Can Adoption Fee be Tax Deductible ?
Some adopters may wonder whether the "adoption fee" or "adoption donation" made to a Rescue which has 501c non-profit status can be claimed as a deductible charitable donation on the adopter's income tax return. The short answer is that an adoption fee or donation made to adopt a dog is almost certainly NOT deductible , but any additional donation made over and above the standard fee almost certainly IS deductible.
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Before reading this article, please read What Donations are Deductible ?, which is pre-requisite to understanding the material in this article.
Some adopters may wonder if any part of the "adoption fee" or "adoption donation" that they pay when adopting a dog from a Rescue group or individual might be lawfully claimed as a tax deduction on their income tax. This article is intended as a general guide as to why the answer is generally that it is NOT. However any additional donation made over and above the standard fee may well be deductible.
First of all, unless the Rescue to which the fee is paid is a recognized 501c non-profit entity, which many of them are not, it is not possible to deduct any kind of donation whatsoever. For the remainder of this discussion we will assume that the Rescue is indeed a 501c entity.
The basic rule is that the only portion of a "donation" that can be claimed as a tax deduction is that part for which the donor "has not received any goods or services in exchange." The familiar example is the high priced charity dinner, let's say $100 a plate, where the dinner itself is worth $35 : in this case only the remaining $100 minus $35 equals $65 is deductible.
Applying that rule to any fee or donation given as part of the dog adoption process, it can immediately be seen that even though all parties view the situation as one of "adoption" rather than "sale" and view the fee as intended to reimburse the Rescue for a portion of its expenses on that dog and to make it possible for the Rescue to keep up the good work of rescueing dogs, it is still undeniable that the adopter has recieved a "thing" of value , namely the dog, in exchange. Moreover the adopter commonly will be receiving some other goods, such as the club newsletter for a period, and some other services such as the right to call upon Rescue personel for advice in regard to training and behavior issues. Now it is very hard to put a cash value on any of these items. Hardest of all to put a market value on the dog, who all too often was earlier thrown away into the Pound as being of no value whatsoever. (consider that if one owns a horse whom one is dissatisfied with or no longer wants or finds burdensome, one normally can sell the horse, ie that horse has some market value to someone, even if alas it is only the slaughterhouse. However one can rarely sell a no longer wanted dog, implying that the dog has no recognizable market value.) However it would immediately be counter-argued that by the time the dog has been through the Rescue and foster care process, it is now been spayed / neutered, vaccinated against Rabies and DHLPPv, and perhaps also been heartworm tested and put on prevention. Each of these items does have a readily discernable minimum cost as could be estimated by a survey of prices for same from area veterinarians, and each of these is something that a normal responsible dog owner must do for any dog if they have not already been done. So the cost of these proceedures would seem to create a minimum value for that dog. Additionally the dog will have received some degree of training, the amount varying with the skills and energies of the foster home, and this training has some value, as might be estimated by consulting area trainers. So the dog's value would be increased by some not so easily determined amount. Now I can for damn sure tell you that for the average rescued dog, the veterinary expenditures on that dog will exceed the amount of the adoption fee. Virtually every Rescue in opperation tends to set its adoption fees way too low in comparison to the costs of doing the rescue and foster care. So I think it is almost impossible for an adopter to evade the point that in exchange for the adoption fee, whether it is called a "fee" or a "donation", the adopter is getting a dog whose value equals or exceeds that fee. The fact that most Rescue adoption contracts call for the adoption fee to be refunded if the dog is returned within some stated "try out" period makes it indisputably clear that the fee is in exchange for the dog and vice versa.
(Please notice that in the above discussion, I am adopting the accountant or tax collector's view of "value," which is economic value. If you don't absolutely believe that the dog you are adopting is a treasure beyond measure, you shouldn't be adopting ! And you'd better believe that the Rescue group and the foster home believes this dog is infinitely precious. But that is moral value, and the tax guys are only concerned with economic value.)
Additionally, since most Rescue groups now have adoption fees that are $200 or above (and if they don't, they should!!!), this is an amount for which a bone fido donation would require a donation acknowledgement letter as described in the article Donation Acknowedgement Letters, in which it is stated that "the donor received no goods or services in exchange for the donation". Based on the arguements above, I would warn all Rescues that they would be on very thin ice if they were to write such a letter in reference to their normal adoption fee. It's simply not worth jeapardizing that hard-won 501c status to do something that is this questionable. If an adopter asks, the Rescue should calmly explain why such an accomodation is not possible. (And if the adopter backs out of the adoption, Rescue can count it as a great fortune to have escaped a bad adoption !!)
Now there may well be times when an adopter, who is financially well off and who appreciates that the Rescue sometimes has very large vet bills on rescued dogs, whether or not that is true of the particular dog being adopted, will offer to make an ADDITIONAL donation over and above the standard adoption fee. Glorious blessings upon all such good hearted people !! And for that extra donation, it IS totally lawful and proper for the adopter to take a tax deduction and for the Rescue to write a donation acknowledgement letter saying that for this portion the donor "recieved no goods or services in exchange." My recommendation would be in such cases that the adopter write two separate checks, one for the adoption fee and annotated as such , and the other for a donation and annotated as such. The donation check should be deposited immediately, as there would be no circumstances that would call for its return to the donor. The adoption fee check could be deposited or could be held for the period of the try out , as it is potentially refundable if the try out proves that this is a mismatch and the dog is returned in good condition. The letter which is written to the donor as proof of donation should say something like " Rescue Org thanks you for your donation of $xxx on date yyy, such donation being made separate from and in addition to our usual adoption fee for dogs and such donation being one for which you are recieving no goods or services in exchange." Ie make it unequivocally clear that even though the donation may be motivated by gratitude for Rescue's services to this particular dog, the donation is not in any way given in exchange for this dog ; the adoption fee and the donation are indeed separate transactions.
I hope I have made that as clear as anything concerning taxes can be made, given that the tax laws strive always to be as inpenetrably incomprehensible as possible.
So if you are making any big donations, be sure to have a good tax consultant or CPA to advise you. For the small donations, I wouldn't worry too much unless some other aspect of your tax return is likely to flag it for special scrutiny or audit (eg if you are a lawyer, a hairless primate physician, or if you have a home office or claim large hobby-business losses such as dog-breeding or racehorses).
WARNING : I am NOT a CPA or Tax Expert of any kind. Please regard this article as just an orientation to the subject. Ask your own CPA or Tax Consultant about any specific issues you might have.