What expense category does equipment rental fall under for a landscaping business?

Wondering how to categorize equipment rental costs for your landscaping business? Properly classifying these expenses is key to keeping your finances in order and maximizing your tax benefits. Let's break down where equipment rentals fit into your expense categories.

Classifying equipment rental expenses

Equipment rental costs can be classified in a few ways for your landscaping business:

• Direct costs: If you're renting equipment for a specific project—say, a backhoe for a large excavation job—those costs are direct expenses tied directly to that project.
• Indirect costs: If the rented equipment supports general operations and isn't tied to a specific job, it falls under indirect costs. This could include a utility vehicle you rent for ongoing maintenance tasks.

Equipment rentals are generally considered operational expenses because they're part of your day-to-day operations.

Examples of equipment rental expenses

Here are some common examples of equipment rental expenses you might have in your landscaping business:

• Mower rentals: For periods of peak demand when your existing mowers can't keep up.
• Excavator rentals: When you need to dig ponds or install large-scale hardscaping features.
• Tree trimming equipment: For occasional jobs that require specialized tools like cherry pickers or stump grinders.
• Aerators and dethatchers: Seasonal equipment you might not own but need for specific services.

For example, renting a mini-excavator for $500 per day to install a client's new water feature would be an equipment rental expense.

Tax implications of equipment rental expenses

Understanding the tax implications of equipment rentals can help you maximize deductions:

• Operational expense deductions: Equipment rentals are generally fully deductible as ordinary and necessary business expenses in the year they are incurred. Keep detailed records of your rentals, including invoices and rental agreements, to support your deductions.
• Non-deductible expenses: Equipment rental expenses for personal use are not tax-deductible.

Ensure you're classifying equipment rentals correctly on your tax returns to avoid issues with the IRS. Tax laws can be complex, so it's wise to consult with an accountant to make sure you're compliant and taking full advantage of available deductions.

Let Ramp automate your expense process

Managing equipment rental expenses doesn't have to be a headache. Ramp simplifies the process by automating expense categorization, tracking, and management. With real-time insights and seamless integration into your financial systems, you can focus on growing your landscaping business while Ramp handles the details.