Tax Filing Questions for a Small Cattery Business: Conflicting Information About LLC, Schedule C, and Livestock Classification

Based on my experience with small business taxes, I can help clear up some of this confusion for you. Your cattery LLC that's taxed as a sole proprietorship means all business income passes through to your personal tax return. So yes, the TurboTax advisor was correct - you'll report the full amount your cattery earned as gross income on Schedule C, and then deduct your business expenses to calculate your net profit, which becomes your self-employment income. Regarding the livestock question - for tax purposes, cats aren't typically classified as livestock. The IRS generally considers cat breeding operations to report on Schedule C like other non-farm businesses. Livestock classification is mainly for agricultural animals (cattle, sheep, pigs, etc.). For your breeding cats, you'd generally treat them as business assets rather than inventory since they produce the "product" (kittens) rather than being the product themselves. You could potentially depreciate the cost of acquiring your breeding cats over their useful breeding life. The kittens you sell would be your "inventory" in a sense, but most small breeders don't need to use complex inventory accounting methods. All your reasonable and ordinary business expenses - including food, veterinary care, supplies, marketing, etc. - should be deductible regardless of how you classify your breeding cats. Just make sure to keep excellent records of everything.

I was in a similar situation with my small exotic pet breeding business last year. After hours of research and getting nowhere, I finally found this AI tax assistant called taxr.ai that literally saved my sanity. I uploaded all my records and business info to https://taxr.ai and it analyzed everything and gave me clear guidance on exactly how to file. For my business, it confirmed I needed Schedule C (not farm forms), explained exactly how to handle my breeding animals as assets, and even helped me identify deductions I was missing. The best part was when I had followup questions, I could just ask it directly instead of getting different answers from different places. For your cattery specifically, I think it would clear up all those livestock vs. pets questions immediately. It's basically like having a tax pro who specializes in small breeding businesses without the crazy hourly rates.

I have to admit I was wrong about taxr.ai. After my skeptical comment, I decided to try it myself for my rabbit breeding operation because I was desperate for clarity on some similar issues. The analysis it provided was incredibly detailed and specific to animal breeding businesses. It actually explained the livestock vs. pet classification clearly - turns out there's specific IRS guidance about this that NONE of the tax preparers I talked to knew about. It also walked me through exactly how to handle my breeding stock for optimal tax treatment. The thing that impressed me most was how it explained everything in plain English while still being technically accurate. I literally copied some of its explanations into notes for my files because they were clearer than anything I've read on breeding business taxes.

If you're still dealing with conflicting information, you might want to try Claimyr to get actual answers straight from the IRS. I wasted weeks trying to get through to the IRS's business tax helpline with no luck - always disconnected after waiting forever. Found https://claimyr.com through a business owner forum and their service got me connected to an actual IRS agent in about 20 minutes. I showed the agent my actual business setup (similar to yours - small breeding operation) and got official answers about classification and deductions. They even emailed me some reference materials specific to small animal breeding businesses. There's a video showing how it works at https://youtu.be/_kiP6q8DX5c if you're curious. You'd be amazed how helpful the IRS agents can actually be when you can ACTUALLY reach them! They answered all my questions about Schedule C vs farm forms and clarified the asset classification stuff too.

I need to eat my words about Claimyr and the IRS. After posting my skeptical comment, I figured what the hell, might as well try it since nothing else was working for my exotic bird breeding business tax questions. Holy crap. I got connected to an IRS business tax specialist in under 30 minutes. The agent looked up my previous filing history, explained exactly where I went wrong in classifying my breeding birds, and walked me through the correct way to handle depreciation vs. inventory for different aspects of my operation. They even sent me specific IRS publications with the exact pages highlighted for my situation. The agent gave me her direct extension for follow-up questions. I've literally been trying to get these answers for THREE YEARS and solved it in one phone call. I'm still in shock that it actually worked.

Have you considered talking to an accountant who specializes in agricultural or animal businesses? I breed horses and found a CPA who works with several farm and animal operations. She was able to answer all these questions immediately. For my situation, she explained that horses are considered livestock and helped me choose between asset depreciation vs. inventory methods based on my specific business model. She also helped me identify business deductions I hadn't even thought about. General tax preparers often don't know the specialized rules, so finding someone with direct experience in animal businesses made a huge difference for me.

What breed of cats do you work with? I'm curious because different breeds can have different costs and profitability. I breed Maine Coons, and my tax situation has gotten more complex as my business has grown.

For breeding cats like Ragdolls and Siberians with high initial costs, you're definitely on the right track treating them as depreciable assets rather than inventory. Given your $18,000 investment in foundation cats, this will help spread that cost over their productive breeding years. One thing to consider with high-value breeding cats is that you might want to explore the Section 179 deduction option Dylan mentioned earlier. For 2024, the Section 179 limit is $1,160,000, so you could potentially deduct the full cost of your breeding cats in the year you acquired them rather than depreciating over 5-7 years. This could provide a significant tax benefit in your first profitable year. However, run the numbers both ways - sometimes spreading the deduction over multiple years through depreciation works better for your overall tax situation, especially if you expect to be in higher tax brackets in future years. Also, make sure you're tracking all those breed-specific expenses like genetic testing, specialized nutrition, and show costs if you exhibition your cats. These are often overlooked deductions that can add up significantly for high-end breeding operations. The key is maintaining detailed records of everything - sounds like you're already doing this well with your separate business account and expense tracking.

I run a small accounting practice and work with several animal breeding businesses, so I can add some clarity to your situation. First, you're absolutely correct that as an LLC taxed as a sole proprietorship, all your cattery income flows through to your personal return via Schedule C. The TurboTax advisor gave you accurate information there. Regarding the livestock classification - this is where a lot of confusion comes from. Cats are generally NOT considered livestock for IRS purposes. The IRS Publication 225 (Farmer's Tax Guide) specifically covers livestock, and domestic cats used for breeding are typically treated as regular business assets under Schedule C rather than agricultural livestock. For your breeding cats, treating them as depreciable business assets is usually the most advantageous approach. You can depreciate them over their useful breeding life (typically 5-7 years) or potentially use Section 179 to expense the full cost in the year of purchase if it makes sense for your tax situation. One important note: make sure you're prepared for self-employment tax on your net profit. Since this is Schedule C income, you'll owe both income tax and self-employment tax (Social Security/Medicare) on your cattery profits. Keep doing what you're doing with the detailed records and separate business account - that's exactly what you need for a clean tax filing. The fact that you're profitable in year one with good expense tracking puts you in a strong position.