There's more to running a successful landscaping business involves more than just planting trees and building pations; it also means effectively managing your finances. Luckily, there are various tax deductions and strategies available that can significantly lower your tax bill, allowing you to keep more of your hard-earned income.
Whether you’re new to the business or looking to enhance your tax savings, here’s a breakdown of the most beneficial tax strategies for landscaping contractors.
Forming an S-Corporation can be one of the most effective ways to lower your tax burden as a landscaping contractor. An S-Corp allows for reduced self-employment taxes, which are usually higher for sole proprietors or LLCs taxed as a sole entity.
For assistance with your S-Corp setup, check out our CPA & Tax Accountant for Landscaping Contractors page.
Setting up a retirement plan not only helps you save for the future but can also reduce your taxable income. Consider options such as SEP IRAs, SIMPLE IRAs, 401(k)s, or defined benefit plans. Contributions to these plans are often tax-deductible, which can help you lessen your taxable income while securing your retirement.
Example: By contributing to a SEP IRA, you can save up to 25% of your net earnings from self-employment, with a limit of $66,000 for 2024.
For more on retirement planning tailored to contractors, explore our guide on landscaping contractors.
Hiring your minor children for legitimate work in your landscaping business can yield significant tax savings. They can earn up to the standard deduction limit tax-free, while you can also deduct their wages as a business expense.
Benefit: This method not only serves as a tax-saving strategy but also allows you to instill financial responsibility in your children.
To effectively minimize your tax burden, deploying a proactive tax strategy before the year’s end is crucial. Partnering with a CPA experienced in the landscaping sector, like Passageway Financial, ensures you make informed decisions regarding tax-advantaged investments, depreciation, and other strategies aimed at lowering your taxable income.
Absolutely! If the truck is used solely for your landscaping business, the cost can be fully deductible. If it’s also used for personal errands, you'll need to keep track of its business usage percentage or use the standard mileage rate, currently 65.5 cents per mile for business miles driven in 2024. For more information, see the IRS guidelines on vehicle deductions. What equipment can I deduct as a landscaping contractor?
Most tools utilized in your landscaping work, like mowers, trimmers, and leaf blowers, qualify for deductions, whether as direct expenses or through depreciation. The Section 179 deduction lets you deduct the entire cost of qualifying equipment in the year it’s purchased.
For many landscaping contractors, an S-Corp offers notable tax benefits over an LLC classified as a sole proprietor. S-Corps allow you to bypass self-employment taxes on distributed income, potentially leading to significant tax savings for high-earning contractors. For an in-depth analysis, refer to our guide on LLC vs. S-Corp.
To convert from a Schedule C to an S-Corporation, you need to file IRS Form 2553. Ensure this form is submitted by March 15 of the tax year in which you want the S-Corp election to take effect. Additional information about filing and deadlines can be found on the IRS website.
By utilizing these tax-saving strategies, landscaping contractors can effectively decrease their tax liabilities while reinvesting in their business’s future success.
For personalized help in setting up an S-Corp or exploring other tax strategies, call our landscaping tax accountants at Passageway Financial today!
