How to Make the Most of Land Improvements

What do the following items have in common: outdoor fence, patio, driveway, sidewalk/walkway, underground sprinkler system, cement slab, sewer line, septic tank, underground swimming pool, and a well?

They are all considered land improvements that you can deduct as a business expense.

A land improvement is something that is attached to your land, costs more than $2,500, increases the value of the land and has a separate useful life apart from the land.

If the cost of anything for your business is less than $2,500 you can always deduct it in one year as a repair on Schedule C.  If you use the land improvement 100% for your business you can deduct 100% of the cost. If it's used for both business and personal purposes, multiply the cost by your Time-Space Percentage before deducting it. If your actual business use percent is much greater than your Time-Space Percentage, you can use the actual business use percent before deducting it.

If the land improvement costs more than $2,500 you can also deduct it in one year under a new rule in 2018. This rule will expire in 2022.

Landscaping (trees, shrubbery, sod, plantings, grading and landscaping fees) is not considered a land improvement. If you spend less than $2,500 on these items, deduct the business portion in one year. If you spend more than $2,500 and they are put immediately adjacent to your home, depreciate them over 39 years. If they are installed away from your home you cannot deduct them. Adjacent to you home means that if you physically moved your home down the road the landscaping would be destroyed.

Tom Copeland - www.tomcopelandblog.com

Image credit: dreamstime.com

For further information about how to depreciate land improvements, see my Family Child Care Tax Workbook and Organizer.