Now that you have had a tree(s) removed from your property, you have likely realized that this is no small expense. Based on the tree’s location and its size, removing it may cost between $150-1500. Additionally, there is the cost of having the stump removed.
After spending so much money on improving your property, you might be wondering if this is a tax-deductible expense. Home improvements can be tax-deductible. Does tree removal in Edmonton classify?
It depends on why you are removing the tree(s) and the type of property the tree is being removed from. Keep reading to find out if your tree removal classifies as tax-deductible.
Can I Deduct a Tree Removal From My Taxes?
Various factors need to be considered before you can deduct a tree removal from your taxes. They include the type of residence, why you had the tree removed, and who removed it.
Type of Residence
The type of property the tree is removed from is an essential part of determining if the expense is tax-deductible or not.
Many tree removals occur at a primary residence. Unfortunately, this is not likely to be a tax-deductible expense. For an expense such as landscaping to be tax-deductible, it must be considered a home improvement.
Home improvements are capital improvements, which are usually tax-deductible. However, for a landscaping job to be considered a home improvement, the project needs to increase the home’s value. Repairs and maintenance do not meet the requirement as they do not increase the value of the house. Unfortunately, tree removal is considered a repair, so it does not meet the criteria to be a tax-deductible expense.
There are some situations where tree removal can be considered a home improvement. For example, if the tree removal is part of a more significant construction project to improve the house, this would be regarded as a capital improvement. Therefore, removing a tree to build an addition, walkway, or patio would be tax-deductible.
However, if the tree was removed from an investment property, such as a rental home or an apartment, then there is a chance that it could be tax-deductible.
Specific conditions must be met for a tree removal on a commercial property to be considered a tax-deductible expense.
If you had the tree removed due to safety concerns for the property or your tenants, this is considered a business expense. This type of expense would be classified as a cleaning and maintenance business expense.
However, removing the tree to make the property more attractive would be considered deprivation capitalization and is not tax-deductible. Since removing the tree will increase the property’s value in the long run, you will recover the cost of the tree removal. This type of removal is not tax-deductible.
Reasons for Tree Removal
For the tree removal to be tax-deductible, the tree must be causing harm or have the potential to harm your property. For example, if a tree has fallen on your property or the tree is diseased and could damage your home, you can claim the removal as a tax deduction.
If the tree has been hit by a vehicle or damaged by a storm, you might be able to claim the cost as a tax deduction.
Unfortunately, if the tree is being removed for aesthetic reasons, you cannot deduct the removal cost from your taxes.
Who Cut and Removed the Tree
Who you hire to remove the unwanted tree is essential in claiming this expensive on your taxes. You must hire a professional to cut and remove the tree if you claim it as tax-deductible. You cannot do the job yourself.
Many people have tried to claim their own labor as tax-deductible. Unless you have your own home improvement company, you should not do this.
It is highly recommended you hire a professional to remove any unwanted trees because they have the proper training, equipment, and expertise. Tree removal is a dangerous job.
Additionally, a professional arborist can help you with any questions and concerns and give you the necessary paperwork and documentation for claiming a tree removal on your taxes.
Next Steps for Claiming a Tree Removal on Your Taxes
If a tree removal fits the criteria for a tax-deductible expense, it is best to claim that expense the same as you paid for it. For example, if you had a tree taken down in 2021, you should include the deduction in your 2021 taxes.
Taxes can be pretty confusing. A mistake can lead to many complications, and the worst-case scenario is that you could be audited. To ensure that you maximize your tax deduction without making any costly mistakes, you should speak with a licensed tax professional. They will inform you of any paperwork and documentation that you need to submit.