Can You Write Off Landscaping on Rental Property?
For landlords, landscaping costs can be a valuable tax deduction. Learn how the nature of the work performed dictates the correct tax treatment for your expenses.
Landscaping costs for a rental property can be written off, but the tax treatment depends on the specific work performed. The Internal Revenue Service (IRS) distinguishes between routine maintenance and significant improvements. Some expenditures are considered immediate, deductible expenses, while others are viewed as long-term capital improvements that provide value for years to come.
Deductible Landscaping Maintenance Expenses
For a landscaping cost to be immediately deductible, it must be considered an “ordinary and necessary” expense for the upkeep of the rental property. This means the expense is common in the rental business and helps maintain the property in a rentable condition. These activities do not add significant value or extend the property’s life; instead, they keep it in good working order and preserve its appearance for current and prospective tenants.
Common examples of deductible maintenance include regular lawn mowing services, fertilization treatments, and seasonal weed control. Other deductible activities are the trimming of existing hedges and trees, routine pruning of shrubs, and applying mulch to garden beds. Planting annual flowers, which have a useful life of a single season, also falls into this category. These are all considered operational costs that are fully deductible in the tax year they are paid.
The primary function of these expenses is maintenance, not enhancement. They are about preserving the property’s existing state rather than upgrading it. For instance, repairing a few broken sprinkler heads is a deductible repair, whereas installing an entirely new irrigation system is not. The costs are related to generating rental income by keeping the property attractive for tenants.
Capitalized Landscaping Improvements
In contrast to routine maintenance, some landscaping expenditures are classified as capital improvements. An improvement is defined as an expense that betters, restores, or adapts the property to a new or different use. These projects add material value to the rental property or significantly prolong its useful life. Because these additions provide a long-term benefit, their costs cannot be fully deducted in the year they are incurred.
Examples of capital improvements in landscaping include installing a new fence, building a retaining wall to prevent erosion, or constructing a new patio or deck. Similarly, installing a comprehensive in-ground sprinkler system for the first time is an improvement. Significant initial landscaping, such as planting large, mature trees and foundational shrubs where none existed before, also falls into this category.
These projects are treated as investments in the property itself. The IRS views them as part of the property’s cost basis. Instead of a one-time deduction, the cost of these improvements is recovered over an extended period through a process called depreciation. This method aligns the expense with the value it provides.
Calculating and Claiming Landscaping Costs
How you claim landscaping costs depends on their classification as maintenance or improvements. Properly separating these costs is necessary for accurate tax filing and to calculate your rental property’s net income or loss.
Maintenance expenses are reported on Schedule E (Form 1040), Supplemental Income and Loss. This is the standard form used to report income and expenses from rental real estate. These costs can be listed under the specific line for “Repairs” or aggregated with other miscellaneous costs on the “Other Expenses” line. The total of these deductible expenses directly reduces your reported rental income for the tax year.
Capital improvements are handled differently. Their costs are recovered through depreciation, which involves spreading the expense over the asset’s designated useful life. For land improvements such as fences, retaining walls, and landscaping, the IRS specifies a 15-year recovery period under the Modified Accelerated Cost Recovery System (MACRS). The annual depreciation deduction is calculated using Form 4562, Depreciation and Amortization. The total depreciation amount is then carried over and entered as a single deduction on Schedule E.
Required Recordkeeping for Landscaping Expenses
Maintaining records for all landscaping expenditures is a requirement for any rental property owner. In the event of an IRS audit, clear and organized documentation is your proof to substantiate the deductions and depreciation claimed on your tax return. Without proper records, you risk having your deductions disallowed, which could result in back taxes, penalties, and interest.
Your records should verify the nature and amount of each expense. Be sure to keep all dated receipts, paid invoices from landscaping companies, and any signed contracts for services. Proof of payment, such as canceled checks or credit card statements showing the transaction, is also important.
To simplify tax preparation, make specific notes directly on your receipts or in a corresponding ledger. For example, a receipt for a lawn service should be noted as “monthly mowing” to classify it as maintenance. A large invoice for a new structure should be marked “new retaining wall installation” to identify it as a capital improvement. Distinguishing between upkeep and major additions at the time of the expense will make it easier to categorize costs when you file your taxes.