Aquariums and taxes...

[Luis Figueroa]

I've seen fish tanks in hospitals and pediatrician offices. Which got me wondering if they write that off on their taxes. Which I'm sure they do.

As a hobbyist with a tank in our house I know we can't have an aquarium deducted on our taxes. However, a doctor uses aquariums to sooth a patient from stress and such. With that being said if it's in your office and you itemized your office there is a way to deduct it off your taxes.

The reasoning for this thread is for anyone who as attempted or (successfully) deducted their tank on their taxes, even a tax preparer who may have the answer. What does the irs look for in order for it to work as a home aquarium? If you have a home based business (not pertaining to our hobby) can it be written off? If there's a medical benefit in having the aquarium or therapeutic even, could it then be a deduction?

Ofcourse proper receipts for equipment and livestock will be documented in case of audit.

 

[smokin'reefer]

How about a tax credit for a natural wildlife habitat? I used to keep bees and there was something I would take, and I can't remember if it was a property tax credit or something like that. Just trying to think outside the box. Good topic for the season.

 

[MIchael10101]

Any tax consultants/lawyers here could give us an answer? I'm considering setting up a tank in my clinic but dropping a 5+K on a tank would be a lot better if it was tax deductible.

 

[HB AL]

I doubt it.

 

[Robthorn]

Do you have business traffic in your home that might benefit from it besides just oooing and Aaahhing? Like soothing at a Dr. Office?

 

[Greybeard]

I work from home... maintain a home office, and regularly write off expenses related to that office.

My tank isn't in my office.

Having been audited on several occasions, I try real hard to stay within the lines on my taxes. If the tank was in my office, I'd likely still not try and write it off.

You want a hobby you can write off? Start raising horses

 

[mrpizzaface]

I try to limit my creativity in relation to tax law.

 

[Michael Llabona]

You are asking to get audited if you do that. If your tank expenses are large enough to make an impact on your taxes then you probably shouldn't do it. I would only do it if the cost of the tank made up a very small portion of my business expenses.

 

[Daniel Waters]

An aquarium located in a dedicated business space, such as a separate office or part of an office building for a corporation / individual could be considered a business expense, much like any piece of furniture or decoration for an office.

For employees of a company who work from home, home office expenses fall under miscelleneous itemized deductions, which were suspended for 2018-2025 as part of the tax reform law that passed at the end of last year.

For self-employed individuals who use part of their home as an office, home office deductions are still available (under schedule C). There are two basic requirements- the home or part of the home is used regularly and exclusively for business and is the principal place of your business. Trying to justify that your aquarium is there for business use only would be a stretch and hard to defend if audited in my opinion.

As far as a possible medical deduction or paid from a health savings account for instance, I don't think that would pass muster unless your doctor or someone could back up your medical need for it.

Full disclosure: I am a CPA but do not prepare tax returns for individuals or provide tax advice. The above is not meant to provide any tax advice and I make no warranty as to its completeness or accuracy. Please consult your tax professional for all tax related questions.

 

[Epic Aquaculture]

A friend of mine owned a restaurant, and had a reef aquarium in the waiting area. I believe he was able to write off the costs associated with installation and upkeep, but had to keep very accurate records with backup for any expenses claimed.

 

[MIchael10101]

I am a physician, and the plan is to be in my office, but when looking at tax laws, I don't think decor can be written off. IE it has to be required for day to day functioning. You can write off artwork, but it has to depreciate in value (ie no fine art). I've looked around and a tank could be sketchy, if I kept it in my office. You'd have a much better argument if it was in the lobby, but I'm never there. I want it for me (I know I'm being selfish).

 

[mitch91175]

Any tax consultants/lawyers here could give us an answer? I'm considering setting up a tank in my clinic but dropping a 5+K on a tank would be a lot better if it was tax deductible.

That is easy it is office equipment if you are setting it up in a business. For home I think you can write it off IF you are running an aquarium related business at home. I am not a tax accountant, but any "business" related expenses are tax deductible.

 

[Instigate]

An aquarium located in a dedicated business space, such as a separate office or part of an office building for a corporation / individual could be considered a business expense, much like any piece of furniture or decoration for an office.

For employees of a company who work from home, home office expenses fall under miscelleneous itemized deductions, which were suspended for 2018-2025 as part of the tax reform law that passed at the end of last year.

For self-employed individuals who use part of their home as an office, home office deductions are still available (under schedule C). There are two basic requirements- the home or part of the home is used regularly and exclusively for business and is the principal place of your business. Trying to justify that your aquarium is there for business use only would be a stretch and hard to defend if audited in my opinion.

As far as a possible medical deduction or paid from a health savings account for instance, I don't think that would pass muster unless your doctor or someone could back up your medical need for it.

Full disclosure: I am a CPA but do not prepare tax returns for individuals or provide tax advice. The above is not meant to provide any tax advice and I make no warranty as to its completeness or accuracy. Please consult your tax professional for all tax related questions.

Do you happen to be familiar with what constitutes a business in the eyes of the IRS? Say you want to start an online business selling fish and coral, but you're not selling anything yet. You're still setting up and buying equipment, you haven't gotten any licenses yet but are researching and planning. It's my understanding you can write off expenses up to five years without making a profit. If you were to be audited what would the IRS be looking for to differentiate a hobby from a business?

