Tax influencers – they’re everywhere. They are particularly pervasive this time of year with tax season starting. Recently a particular “tax influencer” shared a questionable strategy for how they wrote off a horse they acquired. They simply made it a mascot for their tax strategy firm, genius right? Well, not exactly – before you round up the family pet – this would be disallowed under an audit. Let’s take a closer look at this case and why it doesn’t work as well as the rules for mascots overall.

According to the tax code (IRC 162), an item must be an ordinary and necessary expense in order for it to be deductible. A horse is not exactly an ordinary expense for most peoples’ line of work, unless you work at a stable or equine therapy center. It’s also certainly not necessary for most jobs including the tax strategy and preparation occupation the tax influencer was working in. Along with these rules, if you are using the animal for other purposes like general recreation/hobby (a horse), husbandry (cows, pigs, chickens) or even as a family pet like your beloved dog or cat, that would disqualify this deduction as well. If you aren’t sure if your animal can be used as a mascot, here are some questions you should ask yourself.

  • If we asked 1000 other business owners in your industry, would they have a similar mascot expense?
  • How often was the animal used in promotional material? Once?
  • Do you engage with the animal recreationally when it’s not being used for a photo shoot?

Now, it is true that there are a FEW exceptional limited-use cases in which this could be a legitimate deduction. Businesses that use famous mascots frequently for their promotional materials, like the Taco Bell Chihuahua, or mascots for sports teams could take advantage of this deduction. Guard dogs for businesses can also sometimes qualify but once again this situation is murky.

Overall, it’s quite difficult to prove that an animal can be considered a legitimate tax deduction in the eyes of the IRS as a mascot. It’s not a typical or necessary expense for most businesses so including this deduction can raise a red flag for an audit. If you are in the process of preparing your taxes or planning for the year ahead, make sure you are speaking with a legitimate tax planner that can find you a variety of safe and legal ways to optimize your tax plans. A lot of the information available on social media is sensational and designed to draw attention but not always effective or worthwhile. We can help you sift through the noise to find the best tax savings possible here at ClarkSilva – give us a call today!