How would you like to trim your tax liability 10-15% or more? Alpacas are the answer. Instead of paying Uncle Sam the normal 35% +/-, you can chose to enhance your real estate, purchase animals, and deduct expenses directly against earned income. If you prefer to agist or board the animals, you can capture the expenses and cost of the animals against passive income now and 15 years into future. Tax deferred wealth building is another benefit. Taxes are postponed on the increased value until you are ready to start selling the offspring.

Many alpaca breeders throughout the United States have recognized financial and personal freedom. The rewards are many. Their initial investment has grown to a level that permits early independence. Individuals have recognized that their current careers can be incorporated into alpaca breeding with positive results. Take for example the physician who has done extensive research into the Accoyo line of alpacas. He has been winning in the show rings and his progeny line is sought as soon as it hits the ground! As an added bonus, many of these same individuals will share their stories of how they began and grew to today’s levels. The alpaca industry is full of many individuals willing to help you get started!

Raising alpacas on your own property:

First you must establish that you are actively involved in the business and desire to make a profit. Alpaca ownership suggests you:

Even if you are a passive investor you will still be allowed the following tax benefits.
The only question remains as to whether you can take the deductions on a current basis.

Deductible Expenses:

1. Vehicle mileage for all ranch business
2. Fees for income tax return
3. Livestock feed
4. Labor hired to run the ranch
5. Breeding Fees
6. Taxes and insurance
7. Depreciation on animals
8. Depreciation of real property such as barns and equipment
9. Farm travel expenses
10. Educational expenses
11. Advertising
12. Veterinarian care
13. Boarding fees
14. Farm fuel and oil
15. Attorney fees

Also refer to Section 179 from the IRS that allows a substantial deduction each tax year for expenses.

Please note that once you have determined either a net income or loss, that amount is included on the tax return. It is either an addition to or a deduction from ordinary income. Losses can be carried back for 3 years and forward for 15 years. To deduct any loss, you must be at risk for an amount equal to or exceeding the losses claimed. The “Risk Factor” is:

1. The amount of money you contribute
2. The amount of money you borrowed

The passive owner’s losses that are in excess of current income can be carried forward and taken against future income. Timing is the issue.

Tax deferment:
Alpacas in which you have cost basis can be written off over 5, 7 or 10 years if there are being held as breeding stock. Straight line or accelerated schedules allow for a percentage of the asset to be written off. Example: An alpaca is purchased for $20,000, depreciated for 2.5 years or 50% of its value and then resold for $20,000. There would be a gain for tax purposes of $10,000. Result = The adjusted cost basis is deducted from your sale price to determine gain or loss.

Capital Gain Treatment:
The sale of breeding stock qualifies for capital gains treatment. Please note that newborn crias that are not intended for breeding purposes would be considered inventory and produce ordinary income at the time of sale.

Good News!!
President Bush put into law The Jobs and Growth Tax Relief Reconciliation Act of 2003 on May 28, 2003. Tremendous benefits were made available to alpaca owners and breeders.

1. The Section 179 of the tax code allows $120,000 worth of deductions of new and used personal property assets in the year that you place them in service.
2. Long term capital gain income is “on sale” in the tax world! The maximum rate lowered from 20% to 15%.

Now for the GREAT NEWS!  The Economic Stimulus Act of 2008 has been modified.

    1.    You may still expense up to $120,000 for year 2010!

Please refer to IRS Publication 225, “Farmer’s Tax Guide” for more information. It can be attained at the IRS website http://www.irs.gov

Of course, your accountant can advise you of your tax structure and we recommend that you follow that advice.

These are just a few of the exciting
tax advantages of alpaca ownership

Play with the following compounding table and exercise all the possibilities that would be right for you!

Published with permission from the Alpacas Owners & Breeders Association

The price of alpacas has risen throughout the years. Conformation and fiber characteristics are the fundamental guidelines of value. Exceptional females have sold for as high as $160,000 and males at 1.2 million. However, a nice female with quality fiber and good confirmation generally brings anywhere from $15,000 to $30,000. If that animal has won in the show ring, then the price increases. Herdsires that have proven themselves in the show ring and by their progeny also command a higher price.

• Padded feet- Their soft feet cannot damage any terrain, which enables an owner to have less acreage and less need for rotation. In addition, alpacas gently break the grass midway on the blade as opposed to tearing away the root system.
• Three-compartment stomach- Alpacas eat less than other livestock because of their ability to efficiently convert food to energy.
• Camelid family- While it is extremely important to provide a constant source of fresh water, the alpaca can thrive without large amounts of water.
• Stocking Density- Alpacas are considerably easier on the land than most other livestock. Ten alpacas can safely be managed on one acre of land.
• Dung- American Indians used it for fuel and gardeners recognize it as an exceptional fertilizer. Alpacas make it easy to collect. Alpacas create a communal spot to be used by all. This practice also naturally inhibits parasite infestation.