For each of the last several years we have legitimately paid many thousands of dollars less in taxes than if we were not in the business of alpaca ranching. Advice on taxes came fromThe Farmers Tax Guide, a publication obtained directly from the IRS and our tax consultant.
While we cannot offer you tax advice, we can share our experiences with you: The IRS allows deduction of 100% of direct expense from our taxes. Major expense items for deduction are:
Feed - about 25 cents/animal per day.
Veterinary - about $25/animal annually. We have kept our expense down by learning to give our own medications and vaccinations.
Travel - all of our local and distant business related travel.
Maintenance and repair - to all business related structures and equipment.
Services - accounting, tax, legal, education, and advertising.
And, the portion of our home expenses that are allocated to our at-home office, i.e. phones, utilities, insurance, and maintenance.
In addition, the IRS allows depreciation of tangible personal property including:
Alpacas - 100% of the cost of the alpacas depreciated over 5 years.
Vehicles and equipment including computers, cameras, fax and cell phones.
Facilities - the outbuildings used for storage, feeding and sheltering alpacas.
Fencing - of properties and pastures.
And, a portion of the cost of construction and use of your home as an at-home office.
Also, Section 179 of The Farmers Tax Guide allows ranches to accelerate depreciation of $125,000 of startup costs (including the purchase of alpacas) into one year - that means a marked reduction in the taxes that you will ultimately pay each year.
Perhaps the biggest advantage of all has been our ability to build net worth on a tax-deferred basis. We are allowing a portion of our herd to multiply and grow over time without paying taxes on the increased size and value until the alpacas are sold.
Alpacas At Lone Ranch Renate & Richard Gyuro (541) 821-8071