Thank you for getting back to me. He sounds like a delightful little dog. It's too bad he's having these problems. The scratching and itching certainly sound like allergies. Dogs don't usually develop breathing/congestion symptoms with allergies, so I suspect that is something else. Collapsed tracheas are fairly common in small breeds, so your vet may be right, but you won't know without the x-ray. Allergy testing would be the best way to find out what he is allergic to, but unfortunately, that is expensive, too. There are a few things you and your vet can try without doing more testing.
Allergies can be very difficult to treat. One of my dogs has severe allergies, so I know how frustrating it is. Even with the help of a good vet, it's frequently necessary to try different medications before finding one, or more likely several, that work.
There are three main types of allergies: flea bite allergies, food allergies, and inhalant allergies (which may be seasonal or year round).
Even one flea can cause a reaction in a sensitive dog. If you don't find a single flea, don't start treating the dog for fleas as a preventative. Many of the flea treatments can further irritate the skin, so you don't want to use them if they're not necessary. If you ever find fleas, call your vet to find the best way to treat a dog whose skin is already agitated.
If there is a food allergy, the best way to find it is to try a food elimination program under the guidance of your vet. The alternative is to switch to a high-quality diet with very few ingredients, such as California Natural, or one of the duck/potato or fish/sweet potato diets available through veterinarians. You've already tried that, and your dog didn't like it. your home-prepared meals should be fine. I'm a big fan of them, and I do home-prepare my dogs' food. I want to mention something about that just in case you don't already know. Dogs on homemade meat diets need to have a calcium supplement. I use Kal Bone Meal ( a human product). You add 1/4 teaspoon per 4 ounces of meat. You don't need to add any for the veggies or fruit, just the meat. This doesn't have anything to do with the allergies, but is important for your dogs' health.
Despite their name, inhalant allergies cause itching in dogs, not sneezing. Dust mites and pollen are two common causes. Ragweed pollen often causes allergies that develop in the late summer and end after the weather turns cold. These allergies are usually treated with antihistamines. My own dog suffers from these allergies. There are many different antihistamines used in dogs. I had to try three different types with my dog before we found a combination that helped. Hydroxyzine is one that often helps with itching. It's available by prescription from your vet. When antihistamines don't work, the next step is usually to use some form of prednisone, either injected or in pills. If you haven’t tried corticosteroid injections (usually methyl prednisolone acetate) with your dog, that is something else to discuss with your vet. For many dogs an injection every 3 to 6 weeks gives them great relief. Some vets are hesitant to use corticosteroids this heavily because of the side-effects, but when the alternative is a life of misery and nonstop itching, your vet may be willing to try it. Here is a site where you can read more about allergies:http://www.peteducation.com/article.cfm?cls=2&cat=1587&articleid=503
Adding omega-3 oils to the food helps with some skin problems. This isn't an instant fix; it would take several weeks to notice any change. Salmon oil is a good source of omega-3s. Here is a link to a reputable brand:http://www.grizzlypetproducts.com/
You can spray the body parts your dog is licking/chewing with one of the anti-itch sprays available in pet stores. There are also anti-itch shampoos that help some dogs. Here is an online source of over-the-counter allergy solutions:http://www.drsfostersmith.com/Product/NavResults.cfm?N=2001&Np=1&Ntt=allergies&Ntx=mode+matchallpartial&Ntk=All&Nty=1&pc=1
Getting relief from allergies often requires using a number of different remedies, and experimenting (with your vet's guidance) with different medications until you find something that works. Here are two other drugs that are often successful for allergies:http://www.drugs.com/vet/temaril-p-tablets.htmlhttp://www.us.atopica.com/treating/surveyresults.shtml
There are also desensitizing extracts that are injected. They work in about 70% of dogs. I'm getting good results with my own allergic dog using these, after nothing else helped her. There are some downsides to using the extracts, even though they are one of the most effective allergy treatments. They're relatively expensive, especially in the first few months when the injections have to be given more frequently. The dog owner has to be willing and able to give injections because at the beginning of the program, injections are given every other day. Some dog owners just can't bring themselves to give an injection. If you want to read more about this, here's a link to one company's site:http://www.varlallergy.com/index.html
As an example of the lengths you may have to go to, I’ll use my own allergic dog as an example. She is fed a limited ingredient homemade diet and supplemented with fish oils. She takes two different antihistamines, and a low-dose prednisone tablet. Every three weeks she receives an injection of de-sensitizing extracts, All of these measures together control her allergies.
I hope you find some itch-relief for your dog soon. If you need clarification or more information on any of this, just let me know.