PAW Act Allows $2,000 Annual Tax Deduction for Pet Vet Bills and Insurance

The newly introduced People and Animals Well-being Act of 2025 (PAW Act) has one very clear goal: making it easier for you to afford your pet’s healthcare. This legislation changes the federal tax code to allow taxpayers to treat certain veterinary expenses as deductible medical expenses, starting immediately once the Act becomes law.

The Cap and the Catch for Regular Pets

If you have a regular companion animal—the kind that isn't officially a service animal—this bill introduces a new, capped tax break. You can now count up to $1,000 spent on veterinary care (like checkups, surgery, and prescribed meds) and, separately, up to $1,000 spent on pet health insurance premiums toward your medical expense deduction. This means a potential $2,000 maximum deduction per pet, per year, provided you itemize your deductions. For tax years starting after 2025, these $1,000 caps will be adjusted annually for inflation, rounded to the nearest $50, which is a smart move to keep the benefit relevant as costs rise.

Unlimited Deduction for Service Animals

The biggest financial relief in this bill is reserved for owners of certified service animals (defined using the standard in 28 CFR 36.104). For these animals—whether they belong to you, your spouse, or a dependent—the deduction for veterinary care and health insurance is unlimited. This is a massive change for people relying on service animals, who often face high, recurring costs for specialized care. Treating these expenses the same way we treat human medical costs acknowledges the essential role these animals play in daily life and removes a significant financial barrier.

Who Benefits—And Who Doesn't

This is a win for pet owners who itemize their taxes, especially those with high vet bills or who already invest in pet health insurance. If you’re a dog owner who just had to shell out $5,000 for an emergency surgery, you can now count $1,000 of that toward your medical deductions, lowering your taxable income. However, if you are among the majority of taxpayers who take the standard deduction, this benefit won't apply to you. Also, if your regular pet’s veterinary expenses exceed the $1,000/$1,000 caps, you’re still footing the bill for the remainder.

Defining the Details

The bill is specific about what counts as “Veterinary Care,” including anything prescribed or authorized by a licensed vet for treatment, prevention, or diagnosis—from surgery and medicine to diagnostic tests and even specialized nutritional products. This clarity helps prevent confusion and potential disputes with the IRS. By linking the definitions of “Pet” and “Service Animal” to existing federal statutes, the bill keeps things grounded in established legal definitions, which is crucial for smooth implementation.