The IRS has some very favorable tax benefits for alpaca breeders . . . As with any business, the "hands on" alpaca owner can deduct all related business expenses. However unique to the alpaca business, these expenses can be deducted against any source of income. Expenses include: feed, breeding fees, insurance premiums, ranch or investment-related travel expenses, educational expenses, and any other costs associated with running your farm. In addition to operating expenses, capital expenses such as breeding stock, barns, equipment and fencing can be depreciated over a period of time. Alpaca farmers also benefit from tax deferred income. While your herd grows and increases in value, you are able to postpone paying income tax until such time as you begin selling offspring. Alpaca owners choosing to agist their animals, typically fall under the category of passive investors. Passive investors do not always enjoy all of the tax benefits listed above, but still have some tax advantages, and should consult with their accountants.