Is Landscaping a Capital Improvement?

Posted by Sebastian Abrigo on Sep 22, 2022

New landscaping may not boost the value of your rental property, but it can enhance the visual appeal of your rental and attract higher-quality tenants. 

Renters typically want a property that meets their needs and also looks nice – especially in higher-end communities. You don’t necessarily need to create a breathtaking backyard for your renters to entertain their friends and guests, but the landscaping and landscaping enhancements at your rental property is one of the first things prospective renters will notice, as well as something that will leave a lasting impression if done right. 

Landlords have wondered if they can deduct the cost of landscaping as a capital improvement. The Internal Revenue Service provides guidance on repairs and improvements, but you may have to consult with a tax professional to determine how to treat the expense of landscaping improvements. 

Why Improve the Landscaping at Your Rental Property 

As noted, landscaping can be an integral aspect of the overall appeal and perceived quality of your rental property. 

Landscaping boosts curb appeal, which can attract more well-heeled renters. It also can command higher monthly rent, and may even serve to keep renters in place longer if they truly enjoy living in the property because of its amenities. 

Landscaping requirements and preferences also change over time. Take junipers as an example. In the 1990s, these durable and fast-growing shrubs were common residential and commercial landscaping enhancements. Today, however, mature junipers are frowned upon – especially in the fire-prone western region – because they are extremely flammable and pose a considerable fire danger due to their high amounts of volatile oils and the dead wood/leaves that often accumulate around the base of the shrubs. 

If it’s time to make major improvements to the landscaping at your rental property, you may be able to treat the expense as a capital improvement. Keep reading. 

Can Landscaping Be Claimed as a Capital Improvement? 

According to the IRS, capital improvements are substantial enhancements or upgrades that increase the property’s value. They also must be permanent improvements. 

IRS Publication 527 covers capital expenses and how to differentiate improvements from general repairs. Landscaping that betters or restores your property may be capitalized. However, the difference between repairs due to normal use and capital improvements may be a bit murky. Removing those outdated and potentially dangerous junipers for low-maintenance, low-water usage and environmentally friendly shrubs or xeriscaping could significantly enhance the landscaping at your property. The project also could potentially qualify as a capital improvement. 

Replacing cracked concrete walkways with pavers may also qualify as a capital improvement. If you have a triplex and you install a community outdoor kitchen and fire pit in a common area, those enhancements likely will qualify as capital improvements since they better the property and weren’t previously in existence. 

The Bottom Line 

Capital improvements generally increase the value of your property. Repairs, meanwhile, merely preserve its existing value. An experienced tax professional can help you determine whether landscaping upgrades and enhancements are considered general repairs or true improvements to your rental property. 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.      

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.   

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