 

[Daniel Waters]

I am a physician, and the plan is to be in my office, but when looking at tax laws, I don't think decor can be written off. IE it has to be required for day to day functioning. You can write off artwork, but it has to depreciate in value (ie no fine art). I've looked around and a tank could be sketchy, if I kept it in my office. You'd have a much better argument if it was in the lobby, but I'm never there. I want it for me (I know I'm being selfish).

The standard is it must be "necessary and ordinary". There is certainly a lot of grey areas within those definitions. Even taking a very generous interpretation (i.e. the aquarium is in a waiting area and serves the purpose of entertaining or soothing clients), an aquarium would most likely need to be considered a capital asset (and depreciated) versus immediately expensed. Honestly, though, in your circumstance, you are describing a personal asset which just happens to reside in your office, which would not be deductible as it would be considered personal property.

And you are correct about fine artwork. It is considered to have an indefinite life, so therefore it can not be depreciated down over time.

The US tax code is over 70,000+ pages long / over 4 million words. The King James Bible has less than a million just for comparisons sake....you can be the judge which is actually easier to figure out!

 

[Daniel Waters]

Do you happen to be familiar with what constitutes a business in the eyes of the IRS? If you were to be audited what would the IRS be looking for to differentiate a hobby from a business?

Oh boy....here are some answers to a couple of your comments. I'll respond to the others in a separate post.

The distinguishing key feature of a business is that it is there to make money. That being said, something does not have to be profitable and can still be considered a business. Whether something is actually a hobby or a business depends on many factors. The IRS will look at multiple areas. Per the IRS website,

Question
How do you distinguish between a business and a hobby?

Answer
In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. You must generally consider these factors in determining whether an activity is a business engaged in making a profit:

• Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you change your methods of operation in an attempt to improve profitability.
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

 

[Wrasse-cal]

I'm a partner in a LLP. My LLP (and personal) accountant told me since my tank is in my office, I can write it off as a business expense--even with the tank in my actual office and not my lobby.

I don't pretend to understand why.

 

[Daniel Waters]

Say you want to start an online business selling fish and coral, but you're not selling anything yet. You're still setting up and buying equipment, you haven't gotten any licenses yet but are researching and planning. It's my understanding you can write off expenses up to five years without making a profit.

The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby. This does not mean that the IRS could not classify your "business" as a hobby before then (see criteria listed earlier I posted). It also does not mean you can not have losses more than 3 years in a row (many corporations do for example, but they obviously can easily show they are engaging with the intent of trying to make a profit)

The deductibility of expenses obviously depends on the classification. If your "business" gets classified as a hobby, then you are only allowed to deduct expenses up to any income you show. In other words, you can't show a net loss for a hobby. Also, hobby losses do not carry forward to other tax years (unlike corporate business losses). If you're a bona fide business, then you can show all legitimate losses. For most self employed individuals, business income / loss is broken dowon on schedule C and the net income or loss is reported on your 1040 (line 12 for 2017 1040 form). The income or loss simply adds to or decreases your total income from all income sources showing on your tax form (such as pensions, W-2 wages, rent, interest, dividends, alimony, interest, etc...).

Startup costs for a new business....I'm not sure what the rules are for this since the new tax law passed. It used to be you could deduct $5,000 of startup costs and $5,000 of startup organizational costs (assumes startup and organizational costs are less than $50,000). Many purchases for an aquarium "business" such as equipment would be assets that would need to be depreciated over time and could not be immediately expensed (however, there are rules to allow for immediate expensing or bonus depreciation that I'm not getting into in this (you can reference 26 U.S.C. § 179 or just google Section 179 deductions)

 

[Picesduh]

Oh boy....here are some answers to a couple of your comments. I'll respond to the others in a separate post.

The distinguishing key feature of a business is that it is there to make money. That being said, something does not have to be profitable and can still be considered a business. Whether something is actually a hobby or a business depends on many factors. The IRS will look at multiple areas. Per the IRS website,

Question
How do you distinguish between a business and a hobby?

Answer
In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. You must generally consider these factors in determining whether an activity is a business engaged in making a profit:

• Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you change your methods of operation in an attempt to improve profitability.
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

If you are concerned about sharing the cost amount of the tank/equipment/live stock with your significant other, then it’s likely a hobby for you and not a business expense.

 

[John3]

A rich cat can buy a Van Gogh painting for 50 million and write that off as a business expense and yet some guy with a small business who wants a tank to view to keep himself sane while working is creating a tax liability...... gotta love the world we live in.

 

[Daniel Waters]

I'm a partner in a LLP. My LLP (and personal) accountant told me since my tank is in my office, I can write it off as a business expense--even with the tank in my actual office and not my lobby.

I don't pretend to understand why.

I had a client who had a very unique situation. He asked his tax professional the question, and I asked two other CPA's the same question. We got three different answers!

From what I have seen, many tax accountants take very liberal stances (I don't mean wrong, as a lot of this is grey area). The rationale is obviously to try and reduce the tax owed for the client. If you get audited, they may disallow certain deductions and say you owe us $xyz. In that case, smile and write the check.