The One Big Beautiful Bill Act (OBBBA) permanently extends a harsh provision from the Tax Cuts and Jobs Act (TCJA): the ban on deducting “more than 2 percent” miscellaneous itemized deductions.
For dog breeders, this rule is especially painful. The IRS often views breeding as a hobby rather than a business, and hobbies are a tax disaster.
Expenses tied to a hobby aren’t deductible, but income is still fully taxable. In fact, hobby income must be reported separately on Schedule 1 (Form 1040), line 8j—making the imbalance even more obvious.
There is one small break: hobbyists who sell inventory, such as puppies, can reduce their taxable hobby income by the direct costs of raising and preparing those animals for sale. But beyond this narrow exception, the tax rules leave hobby breeders exposed.
The good news? You don’t have to accept hobby status. By structuring your dog breeding as a business, you can unlock significant tax benefits and escape the OBBBA/TCJA trap.
The Business Escape
Make your dog breeding activity a business. As a business, it escapes all the trouble above and can generate generous tax benefits.
For tax purposes, a “business” is any activity which you engage in regularly and continuously primarily to earn a profit. Your desire to earn a profit doesn’t necessarily have to be reasonable in the ... Log in to view full article.
