Son Has A Landscaping Business

Happy New Year, Indies!

It is not my policy to answer questions that are unique to one person's situation . I have made an exception here because I think this is a cool Q&A to start off the new year. My answers are in orange.

-- June


Ms. Walker,

Your book has been very helpful to us -- equally understandable by a teen and his OLD, almost 50-yr old dad. Ohmygosh, you think 50 is old!

Our 16-yr old son has mowed lawns for neighbors since he was 10 using the unregistered name "Clean-Cut Landscaping Services" the last four years. To get him started, we trash-picked a lawn mower and had it rebuilt for him. He repaid us and has since purchased all his equipment with cash, grossing $30K last year. Impressive.

He now uses a 8'x12' shed and half our 22'x24' two-story barn garage for his ~20K worth of mowing, leaf collection, snow blowing, mulching, planting, hedge, and tree equipment. His younger brother is now working with him, pulling the 8' bike trailer with equipment that the older one had pulled with his bike before he purchased his commercial riding mowers. A family business is good.

He is home schooled and consistently scores extremely well on standardized tests. His routine is starting his school work at 0530 and finishes at ~1300, with some variation for outside coop classes. With No-Child-Left-Behind as policy in public school the past few years, it's no surprise that home-schooling has been on the rise.

Our questions follow:

1. Can we charge him rent on the shed and garage storage space for his business equipment and he deduct that as a business expense? That would help to compensate us for what is now used solely by him. Yes, if you claim the rent as income.

2. Presumably he could not use such a deduction until he is actually paying us? Correct. That is, we cannot prorate the tax, repair, utility, etc. proportion of business-use of our total living space (house, garage, and shed) described in your book until it is a valid expense to him? You are asking about a home office deduction. You can not take a home office deduction because it is not your business.

3. Can we charge him for the sizable laundry cost required for his business and he deduct that? He currently buys his work clothes and shoes. Think of it this way: Were he to pay a laundry service to clean his clothes he would deduct the expense; the laundry service would claim the amount paid as income. You would need to claim the fee for laundry service as income. Depending on your income and tax bracket it may or may not be a tax advantage to have him pay you.

4. Can he claim as transportation expense the mileage from his garage and shed storage area to those neighbors where he conducts his work? He uses his large, 5' deck riding mower to transport all his equipment. His 50-customer clientele is primarily within a 1-mile radius, but for some jobs he has to make multiple trips to transport all the equipment required for that job. Yes.

5. To avoid withholding social security taxes, to his younger brother, will his brother also need to meet the criteria for a sole proprietorship? I assume that would be the simplest arrangement for the two. It's not a question of simple. His younger brother is his employee.

6. Finally, you mention in your book the option of fully deducting the cost of purchased equipment the year in which it was purchased. Are there any particular requirements that he must meet to do that? That's a tax preparation how-to question regarding depreciation. I do not give tax preparation instruction.

Thank you.
v/r Jonathan (dad) for Abraham (older son) and Moses (younger son)
Glenside, PA
You are welcome. Sounds like you have great kids. Kudos to the parents.
June Walker