Category: Alpaca

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Alpacas and Taxes


Happy New Year!  Ugh, along with the new year comes taxes.  Before we started our alpaca farm, taxes were a breeze, just plop a few numbers into H&R Bock hit submit and voila my taxes were done.   It’s not so easy any more. *sigh*

With farm business come receipts. Lots and lots of receipts.  Receipts for the feed store, hay, equipment, mileage, chemicals, vet fees, marketing, livestock, professional development, travel, utilities, payroll, fertilizers, fuel, insurance and the list just keeps growing.  Now with it being December 31st my mind should be thinking of champagne and celebrating but instead I’m dreading the lost weekends to mountains of bureaucratic paperwork.  The good news is this is our second year of itemizing all of our deductions so we remembered to save all of our receipts.  Yes it might be a PITA to go through them all but it’s $$$ in your pocket the first few years.  That is until you sell a female alpaca and end up owing the IRS, LOL

Alpaca Tax Tips:

Thinking of starting an alpaca farm?  Start finding old receipts NOW.  When we bought our property 4 years ago it never occurred to us that we might end up having a production farm so we hardly saved any receipts.  Big mistake.  You can deduct farm related items several years prior to you actually becoming a farm.  Examples:  Your property, dwellings, trucks, tractors, equipment, fencing etc.  All useless to you if you can’t find the $%*(@# receipt! 

My advice.  If you have even an inkling of wanting an alpaca farm even 3-5 years into the future start saving your receipts now.  Especially those related to your research of alpacas.  Did you pay for a seminar? Travel Expenses? Mileage?

Get into the habit now of thinking what actually would be considered a tax deduction.  I find myself hording receipts, was that roll of paper towels for the house or the barn? Was the gallon of milk to feed a bottle baby?  Another nice way to think when researching alpacas is the lovely “farm tax exempt” form.  Now when I walk into places like Tractor Supply the prices on the shelf are the actual price because I don’t have to pay sales tax on an item I use for the farm. Not to mention also think along the lines of what tax bracket you’re in.. Are you 10%, 15%, 25% or more? Take that % into account as you will be deducting that on your taxes at the end of the year too.

Fuel Receipts: Gas purchased for vehicles (like tractors) that never leave the farm property are exempt from fuel taxes.  Yeah about ½ of the cost of a gallon of gas is taxes.  $$$ back in your pocket.  Be sure to mark your receipt though, we right TRUCK or TRACTOR on ours so we know if we get to not only deduct the cost of the fuel on our taxes but if we also get the taxes we paid on the fuel back.

The best advice I can give is to get a really good accountant.  Find one who knows agriculture and preferably alpacas.  You will get back on your taxes many times over than what their fees are.

For your viewing pleasure here is a blank copy of the Excel file we give to our accountants.  It is based on the Schedule F form and our accountants really appreciate it.  The more work we are able/willing to do on our end to keep things organized keeps their processing time down and costs low.  

Good luck on your alpaca adventures! 

Disclaimer: I am not nor do I pretend to be an accountant.  Please seek professional guidance elsewhere.

See Our Other Posts!
Starting an Alpaca Farm: New Buyers Guide
Agisting Vs Farm Ownership
Alpaca Care Costs

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12 Alpaca Days of Christmas

Alpaca_Wreath
On the first day of Christmas
My true love sent to me:
A Long Haired Champion Suri

On the 2nd Day of Christmas
My true love sent to me:
2 Heated Buckets
And a Long Haired Champion Suri

On the 3rd Day of Christmas
My true love sent to me:
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 4th Day of Christmas
My true love sent to me:
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 5th Day of Christmas
My true love sent to me:
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 6th Day of Christmas
My true love sent to me:
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 7th Day of Christmas
My true love sent to me:
7 Fans a Blowing
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 8th Day of Christmas
My true love sent to me:
8 Cria Pronking
7 Fans a Blowing
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 9th Day of Christmas
My true love sent to me:
9 Dam’s a Cushing
8 Cria Pronking
7 Fans a Blowing
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 10th Day of Christmas
My true love sent to me:
10 Spinners Spinning
9 Dam’s a Cushing
8 Cria Pronking
7 Fans a Blowing
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 11th Day of Christmas
My true love sent to me:
11 Drive By Breedings
10 Spinners Spinning
9 Dam’s a Cushing
8 Cria Pronking
7 Fans a Blowing
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

On the 12th Day of Christmas
My true love sent to me:
12 Volunteers
11 Drive By Breedings
10 Spinners Spinning
9 Dam’s a Cushing
8 Cria Pronking
7 Fans a Blowing
6 Macho’s Fighting
5 Bales of Hay
4 Tui Grazing
3 LGD’s
2 Heated Buckets
And a Long Haired Champion Suri

 

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Feeding and Weaning a Bottle Fed Cria

Well I must say that our first experience with birthing and raising a cria has been an exciting one.  I wasn’t expecting to be so involved though.  I thought I’d share with you our hands on 2 month timeline for raising our little Albina. 

