If you own a lawn care or landscaping business, you know what an interesting, challenging and lucrative field this can be. While running your own business can be exciting, it is also full of challenges and sometimes, uncertainty.
One of the biggest challenges for small business owners is often their cash-flow, revenue and overall profits. After all, people go into business to make money. The same is true for landscapers and lawn care specialists. While the field has great potential, especially in certain areas, expenses can often be high and prohibitive for those just getting started.
This is where deductions come into place. It is important to have a basic understanding of the tax system in order to minimize your payments and therefore earn more money. In this post we will discuss the ins and outs of landscaping tax deductions, to make sure that you are maximizing your earning potential.
What are Lawn Care Business Tax Deductions?
As a small business owner, you know how important it is to have accurate bookkeeping and accounting services. You must record all income that comes into your business as well as keep track of all of the money that comes out.
The reasons for tracking your income are fairly obvious and clear. The tax authorities require each individual and business to submit tax returns and pay taxes appropriately according to their income. This can be a bit more complicated as a small business owner, as opposed to an employee, which is why it is always recommended to consult a trusted accountant. You will also have to pay self-employment tax (social security and medicare) and potentially other necessary taxes.
However, in order to offset some of the tax burdens, as a small business owner, you have many tax deductions that will lower the amount you have to pay. What does this mean? Every business related expense can be deducted from your income. As a result, you will owe fewer taxes, as your total profit will be lower.
While each business should check with a CPA about its specific deductions, there are many common landscape business tax deductions.
Common Lawn Care Business Deductions
In this section, we will discuss the most common lawn care and landscaping tax deductions. As we’ve mentioned, it’s important to track each expense carefully and save receipts, in order to receive the full benefits when filing your taxes.
1. Self-Employment Tax
Self-employment tax can be a frustrating expense for small business owners. If you’re considered a sole proprietor/independent contractor, you’ll have to pay this tax. Self-employment tax means that you are paying both the employee and employer side of your social security and medicare. This cost totals 15.3% of your income!
The good news is that part of the self-employment tax is deductible. Your accountant will explain exactly how much and will adjust the amount accordingly on your tax return.
2. Home office
While you are most likely on the move as a landscaping business owner, you undoubtedly have a home office as well. This is likely the place you do the administrative work for your business, supply orders, bill paying, customer interaction and more. Because of this, your home office expenses are a tax deduction.
These deductions may include the cost of internet, phone, office supplies, furniture, computer, printer and more.
3. Equipment & Supplies
Equipment and supplies is a big expense category for lawn care business taxes. In order to grow a successful business, you have most likely invested in a great deal of equipment and supplies for your business. Some are one-time large purchases which you may only make every few years (for example, lawn-mowers, tree trimming tools, etc.). Other supplies may be a recurring expense such as materials for gardening.
No matter the size of the expenses, include them as deductions. Some may be depreciated over the years (meaning you’ll deduce part each year on big purchases). Consult with your accountant on this matter.
As mentioned above regarding your home office, if you work from home, you’ll be able to deduct various home expenses on your tax return. These may include your typical home utility expenses such as electricity, water, gas and heat. Each situation is individual and takes into account the size of your home, type of business, etc.
5. Car Expenses and Mileage
As a landscaping professional, your vehicle is likely an important part of your work. You may even have a special car or truck for work purposes. This is why car expenses and mileage can be deducted on your tax return. Make sure to keep track of your yearly mileage on each vehicle related to your business and save all gas receipts.
In addition to everyday deductions related to your vehicle, repairs and maintenance can also be included on your tax return.
No matter your field, business insurance is critical for all small businesses today. If something goes wrong in your business, you want to make sure that you are protected both legally and financially. We recommend purchasing the appropriate landscaping insurance or lawn care insurance in order to be covered in specific circumstances related to the field.
7. Employee Wages and Contractor Expenses
If you have employees or freelancers/contractors working for you, their wages can be deducted from your taxes. This can be a significant fee that can reduce your tax burden substantially. For employees, not only is their salary deductible but also other payments related to their work (social security, etc.).
Landscaping Tax Deductions - Final Thoughts
As we’ve discussed, it is important to understand what business tax deductions are relevant for your business. After all, who doesn’t want to reduce the amount they have to pay on their taxes?
While taxes may feel overwhelming and confusing for many, having the knowledge and knowing your rights can improve your business status and your income level. As always, we recommend consulting an accountant specializing in small businesses in order to make sure you are deducting and filing taxes correctly. Good luck!