If you use part of your home regularly and exclusively for business, you are allowed to take the home office deduction. The home office deduction is not one deduction, but many. You are allowed to deduct your home office percentage of most expenses that benefit your entire home—the IRS calls these indirect expenses. For example, when you have a tax deductible home office, you are allowed to deduct the home office percentage of your rent and utilities. Thus, if your home office takes up 10% of your home, you can deduct 10% of the cost of your rent and utilities. Without the home office deduction, such expenses for your personal home are not deductible at all. If you own your home, you can deduct your home office percentage of your mortgage; but this expense is deductible as a personal itemized expense whether or not you take the home office deduction.
You are also allowed to deduct your home office percentage of the money you spend on maintenance for your entire home. This includes housecleaning of your entire house, roof and furnace repairs, exterior painting, termite inspection, pest extermination fees, home alarm costs, and snow removal expenses. However, home maintenance costs that don’t benefit your home office—for example, painting your kitchen—are not deductible at all.
But what about lawn care and landscaping? The IRS doesn’t like to allow a home office deduction for these expenses. In fact, back in 1980 the IRS proposed a regulation disallowing landscaping and lawn care expenses as part of the home office deduction. Fortunately, this regulation never became final. The IRS audit manual used by its agents also says that this deduction should not be allowed. The IRS’s reasoning is that such expenses are “inherently personal,” not business-related, and thus shouldn’t be allowed.
Nevertheless, despite the IRS’s predilections, lawn care and landscaping can be deductible if you have a home office. The U.S. Tax Court has repeatedly held that such expenses are deductible if the exterior appearance of a taxpayer’s home is of significant importance to his or her business. In one case, for example, a husband and wife operated a recording business out of their St. Louis home. The IRS denied their deductions for home landscaping and maintenance. They appealed to the U.S. Tax Court which held they were entitled to the deduction because clients regularly came to their home and the appearance of their residence and the grounds was significant for their business operation. (Charles Hefti v Commr., TC Memo 1988-22 .) The Tax Court also allowed the deduction where a husband and wife operated a day care center in their home. Obviously, keeping their grounds in good shape was important for their home business. (Nielson v. Comm’r, 1990 TC 1.) In yet another case, a dentist who used one wing of his large home as his dental office was allowed deduct landscaping services. (Rhoads v. Comm’r, 53 TCM 1308.)
These cases make clear that if you regularly see clients or customers in your home office, you may take a deduction for lawn care and landscaping. On the other hand, you shouldn’t take this deduction if no one other than the FedEx delivery person visits your home office. If you do deduct landscaping expenses, keep track on your calendar of all the clients or customers who visit you in your office during the year. Also, keep careful track of all the money you spend on gardeners and other landscaping services.