By: Gina Morgan
Provided you meet the minimum requirements, there are many tax advantages available to alpaca owners. An owner does not have to be caring for the alpacas on their own land on a daily basis in order to benefit from tax breaks. You may agist your alpacas (passive ownership) and still claim deductions, however not all allowable deductions may be applicable to alpaca owners while they are using the agisted ownership approach, simply because you may not be actively incurring the deductible expenses while agisting.
In order to claim tax deductions as a farmer (active or passive), you must establish that you are in business to make a profit. Your farming operation can not be a hobby. If your farm reports a profit in three of the last five tax years, it is presumed to be a for profit operation. If the farm is new or has not had a profit to report for three years, you may qualify as a for profit enterprise if some or all of the following hold true:
You operate your farm in a business like manner.
You have a business plan and you are making appropriate, justifiable business decisions.
You are maintaining strict business bookkeeping methods.
You possess the necessary knowledge to operate a farm in a business like fashion or you have advisors who possess the knowledge.
Your losses are due to circumstances beyond your control or are associated with the customary start-up expenses of farming.
You depend on income from farming for your livelihood.
You display, through investment of time, effort and approach that you intend to make the farm profitable.
You are able to make a profit from farming in some years.