As a commercial property owner, you know that a great looking landscape can help your property stand out from the competition. It can also attract tenants and encourage customers to shop or work there. However, you might be wondering if landscaping services are considered capital improvements. The answer is yes, but there are some restrictions.
Landscaping is the process of designing, planning and constructing gardens and outdoor areas to enhance their appearance. It is often divided into two categories: hardscaping and softscaping. Hardscaping includes non-organic materials, such as retaining walls and patios, while softscaping includes planting designs and mulching. While the IRS allows companies to capitalize certain landscaping expenses, there are some guidelines they must follow to determine whether the work should be categorized as a capital improvement or an ongoing maintenance expense.
To be classified as a capital improvement, the project must add value to a commercial property and have a long-term benefit. This is different from a repair or routine maintenance, which preserves existing value. For example, a redesigned parking lot or entrance would be a capital improvement because it adds value to the property by creating a new space that increases visibility and improves security. Adding a fountain to an office building entrance is another example of a capital improvement because it changes the perception of the business and adds value.
If you’re not sure whether an expense meets the criteria for a capital improvement, it’s best to consult with a professional tax advisor. They can help you understand the regulations and potential benefits of capitalizing on your landscaping expenses.
In addition to large projects that boost curb appeal, there are a number of smaller landscaping services that may be considered a capital improvement. These include:
Installing new plants
If a commercial property wants to replace old or tired landscaping with something more modern, the cost can be considered a capital improvement. A new design that incorporates a variety of trees, shrubs, flowers and ground cover can provide a fresh look to the entire property. The new landscape will attract more tenants and potential customers to the business, and it can increase the value of the property for the future.
A complete landscape overhaul
A total landscape overhaul is a large project that can be a capital improvement. The service could be anything from a major tree planting to resculpting the landscape for greater aesthetic value to addressing drainage problems. Sometimes, a master plan is developed to determine improvements that will be made over a few years. This can be a capital improvement because it establishes long-term goals and defines the plant palette that will be used for future renovations.
Aerating the lawn is a service that can be considered a capital improvement because it helps with nutrient uptake. This is particularly true if the lawn has compacted soil or has been damaged by excessive foot traffic or prolonged drought. It’s best to aerate the lawn during its peak growth periods, which are typically in the fall and spring. capital landscaping