Alpacas as a Business Investment

There are several ways to invest in alpacas.  One of course is to raise alpacas on your own farm, but there are a couple of other options where you can board (called "agisting") your alpacas.

One can invest "passively" as you would any other financial investment, that is purchase alpacas that are bred, raised and marketed by the farm where they are boarded.  With this method you do not participate in the day to day care of the animals.  All or most of the decisions concerning herd management are left to the agisting farm.   For Tax purposes the IRS considers the investor as "passive" and any tax deductions can only offset profits made in your alpaca business.

Then you have the "active" investment where you board your alpacas but play an active roll directly in all decision making processes.  That is, you are actively involved in important decisions such as breeding, showing, sales and marketing.  You must document your involvement via phone logs, e-mail, travel mileage etc.  In this case the IRS considers you an active breeder and you are entitled to all of the tax deductions for expenses and depreciation with one great advantage. The deductions can offset earned income from any other source such as salaries and commissions.