Pets as Dependents: A Proposed Deduction

The success of American government is that the elephant can dance. The most common dance we watch is taxation, and over time the dance reacts to the advances, retreats, and missteps of the population. The complicated deductions, exemptions, subsidies, and credits on a 1040 form testify to the malleable nature of the personal income tax code. Over the past century, the IRS has corresponded to society’s needs through various programs, such as deductions for student loan interest, mortgages, educator expenses, and much more. Most recently we saw the “Clean Fuel Vehicle Deduction,” which came out of a perceived necessity created by skyrocketing oil markets, and this was a gracious turn by the elephant toward a segment of the population. But the Clean Fuel Deduction has a potential expiration date of 2006. Appropriately, the deduction must woo the elephant in the first few dances, as it gets only one or two songs, and if deemed unworthy by voters, the deduction will soon become a wallflower in the history of US tax code.

Bearing this ability to change, it seems remiss that no movement has begun for a pet owners deduction. While making this argument invites a certain backlash, legitimate points can be made, starting with the favorite statistic: money. In the past decade, pet expenses have increased 100% and we may only be at the knee of the curve of this trend. Annual pet expenditures in the US went from $17 billion in 1994 to $36 billion in 2005 (according to the American Pet Products Manufacturers Association). This growing market sector mirrors our society’s desires and needs, and with every new doggy daycare and boutique that opens downtown, another PetSmart springs up in a strip mall. The change is not subtle at all.

Why argue for a tax deduction for pet owners? Simply stated, because our increasingly transient society has made pets a quality-of-life issue. With the decline of the traditional family, siblings and parents often live on opposite ends of the country. Jobs leap from city to city and careers change by necessity in the dynamic economy. Landing a job after college or high school can dislocate a family, and to fill that void people have turned to pets. Also, careers demand more, making fewer professionals choose to have children.

With many single households and empty nests, the current situation doesn’t address a large body of the public. Households that lack any chance at deductions often have pets and pay anywhere from $12,000 up to $38,000 over a dog’s life of fourteen years (peteducation.com). Compare these numbers to the cost of raising a child, which runs from $124,000 to $250,000 (moneycentral.msn.com). The numbers quoted for raising a child include college costs, so the assumption can be made that a child can be claimed as a dependent for approximately 23 years. With the standard deduction at $3,100 per year per dependent, a taxpayer with a child can reduce his amount due to Uncle Sam by $71,000.

When a pet dies, pet owners usually acquire a new pet, and so over those same 23 years, if we average the cost of pet ownership to be $25,000, the amount a pet owner will spend in 23 years comes out to just over $41,000.
This means a pet owner pays 20% of what a parent pays, so why not assist pet owners with a comparable tax-deduction, or “pet-dependent” credit? An identification number for pets could simplify this, as pet vendors and groomers could send out annual statements to pet owners. Likewise, this would alleviate the cost for parents with traditional dependents. Parents with pets stand to gain more from this deduction than single households would, since they already foot the ever-growing bill for children.

The argument might be perceived as the latest outcry of overly affectionate pet owners, but at this point, the emotional tie to pets has become so strong that arriving in the middle of a conversation, it is sometimes difficult to distinguish whether a person is praising a pet or a child. Certainly, the debate over whether the love for pets is equivalent to love for children will not find an answer in this short argument. However, while love for pets sometimes does go overboard, it is not for the state to measure affection, but instead we measure what we can. What can be quantified is money, the number of pets, and the fragmentation of society.

On the IRS website, Topic 354 discusses what determines dependency status. The test for a dependent has five questions:

1. The Member of Household or Relationship Test: To meet this test, the dependent must live with you for the entire year. So far so good.

2. The Citizen or Resident Test: To be a citizen, a dependent must be born in the United States.

3. The Joint Return Test: Does not apply, since pets do not file tax returns.

4. The Gross Income Test: A dependent cannot earn more than the standard deduction. Pets do not earn anything, leaving only one question left.

5. The Support Test: You must provide over half of the dependent’s support during the year. Clearly for pets, the amount of support is 100%.

Lastly, a dependent must have an identification number, and currently this is the only impediment to pets fitting into the role of a dependent.

Surely if hobbies such as gambling can be deducted from taxes, a place on the 1040 for pets exists, too, particularly since the pursuit of happiness is often as simple as coming home to man’s best friend. Asking the elephant to dance is the hardest part, but it’s already being done with dollars.