Part of your job as a gardener or landscaper is to prune plants back to reduce their size and you can also do this with your taxes. If you're self-employed, there are tax deductions that can trim the net amount of taxes you'll owe. It's important to familiarize yourself with the rules for reporting business income and the types of tax deductions available.
Filing Your Tax Return as Self-Employed
If you are in business for yourself as a gardener or landscaper, the IRS will consider you to be a self-employed business person. That means you need to report business income and deductions on your tax returns.
Use Schedule C or Schedule C-EZ to report your income. Schedule C-EZ is intended for simpler tax filings, and you can only use it if you meet all of the conditions, like having total business expenses of $5,000 or less.
Since you are self-employed as a gardener or landscaper, you must pay self-employment tax in addition to income tax. Use Schedule SE to calculate what you owe.
Self-employment tax includes taxes to fund Social Security and Medicare.
- It is set in 2018 at a rate of 15.3%.
- Employees and employers share these expenses. The employees’ portion is withheld directly from their paychecks.
Remember to file your quarterly estimated tax payments during the year according to the time schedule set by the IRS.
Business Tax Deductions
Consider taking business deductions for all of the expenses that are ordinary and necessary for operating your gardening or landscaping business. Examples include:
- Wages you pay to employees or helpers
- Other materials
Keeping clear records is critical because it's easy to forget small deductions over time, such as the fuel used to power your lawnmower. Keep receipts for all business-related costs to show the IRS in case you are audited.
You can deduct larger items, like a lawnmower, over time because it is considered a “capital purchase”. You can spread the deduction of a "capital purchase" over the number of years you expect the item to last. For example, if a lawn mower costing $500 is expected to last five years:
- $500 x 20% = $100
- $100 is the deduction you can claim each year for five years.
Capital purchases are business assets you buy such as machinery, cars, buildings and other "capital" items.
Vehicle Use Tax Deductions
If you sometimes use your work vehicle for personal transportation, that doesn't necessarily mean you can't take a vehicle business deduction.
As long as you keep careful records of the miles you drive the truck for business versus the miles driven for personal use or pleasure, you should be able to claim a good portion of the costs as a business expense. The IRS allows you to take the standard mileage rate of 54.5 cents per mile in 2018 or actual expenses.
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