Depending on how much money you’re bringing in from your rental properties, you could be looking at paying as much as 37 percent of your income to taxes each year. Understandably, you may want to reduce that tax burden as much as possible. When you’re looking for possible deductions, you may find yourself wondering, “Can you write off landscaping on rental property?”
The question of what you can write off on your taxes centers around whether the work being done improves the home or maintains it. Read on to learn more about rental property deductions and whether you can deduct your landscaping costs.
Improvements vs. Maintenance
Before we dive into the specifics of whether you can deduct landscaping costs, let’s talk about the two types of repair costs for your property: improvements and maintenance. As you might guess, improvements add value to your rental home, while maintenance keeps it in the same state it has been in. Both of these get classified as a rental property expense, but only one is tax deductible.
If you’re making significant improvements to the home you’re renting, you cannot deduct those expenses from your taxes. For instance, if you spend $50,000 renovating the kitchen, you can’t deduct that money. But if you spend $50 replacing the faucet, that falls under the category of maintenance and can be deducted as a necessary cost.
Can You Write Offs on Rental Properties?
The question of whether you can write off landscaping on a rental property depends on how many changes you’re make. As a general rule of thumb, new landscaping cannot be written off on your taxes. Landscaping can raise the value of your home by up to 13 percent, so it would not count as a necessary expense for your property.
That being said, if your property already had landscaping at the time it was last assessed for taxes, you may be able to write off your landscaping costs. Because that landscaping is in place, failing to maintain it would damage the value of your property. Maintaining that landscaping becomes an expense that you can write off.
Is Lawn Care Tax Deductible for Rental Property?
As a general rule, lawn care for your rental property will generally be considered a deductible expense. As with the landscaping question, the determining factor is whether the work is meant to maintain the value of the house or to improve it. If it’s meant to maintain that value, it’s considered a necessary expense.
Allowing your lawn to go unmowed would damage the value of your property, and depending on where you are and your specific situation, you may not be able to mow the lawn yourself. Because this expense is part of running a business as a landlord, you can deduct it from your taxes.
Is Tree Removal Tax Deductible for Rental Property?
The question of whether tree removal is deductible can be a little fuzzy, depending on why the tree is getting removed. Trees that have to be removed for safety reasons will be considered a tax-deductible expense. Failing to remove the tree could result in the house being damaged or destroyed, so removing it isn’t a choice.
However, some tree removal may be done as part of a larger overall landscaping effort to improve the value of the house. In this case, since the tree removal constitutes a capital gain on the house, you can’t deduct it from your taxes. You may need to get an arborist to inspect your tree to determine if removing it is a safety necessity or not.
Deducting Property Taxes
Even if you can’t deduct the cost of landscaping or tree removal for your rental property, there are still several other ways you can save on your taxes. One of the most common with landlords and homeowners alike is to deduct the cost of your property taxes. These taxes fall under the realm of necessary expenses to maintain the property and so aren’t an improvement investment you’re making in the house.
Although personal property tax deductions have a limit ($10,000 if you’re married and filing jointly), business property taxes do not. This means that, even though your rental properties are residential, you can deduct the full amount you paid in property taxes from your income. Given that the average American pays more than $3,000 in property taxes each year, this can be a major deduction.
Deducting Mortgage Interest
In addition to deducting your property taxes for your rental properties, you can also deduct mortgage interest from your taxes. Interest is the fee you pay your lender for the privilege of borrowing the money to buy your property. In the early years of your mortgage, you may pay more in interest than you actually do to the principal on the loan.
Although mortgage interest can be costly, you can deduct that expense from your taxes. This means that, as long as you have a tenant who covers the cost of your mortgage, you’re getting a loan for free. You don’t have to count the money you pay toward interest as income, so you get out tax-free and can collect a lot more profit.
Learn More About Rental Property Deductions
Landscaping can be expensive, and you may find yourself wondering, “Can you write off landscaping on rental property?” As long as the landscaping is maintaining the value of your property, not improving it, you can write it off. The same goes for lawn care and tree removal – any necessary expense for maintaining the home can be deducted.
If you’d like to learn more about rental property deductions, check out the rest of our site at Nomadic Real Estate. We can help you with leasing, management, sales, and, most importantly, peace of mind. Learn more about our property management services today and discover how we’ve helped thousands of landlords throughout D.C., Maryland, and northern Virginia.