Boosting the curb appeal of your commercial property is vital to keeping it well-maintained and welcoming. A pristine property makes it much easier for people to shop, work and visit – plus, it can often command higher rents than a less-spruced site. But can you claim these commercial landscaping costs as a capital improvement? The answer, according to David Keffer, branch manager at Level Green Landscaping, is yes. In fact, the right landscape enhancements could even be tax deductible.
Keffer’s company specializes in providing commercial landscaping services and has experience with many different projects, including hedge trimming, lawn mowing and more. They can also help with a variety of other projects, such as installing water systems or constructing hardscapes. The company suggests that clients plan their landscaping for September through November, when the weather is cooler and the soil is more conducive to planting. This way, the plants will have time to settle in before they are subjected to the summer heat.
For landscapers looking to make capital improvements, they must ensure that the project adds to the value of the property in a significant way, as opposed to repairs and maintenance, which preserve existing values. In addition, the project should be permanent and have a useful life of more than one year. It is important to note that recurring maintenance expenses should not be capitalized, as these expenses should be expensed in the year they are incurred.
Generally, any materials used in a capital project must be paid for with sales tax, unless the customer is eligible for an exemption. When a landscaper performs a capital improvement, they should ask the customer to provide them with a properly completed Form ST-124, Certificate of Capital Improvement (TB-ST-124). This will relieve the landscaper of their liability for sales tax, and should be kept in the landscaper’s records.
Landscapers should also keep in mind that any work they perform on a property that is considered a repair, service, maintenance or installation of real estate is taxable if the landscaper is not registered for sales tax, or has not received a valid exemption certificate from the customer. For more information, see the Tax Bulletin Contractors — Sales Tax on Repair, Service, Maintenance and Installation of Real Property (TB-ST-129).
Keffer says that the benefits of capital landscaping are numerous, but it is important to work with a knowledgeable and experienced financial professional or accounting professional to ensure you are claiming all of the available tax deductions and credits for your business. If you are interested in exploring financing options for your landscape business, the SBA 7(a) loan is a great choice for many companies. You can also explore other SBA loan options, such as the CAPlines program for small businesses or the SBA 504 loans. The key is to find the right solution for your business, so you can continue growing and improving your customer’s experience.