When my cousin first said she was buying an alpaca 10 years ago, I asked "what the heck is an alpaca?". Now that she has more than 30, I have learned the answer to that question and many more. When my sister decided to buy an alpaca 2 years ago, I learned even more - especially about the tax benefits. I also learned that not many accountants know anything about alpacas or the tax benefits in being an alpaca farmer.
The major tax advantages of alpaca ownership include the employment of depreciation, capital gains treatment, and for active hands-on owners, the benefit of offsetting ordinary income from other sources with expenses from the alpaca business. Wealth building by deferring taxes on the increased value of your herd is also a big plus.
If you are contemplating getting into the alpaca industry, you should do several things before buying your first alpaca:
- Visit farms near you and talk to the breeders about the care and raising of alpacas.
- Get the pamphlet "Financial Aspects of Alpaca Ownership" from the Alpaca and Breeders Association.
- Get IRS Publication #225 "The Farmer's Tax Guide".
- Consult an accountant about your particular financial and tax situation - preferably one who knows what an alpaca is.
