Can you claim pet expenses as tax deductions? And answers to other hot tax questions

HOUSTON - Social media has been buzzing with posts about taking tax deductions for your pet.  But are they true?  Can Fido or Fluffy really be a tax write-off?

You might be surprised that the answer is both yes and no.

Most people consider pets to be like members of the family.  The American Pet Products Association says Americans spend about $136 billion on pets a year.

Tax experts tell us they cannot be claimed as a dependent on a federal tax return, but there are some specific cases where you can deduct certain pet expenses.

What pet expenses are tax-deductible?

If your pet is a service animal, you may be eligible for a tax write-off because your pet is providing a medical service.

Or if you foster a pet for a 501(c)(3) adoption organization, you may be able to write off expenses that are not reimbursed, such as vet bills, pet food, and supplies.

And for you influencers, you may qualify for a tax deduction if your pet performs and earns income for you, whether it's on social media, in movies or TV, or if the pooch competes in events and wins cash prizes.

"You do have to pass the litmus test for common sense. If you have an animal for your influencing, you better have a lot of created content related to that animal and history and prospective activity," said Mark Steber of Jackson Hewitt.

If your dog serves as a guard dog for your business, you may be able to claim it as a business expense.

Some pet parents wonder if pet insurance is tax-deductible.  Tax experts say only if the pet is a service animal or performs for money.

Income over $5,000 received over payment apps must be reported

Now let's talk about another tax talker this year.  Paying tax on income paid over payment apps such as Zelle, Venmo, and PayPal.

Do you have a side hustle where you get paid through a payment app?  There's an important tax change this year.

You may have received a 1099-K form if you received more than $5,000.  

This is part of a gradual change of having to report income over these payment apps.

The backstory:

The American Rescue Plan, a 2021 COVID-19 relief bill, included a provision requiring payment services to provide users with a 1099-K if they had business transactions of $600 or more.  That was supposed to take effect for the tax year 2022, but the IRS pushed it back due to some confusion.

"If you're getting paid through one of those platforms, if you got more than $5,000 in payments for business, you’ll get a 1099-K this year and so will the IRS.  You’ll have to put that on your tax return and manage that.  It’s a transition down to $600 in 2026 that was put in place years ago," explains Steber.

What's next:

For tax year 2025, the threshold drops to $2,500, and then to $600 for tax year 2026.

Big picture view:

This rule only applies to income-generating transactions.  It does not apply to personal transactions, such as splitting a restaurant bill with friends or family.