Monday, November 9, 2009

The Happy Act Deductions for pets, who will benefit?

Have you heard of the House bill that gives $3500 to pet owners?  How does it affect you?  Will you be able to benefit at all?  First read the bill (it's short, I promise, don't worry if you don't understand the technical jargon).  Then scroll down and read my blog about it.  Remember, I'm a tax pro, this is my take on the bill as it looks like it would be implemented, if of course, it would pass.

Humanity and Pets Partnered Through the Years (HAPPY) Act (Introduced in House)

Have you heard of the bill that gives $3500 to pet owners?  How does it affect you?  Will you be able to benefit?   First read the bill, then scroll down for my blog about it. 
HR 3501 IH

1st Session
H. R. 3501

To amend the Internal Revenue Code of 1986 to allow a deduction for pet care expenses.

July 31, 2009

Mr. MCCOTTER introduced the following bill; which was referred to the Committee on Ways and Means


To amend the Internal Revenue Code of 1986 to allow a deduction for pet care expenses.
    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


    This Act may be cited as the `Humanity and Pets Partnered Through the Years (HAPPY) Act'.


    The Congress finds the following:
      (1) According to the 2007-2008 National Pet Owners Survey, 63 percent of United States households own a pet.
      (2) The Human-Animal Bond has been shown to have positive effects upon people's emotional and physical well-being.


    (a) In General- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:


    `(a) Allowance of Deduction- In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the qualified pet care expenses of the taxpayer during the taxable year for any qualified pet of the taxpayer.
    `(b) Maximum Deduction- The amount allowable as a deduction under subsection (a) to the taxpayer for any taxable year shall not exceed $3,500.
    `(c) Qualified Pet Care Expenses- For purposes of this section, the term `qualified pet care expenses' means amounts paid in connection with providing care (including veterinary care) for a qualified pet other than any expense in connection with the acquisition of the qualified pet.
    `(d) Qualified Pet- For purposes of this section--
      `(1) QUALIFIED PET- The term `qualified pet' means a legally owned, domesticated, live animal.
      `(2) EXCEPTIONS- Such term does not include any animal--
        `(A) used for research or owned or utilized in conjunction with a trade or business, or
        `(B) with respect to which the taxpayer has claimed a deduction under section 162 or 213 in any of the preceding 3 taxable years.'.
    (b) Clerical Amendment- The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items:
      `Sec. 224. Pet care expenses.
      `Sec. 225. Cross reference.'.
    (c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

    Who exactly can claim this deduction?  Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) refers to itemized deductions on Schedule A.  This doen't help the average joe without a mortgage, property taxes and medical expenses.  It is also slated to go into a section that is subject to the 2% floor (the amount to be subtracted from the section amount).  If you have say $50,000 adjusted gross income, before exemptions for dependents and yourself, and had no other deductions in that section, you would be able to deduct 2,500 (2% of $50,000 is $1,000).  Add all your other deductions such as charities (with receipts only , please), medical expenses (again subject to the 2% floor, subtract that $1000 to see if you can claim those expenses), own a home, pay state taxes (reduce by refund of previous year), property tax, vehicle license (only the tax), cost of having your taxes prepared last year and a host of other, usually small deductions.  If this amount doesn't exceed the standard deduction (for 2008 taxes it was $5700 for single or married filing separate; $11,400 for married filing joint; and $8350 for head of household) don't take it, unless you are in the very rare position of being required to.
   People who really need this deduction, those who don't have a deduction for their home, can't afford health insurance, and haven't seen a doctor in umpteen years, are not going to see any benefit whatever from this bill, unless before it gets passed, someone gets smart and puts the deduction above the line (before the gross income line), or as a credit against tax due, which could bring your tax down to $0.  Best yet would be a refundable credit which means if there is any left after tax is deducted, you get it as a refund.   All this would mean that you would not be able to file a 1040EZ, but for a bigger refund, or less taxes paid, that isn't so bad.
   Animals are still being dumped or are suffering because their owners can't afford food or vet care.  If this money was put into the hands of those who really needed it, city and county shelters  would not be so overwhelmed with incoming animals.  This influx of animals costs a lot, in housing, feed, emergency care, even killing the animals is not cheap.  The cost to the people who work with the animals is great, emotionally and physically, and is especially devastating when they get laid off because the cost of dealing with the influx,  the cost of  larger number of call outs for abandonment and neglect, and even plain out and out cruelty, the lower adoption numbers, the loss of the revenue from vaccines and licenses, all add up to shelters running out of money and having to lay off personnel.  Many charity shelters have closed already, many more probably will as they become overstuffed and underfunded.  When these charities close, the government run shelters have to take up the slack.  They have to, it's the law in most places, it's the mandate and the legal liabilities if they did not and someone was injured or killed could bankrupt a city.  More cost, more dead. 
   Remember, everyone pays taxes, in one way or another.  When you file your income tax, you probably only look at your refund line, but don't forget to look at the taxes due line.  It can surprise you how much that really is.  Even those receiving EITC (Earned Income Tax Credit) would get more if they had no tax due.  Some, of course, are already at zero tax due, but not most.  Even if you don't pay any income tax, though, you still pay plenty of taxes.  Take bread for instance.  When you buy a loaf of bread, you pay a portion of the farmer's taxes, the flour maker's taxes (and those of the other ingredients), the breadmaker's taxes, the store's taxes the truck companies' taxes (for each step of the way) and the of course all of the sales taxes. charged when you buy the bread.  That doesn't include any other taxes that increase the overhead along the way.
  Don't let anybody tell you that this is a needless bill, that Representative Thaddeus McCotter of Livonia, MI should be focusing on jobs, and not spending our money.  Remind them how much money this could save the cities and counties especially if this was a credit available to the falling middle class, bypassed by almost all tax credits as it is, but the very ones who would benefit the most. Remind them of the people who care enough for their pets that they will sacrifice their food and medicine to care for their beloved animals.  Remind them that heartbreak has very real health consequences, as does guilt if those animals are abandoned to a system that must kill them because they also lack money.
   Tell your representative to vote yes, but also to make this at least an above the line credit.  Tell them this will save your city and your county money.  Tell them it will save jobs.  Tell them it will save your emotional and physical well-being.  And if they care, tell them it will save lives.

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