There are many different opinions of what to feed cria. Here is the milk cocktail we chose to feed.

2 large spoonfuls of store brand probiotic vanilla yogurt.  Cover yogurt with half/half (~ 3-4oz), fill rest of the bottle with Vitamin D whole milk.  Leave some air in the bottle and shake very well to mix in all the yogurt.  Warm the bottle in a pot of water and it’s ready to serve.  Depending on quantity of milk we chose to feed in a 9oz glass human baby bottle or in a 24oz soda bottle with a flutter lamb nipple.  Cut an ‘X’ in the nipples so that milk flows freely. 

Day 1:
Weight: 20lbs
Albina was able to stand and walk within 40 minutes of birth.  She had a great suck reflex and tried to suckle on the wall.  We checked mom for milk but she was dry.  We repeatedly applied a hot cloth to mom’s belly but no milk dropped.  By hour #2 we decided to mix up some powdered colostrum.   (NOTE:  Learn from our mistake to NOT use powdered colostrums, it does nothing.  Try for fresh cow/goat or frozen llama/goat.)  Baby drank down 24oz of (what we thought was useful) colostrum in 12 hrs. 4oz every 2hrs or so.

Day 2:
We continued to apply hot towels to mom’s belly and finally started to get milk.  YIPPY! Or so we thought.  We pointed baby at mom’s udder but she freaked out, kicked and sat on her baby.  Back to the bottle.  We mixed in the last bit of useless colostrum, with some electrolytes into the above milk cocktail and Albina continued to drink well. 

We took Albina and mom to the vet for a checkup and an IGG and BVD test.  Both came back with a clean bill of health and a 24hr wait for test results from the blood work.

Feeding schedule was 4oz every 2hrs around the clock total of 48oz of milk. Albina drinks bottle without human contact.  We put the bottle in a feeder and she feeds herself.  See Self Feeding Bottle Baby

How much should a cria drink?  10% of body weight to maintain.  15% of body weight to grow.  
15% of 20lbs = 3 pounds = 48oz of milk.  

Day 3:
Feeding still at 4oz every 2hrs around the clock
Weight: dropped to 19.8 lbs

IGG test came back at a ZERO!  Yikes.  Lessoned learned about powdered colostrum. Next time we will be getting fresh cow’s colostrum from the dairy at the end of our road.  Back to the vet we went for a plasma transfusion.

Day 4:
Feeding 4oz every 2hrs around the clock.  Getting very tired.

Day 5:
Feeding 4oz every 2hrs around the clock.  Back to the vet for another IGG test
Weight: 22lbs

Day 6:
Tried feeding in the middle of the night.  Cut out the 2am and 4am feeding… now feeding 6am, 9am, noon, 2pm, 4pm, 6pm, 10pm.  Albina is drinking 7-9oz per feeding now.  IGG Came back at 800!  Yippy!

Week 2:
Still feeding at the Day 6 schedule and she is consistently drinking 8-9oz a feeding all week

Week 3:
New feeding schedule: 6am, 10am, 2pm, 6pm, 10pm She is a piggy and is now consuming 64-70oz a day. We stopped feeding out of 9oz baby bottles and now are using a lamb nipple on a 24oz Mt Dew bottle.

Week 4:
New feeding Schedule: 7am, noon, 5pm, 9pm  Still is consuming 64-70oz a day.

Week 5 & 6:
New feeding schedule: 7am, 3pm, 9pm She is now drinking over 70oz a day

Week 7 & 8
New feeding schedule: 8am & 9pm She’s losing interest in milk all together beginning of week 8 and often refuses the bottle or only drinks 2-4oz.  By now she’s happily eating grass, grain, hay and uses the bottle more for a water supplement than for nourishment.

Weaning:  At the end of week 8 she was drinking only 6oz a day maybe.  I made the decision to cut her off fully.  She weighs 52lbs now and is very independent, strong and healthy.  My only concern was her water intake but recent barn cam footage shows she is drinking.  I did consult a vet about weaning at 2 months of age since usually cria will nurse off mom until 6 months or more. They assured me that 2 months is perfectly fine for weaning as long as the cria has a creep feeder with as much hay and grain they want that adults can’t get to.

beaniedrink
Albina drinking water @ 2 months old
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How To Own Alpacas Without A Farm

 

Most of us have seen the Mike Rowe Dirty Jobs video of alpaca ranching.  There’s shearing, poop clean up, spitting, breeding, birthing, teeth filing, injections, toenail clipping and general farm care.   To say the least investing in alpacas is a messy business …. Or is it?

