on their taxes. Income limits apply.

● Merchant Fees – This deduction is 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.

● Malpractice Insurance – Insurance is a critical part of any business but is especially important in the medical field. The payments you make for malpractice insurance are completely deductible as they are a necessary expense of doing business for potential legal situations.

● Employee Expenses – For small businesses, salaries, wages, commissions, and bonuses are tax-deductible if 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 whole or partially deductible when an employee incurs expenses while working for the business. These include costs such as meals, travel, education, and entertainment.

● Guard Animals – If you have a furry friend that lives at your practice (whether that be at your home or separate office) and their primary purpose is to deter intruders from your business. You can claim this animal as a “necessary and ordinary” part of doing business and deduct the expenses spent on their medical care.

● Depreciation – When you make any large capital investment for your business whether its property or equipment (x-ray machines, examination tables, etc.), be sure to create a depreciation chart and deduct the depreciation expense.

● 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 -Medical Supplies/Equipment
-Patient Refunds -Administrative costs

● 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 limit will remain at $19,500 with an additional “catch-up’ amount of $6,500 for those over fifty.

● 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.

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

● 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 veterinarians via membership fees.

● Health Insurance Premiums – If you are a self-employed veterinarian and pay for your own health insurance, you can deduct your premiums paid from your income before taxes paid.

● Travel Expenses – If you often travel for your business (out-of-office clinics, networking events, etc.) you can claim all these expenses as tax-deductible items.

● Service Animals – Does your practice train any animals to be used for the support of a disabled individual? (Visual, hearing, physically impaired). You can claim the medical expenses you have invested 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.

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. in which 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) Don’t miss out! If you don’t save your receipts to prove where the money went, then you won’t be able to safely deduct these items on your taxes. Always keep adequate documentation for your tax pro to keep your records audit-proof!