Huacaya and Suri Alpacas for sale, along with fine Alpaca items available from our store.
The home of fine Huacaya and Suri Alpacas for sale
 

10 Tax Tips

1. Assuming you are raising alpacas for profit -- and who isn’t? -- all expenses can be written off against your income – including veterinarian care, feed, fertilizer, etc.

2. Be able to substantiate that you are not a “hobby” farm, as the rules governing those types of farms are much different.

3. You can also depreciate tangible property as breeding stock, barns and fences, which helps to cover your cash flow.

4. You can expense up to $250K of assets (under the Sec. 179 expense), but the write-off is LIMITED to your income. So if you have a net profit of $20,000 before the Sec. 179 expense, you can deduct up to $20,000, not the entire $250K.

5. Raising alpacas allows you to grow your herd, deferring tax on your investment’s increased value. A small farmer can purchase several alpacas and then allow their herd to grow over time without paying tax on its increased size and value.

6. It’s always helpful to review IRS publication 225, the Farmers Tax Guide, at your local IRS office or at the IRS website at http://www.irs.gov/pub/irs-pdf/p225.pdf.

7. An alpaca can typically be written off, or depreciated, over five years if they are being kept as breeding stock. This is what is known as the straight-line method and it allows you to deduct one-fifth of the cost each year, except the first year, which allows for only six (6) months of write-off.

8. How the sale of an animal is treated for tax purposes (the reporting requirements) depends on the class of the animal. A good summary can be found in Chapter 11 of Publication 225:

Class of Animal

 

Type of Asset

 

Sale Reporting

Purchased for breeding

Depreciable when placed in service, IRC section 1231 property

Form 4797 – asset used in trade
or business

Offspring raised for
breeding purposes

IRC section 1231 property generally zero basis

Schedule D – before placed in service, Form 4797

Offspring raised for
sale as breeder

Ordinary income asset

Schedule F – sale of raised animals
 

9. Remember to keep good records. Document all expenses, and hang on to thoseall-important receipts for a minimum of three (3) years.

10. 2009 will be a great year to refinance any existing mortgages or lines of credit - interest rates are lower than they’ve been in years!