Did you know you can invest in alpacas without ever having to wear muck boots or pick up a shovel?  Or put off that large initial investment in a farm while realizing your dream of alpaca ownership?  Agisting or Boarding Alpacas at Dutch Hollow Acres allows you realize most of the benefits of alpaca ownership without the cost of establishing a farm or consuming your time to run it.  There are 2 types of agisting investors; Active and Passive.

Active:
These investors want to be part of their alpacas life and their care.  Most of these folks plan on having a farm in the future but do not currently own one or live close enough to the agisting farm where they can be part of the alpaca lifestyle.   Active investors take part in important decisions of their investment from showing, breeding, marketing, selling under their own business/farm name.   Active agisting allows the investor to be seen as an active breeder by the IRS and entitles them to all related tax deductions.  These deductions (including the purchase of initial livestock) can be healthy sized offsets to other forms of income.

Passive:
The passive investor is the type of person who sees alpacas solely as an investment animal and do not plan on taking part in any of the day to day care or decisions.   The aigsting farm makes all or most of the investment decisions such as breeding and marking of the animals.  The IRS allows this type of investor to only take deductions against any income earned from your alpaca investment.

What do boarding fees cover?
Dutch Hollow Acres board covers all of the general care and maintenance of the alpaca which includes: Grain, hay, water, de-worming, and toenail clipping.  Additional services such as sheering, teeth filing, breeding, birthing, marketing, brokering, etc are covered by the owner.

2009 Tax Deductions:
The IRS still has a great option under section 179 to deduct up to $133,000 of your initial alpaca purchase on your 2009 return.   Assuming a $25,000 initial investment, return on investment could be…. $3,750 for 15% tax bracket,  $6,250 for 25% tax bracket,  $8,250 for 33% tax bracket, or $11,250 for 45% tax bracket.   If you make your alpaca purchase late 2009 and file your tax return early 2010 you could see a sizeable tax return right away!  The IRS will let you fully deduct the purchase price of your alpacas even if you only put 25% down and are financing the rest.

Active investors can take even more deductions such as mileage in their return.  See your tax accountant for details.  It’s advisable to get an accountant who has experience with alpacas.

Initial investment:
Most alpaca investors plan on running their own farm some day and have been holding off on the idea of investing in alpacas until they can care for them.  In actuality it’s cheaper to agist your initial investment and take advantage of Section 179 tax deductions now than waiting another 5 years.  The typical alpaca investment includes 2 females.  1 Bred female and 1 juvenile female to keep investment costs more tangible.   Assuming a 50/50 male to female ratio and 80% live birth your initial 2 female purchase can grow to a herd of 12 in 5 years (7girls, 5 boys).   Assuming you don’t sell anyone off the herd could grow to 50 in 10 years!

General 1st Year Cost Analysis:

 

Farm Ownership

Agisting

2 Females

$25,000

$25,000

Farm Startup, Barns, fences, etc

$100,000

0

Equipment – tractors, implements, etc.

$30,000

0

Hay, Grain, Water

$300

0

Vet & Misc.

$1,200

$1,200

Insurance (theft, accidental death, major health)

$813

$813

Board

0

$1,825

Total

$157,313

$28,838

 

By boarding your initial herd, you can save the money you would have invested in farm start up costs and reinvest in more females or higher quality studs and grow your herd faster.  After 5 years the sale of your alpacas can be used to purchase your new farm!  The purchase of that farm can also be used to offset the income made on the sale of those same alpacas.

Guaranteed Return on Investment:
There are many variables that come into play with alpaca ownership that can affect profitability and as with any investment there is no guarantee on return.  Often the amount of effort you put into your investment is related to the amount of profit realized from it.  As a general rule bred female offspring will sell for as much as you paid for the dam.   Our other income sources come from the sale of fiber quality/pet males, stud fees, boarding, marketing/brokering fees, and sale of raw fiber or finished alpaca products in our farm store.

The majority of alpaca investors raise and breed alpaca’s full time within 3-5 years.  Currently my husband and I choose to still hold our “day jobs” as well as manage our farm.  We find that the care of alpacas is much less than other types of livestock and allows us to comfortably do both.

To learn more feel free to ask us any questions or schedule a farm visit.
Dutch Hollow Acres
Lindsay@lklik.com
585-991-6706