Can Your Chickens Be Claimed as a Tax Write-Off?

The tax deductibility of chicken-raising expenses depends on how the IRS classifies your activity. This article explains the factors determining if your activity is a business or a hobby, outlines eligible business expenses, discusses essential record-keeping, and details how to report income and expenses for tax purposes.

Determining Business Versus Hobby Activity

The IRS classifies chicken-keeping as either a business or a hobby, which determines its tax treatment. The primary distinction is whether the activity is engaged in for profit. If an activity is primarily for personal pleasure, it is generally considered a hobby, which significantly limits expense deductions.

Conducting the activity in a businesslike manner is a key factor. This includes maintaining accurate financial records, such as separate bank accounts, and operating similarly to other businesses. The taxpayer’s expertise and their advisors also play a role, as demonstrating knowledge of business methods can indicate a profit motive. Substantial time and effort dedicated to the activity further suggests an intent to make a profit.

The IRS assesses whether assets used in the activity, such as land or coops, might appreciate in value. A history of success in similar activities can support a business classification, even if the current activity is not yet profitable. The history of income or losses is scrutinized; consistent losses might suggest a hobby, but efforts to improve profitability can indicate business intent.

The taxpayer’s financial status is also a factor, as significant income from other sources might suggest the activity is not relied upon for livelihood. The presence of personal pleasure or recreation elements is also considered. While no single factor is conclusive, the overall facts and circumstances determine if the primary intent is to generate a profit. An activity is presumed to be for profit if it generates a profit in at least three out of five consecutive years.

Eligible Business Expenses

If your chicken-keeping activity qualifies as a business, you can deduct ordinary and necessary expenses. An ordinary expense is common and accepted in your industry. A necessary expense is helpful and appropriate for your business. These expenses are subtracted from your gross income to determine your net profit, which is then subject to tax.

Common deductible expenses include feed, veterinary care, and equipment such as incubators, feeders, waterers, and processing tools. Larger assets like coops and housing might be depreciated over time. Marketing and sales costs, including advertising your eggs or poultry products, are also deductible.

Utility costs directly related to the chicken operation, such as electricity for coop lighting or heating, can be deducted. Vehicle mileage incurred for business purposes, such as traveling to purchase supplies or deliver products, is also deductible. You can claim this using the standard mileage rate (70 cents per business mile for 2025) or actual expenses. Taxpayers are responsible for determining what qualifies as ordinary and necessary for their specific business.

Record Keeping for Chicken Activities

Maintaining accurate records is essential for any business, including chicken operations, to substantiate income and expenses for tax purposes. The IRS requires businesses to keep records that clearly show both income and expenses. These records serve as proof of your business transactions and are necessary if your tax return is reviewed or audited.

Keep detailed records of all income generated, such as sales receipts for eggs, meat, or live birds. For expenses, retain documentation like receipts for feed, veterinary services, equipment purchases, and utility bills. For vehicle mileage deductions, a mileage log is required to document the date, mileage, destination, and business purpose. These records should identify the payee, amount paid, proof of payment, date, and a description of the item or service.

Organize these records systematically, perhaps by categorizing them by type of income or expense and by year. While paper records are acceptable, digital record-keeping systems and cloud storage can provide secure and accessible ways to manage your financial documents. The IRS generally suggests keeping most tax records for at least three years from the date you filed your return, though some records may need to be kept longer, potentially up to seven years.

Reporting Chicken Income and Expenses

If your chicken-keeping activities are classified as a business, you will report your income and expenses on specific IRS forms. As a sole proprietor, a common structure for small-scale operations, you will use Schedule C (Form 1040), Profit or Loss From Business. Schedule C details your gross income from sales and services, subtracting eligible business expenses to arrive at your net profit or loss.

Your net profit or loss from Schedule C is then transferred to your individual income tax return, Form 1040. If your net earnings from self-employment are $400 or more, you are also responsible for self-employment tax. This tax covers your contributions to Social Security and Medicare.

You calculate your self-employment tax on Schedule SE (Form 1040), Self-Employment Tax. The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare. This tax is applied to 92.35% of your net earnings from self-employment. For 2025, the Social Security portion applies to net earnings up to $168,600, while the Medicare portion applies to all net earnings. A portion of your self-employment tax is deductible when calculating your adjusted gross income.