You don't necessarily have to have the land, or the money in the bank to get started in alpacas. Options for boarding (“agisting”) and financing your initial Alpacas are available from most breeders.

Usually the way this works is that the rancher will keep your first alpacas on his or her farm until they are paid off. Sometimes this works out really well for beginners, because without taking a real "cash flow hit" then can have an alpaca or two, and take the first year or so to learn, study, go to shows, look for and prepare their property, etc.

It's also a way to 'put one foot' in the industry for a year or so without having as much at risk. (If you change your mind you have the option of just selling your animals ... you won't have to worry about selling the land you purchased and and prepared for livestock).

If you DO decide to start out this way, it's still a good idea to insure your alpacas.

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Many people find that alpaca ownership can help their tax situation. But, before I can discuss this with you, please allow me to present this disclaimer (my attorney threatened to strangle me with alpaca fiber if I didn't)

DISCLAIMER: It's important that you find an accountant well-versed in farming and ranching to go over the tax laws with you. (We are NOT licensed attorneys or certified accountants, and thus we are unable to offer tax, financial, or legal advice). The laws change every year, and a professional can help get you up to speed. Information presented here in is for education only.

OK!

For some ranchers, alpacas can be a way to create tax-free wealth.

Because herds grow slowly over time, you can raise alpacas without paying tax on your herd's increased value. For example, if you start with a $20,000 investment in a pregnant female, the next year you could have a cria worth $15,000 - $20,000 (plus your original animal, of course).

If this offspring is a female too, three years later you could have her cria, as well as two additional crias born from her mother (your first alpaca), worth an additional $45,000. Your first cria has also increased in value since she'll now be a PROVEN female, so your potential profit would be a hypothetical $50,000. But you often don't have to realize this value tax-wise until you sell. So it can be like growing your savings in a tax- deferred account. (Except it can multiply more quickly).

Alpacas can also usually be depreciated every year just like any business capital expense. Various methods of depreciation exist, and your accountant can tell you the best one for your tax situation. Barns, fences, vehicles used to transport them and other items can usually be depreciated, too.

The key to the most tax breaks for many people is if the Internal Revenue Service considers their ranch an active, full-time enterprise designed to turn a profit. At this time, it seems that the IRS criteria for determining whether your organization is for-profit if the farm has made a profit three out of five years of operation. (But you really need to check the code!)

Turning a profit could be difficult the first few years of operation, so there are other considerations the IRS takes into account to determine if a farm is a for-profit enterprise. They include:

• The amount of time you spend actually working on the ranch.
• If you depend on the ranch for your income.
• Whether your losses are due to start-up costs or circumstances beyond your control.
• Whether you, your employees and your investors have the know-how to run a profitable operation.
• That your ranch does not appear to be a 'hobby'.

Even if you buy alpacas purely for investment purposes with no intent to ever live outside the big city on a ranch, (that is ... if you plan to board your alpacas elsewhere) you may be able to qualify for some tax breaks.

However, if you qualify as a farm, you can probably write off many of your ranching expenses, like barn construction and repair, fencing, accountant fees, hired labor to run the ranch and insurance.

Expenses directly related to caring for your alpacas may also be deducible if you qualify as a farm. This includes goods like feed and vaccinations, and services like veterinary care and shearing costs. You can usually also deduct mileage to shows and business trips to other farms.

Many alpaca owners are benefiting from changes in federal taxes that were designed to stimulate the economy. At the time of this writing, Section 179 currently allows 100 percent deductions of capital expenses up to $100,000 that in the past would have been depreciable over longer periods of time.

Families in upper tax brackets have taken advantage of the Section 179 to start their ranches.

Your accountant can help you determine if you qualify. Several factors apply, including whether you are intending to make a profit and actively work in the enterprise.

To learn more about federal income tax deductions for livestock, read the IRS's publication "The Farmer's Tax Guide". It will provide you with the information you need to talk with your accountant about your particular situation.

Other tax breaks are dependent on the state in which you live. In many areas of the country, people save money on their property taxes with an agriculture exemption. Local entities give tax breaks for acres dedicated to farming or ranching.

In some states, sales tax isn't required on any items purchased to be used in your alpaca business. This can save you thousands if you buy a vehicle like a minivan or SUV to transport your animals, fencing materials or improvements to your farm that is related to caring for your alpacas.

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If you're thinking about getting into the Alpaca business, you'll need to know how to keep these little darlings healthy and happy.

Besides being just a part of the day to day knowledge necessary to run your farm, ... from a business perspective, their health and happiness IS your investment, so it's really critical.

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