Do I Have to Pay Taxes on Dog Sitting Income?
Understand the tax implications of dog-sitting income, including reporting methods, potential deductions, and the importance of accurate record-keeping.
Earning money from dog sitting might seem like a casual side gig, but it has tax implications. Whether you watch pets occasionally or run a full-time business, the IRS considers this income taxable. Failing to report earnings properly could lead to penalties.
When Dog-Sitting Income Can Be Taxable
The IRS requires all income from dog sitting to be reported, whether it’s a one-time payment or a steady stream. If you earn at least $400 in net income, it is classified as self-employment income, making it subject to both income and self-employment taxes, which cover Social Security and Medicare contributions.
Even if you make less than $400, the IRS still expects you to report it. If you use platforms like Rover or Wag! and earn over $600, you may receive a Form 1099-K. However, even without this form, all income must be reported.
Receiving payments in cash or through apps like Venmo or PayPal doesn’t exempt you from taxes. The IRS can track unreported earnings through bank deposits and payment records.
Reporting Methods for Earnings
How you report dog-sitting income depends on whether you operate independently or as a structured business. If self-employed, you must file a Schedule C (Form 1040) to report earnings and expenses. This form determines net profit, which is subject to income and self-employment taxes.
For payments processed through PayPal, Venmo, or pet-sitting apps, tax reporting rules have changed. If your total transactions exceed $600 in a year, the payment processor may issue a Form 1099-K, which is also sent to the IRS. Even if you don’t receive this form, you must report the income.
If you receive direct payments via cash, checks, or bank transfers, no third party will issue a tax form for you. Keeping accurate records ensures consistency between reported income and bank deposits, reducing the risk of discrepancies if audited.
Possible Deductions
If dog sitting involves regular expenses, you may be able to deduct costs directly related to your services. The IRS allows deductions for ordinary and necessary business expenses, which can lower taxable income.
Supplies such as leashes, treats, waste bags, and cleaning products are deductible. Pet food purchased specifically for animals under your care may also qualify.
If you use a dedicated space in your home exclusively for dog sitting, you may be eligible for a home office deduction. The IRS offers a simplified deduction based on square footage or an itemized approach that calculates actual expenses like utilities, rent, and internet.
Transportation costs are also deductible if you travel to clients’ homes or transport pets. If using a personal vehicle, you can deduct mileage at the IRS standard rate of 67 cents per mile for 2024 or claim actual vehicle expenses like gas, maintenance, and depreciation if the car is primarily used for business. Keeping detailed records of trips is necessary to support these deductions.
Record-Keeping Obligations
Maintaining accurate financial records is essential. The IRS requires documentation to support reported earnings and deductions. Without proper records, proving income and expenses during an audit can be difficult, potentially leading to disallowed deductions and additional tax liabilities.
A well-organized system should include invoices, receipts, contracts, and client agreements. Payment records from apps like Zelle or Cash App can serve as documentation, but generating detailed invoices listing services provided, dates of care, and amounts charged is advisable. Bank statements reflecting payments also help establish a clear financial trail.
Tracking expenses is equally important. Keeping receipts for pet supplies, business-use equipment, and transportation costs ensures deductions can be properly substantiated. For home office deductions, utility bills and lease agreements should be retained. The IRS generally recommends keeping tax records for at least three years, though records related to asset depreciation or business property should be kept longer.
Consequences for Misreporting
Failing to report dog-sitting income can lead to financial and legal consequences. The IRS detects unreported earnings through third-party payment processors, audits, and data matching. If discrepancies arise between reported income and IRS records, taxpayers may face penalties, interest charges, or an audit.
Penalties for underreporting income vary. If the IRS determines income was unintentionally omitted, a failure-to-pay penalty of 0.5% of the unpaid tax per month may apply, up to 25%. If the omission is considered substantial—typically 10% of total income or $5,000, whichever is greater—an accuracy-related penalty of 20% of the underpaid amount may be assessed. Intentional tax evasion carries more severe consequences, including fines and, in extreme cases, criminal charges.