There are essentially two ways to own alpacas. The first approach is to simply purchase the animals and start raising them. The second approach is to purchase the animals and place them in the care of an established breeder. This is referred to as Boarding or Agistment.
Purchase & Raise
Raising alpacas on your own property with hands-on, offers the farmer the best tax advantages. If the alpacas are actively raised for profit, all of the expenses attributed to the endeavor can be written off against your income.
By boarding the alpacas with an established breeder, the passive owner can enjoy some of the tax advantages such as the cost of breeding stock and expense directly relating to the maintenance of the animals.
The main difference between hands-on or active farmer and a passive owner involves the active owner’s ability to deduct his investment losses against his other income as well as income directly derived from his alpaca business. The passive investor may only be able to deduct losses from his investment against gain from the sale of animals and fleece. Talk to an accountant familiar with agriculture and depreciation scheduled.
Gross Income Calculations
- Sale of livestock
- Sale of crops, i.e. fiber, meat, manure
- Breeding fees
- Boarding fees
- Agriculture program payments
- Income from Cooperatives
- Cancellation of debts
- Income from other sources, such as services
- Interest income
- Show ring monetary awards
- Services, i.e. consultation, transportation, shearing
- Veterinary care & supplies
- Vehicle mileage
- Accountant fees
- Taxes and Insurance
- Travel to shows, sales, meeting
- Repairs and Maintenance
- Interest expenses
- Breeding fees
- Rent and Lease costs
- Depreciation on animals used for breeding
- Real property improvements (barns, fencing, equipment)
- Educational expense
- Advertising & sponsorship
- Farm fuel/oil
- Farm publications
- Membership dues and subscriptions
- Misc. chemicals (weed killer, etc.)
- Tools with a useful life of less than one year
- Farm use portions of telephone, utilities, property taxes
- Farm equipment and supplies
- Business vehicles, i.e. tractors, trucks, trailers
- Office equipment and supplies
- Percentage of home for office space
Financing your First Purchase
Most alpacas are sold for cash. But many buyers convert other assets to purchase their first alpacas. Some people have a line of credit for investment purposes. Others use their equity in real estate to secure funds. There are government programs and low interest specialty business loans available as well.
Some breeders offer financing for your purchase. It is typically short term (1-2 years) and involves paying some percentage for the animals before you take possession of them (25-50 percent).
Insurance can be easily obtained while the balance is still owing and as long as you wish your investment to be protected. The seller is listed as “loss payee” on the policy until the balance is paid in full.