Running a cleaning business, whether it is residential, commercial, or specialized janitorial services, typically involves a range of expenses for the owner. Due to the high cost, newcomers to the janitorial industry often struggle to decide whether to pursue this field.
However, the good news is that our government is now taking positive steps to support our local businesses. The government has made many of the expenses for cleaning businesses now tax-deductible. That means you can get a reduced taxable income from this business and keep more of what you earn!
Here, we are with an expert guide on tax deductions for cleaning businesses.
In this guide, we will cover-
- Who can claim tax deductions?
- Which expenses are deductible?
- How you can maximize your deductions with smart recordkeeping and effective planning!
Let’s see the details of this guide-
Who Can Claim Tax Deductions?
Everybody who is related to janitorial services can claim a tax deduction. However, they must meet specific criteria in some cases. Let’s explain-
Cleaning businesses related to a sole proprietor, LLC, partnership, or corporation are qualified for a wide range of business tax deductions. Suppose you are an independent contractor or own a small cleaning company; in which case, you can claim a tax deduction. However, you must provide proof that your expenses are legitimate and necessary for your business.
Not only that, suppose you are just starting up or running your business from home, you can still claim tax deductions for home office expenses and other official supplies.
Whether you are providing home cleaning services or running a janitorial operation, the first thing you need to understand is the details of your eligible deductions. Especially when you need to reduce your tax liability to save your funds.
Therefore, it’s advisable to consult with a tax lawyer to fully understand the situation, taking into account your current business scenario.
Why Tax Deductions Matter for Cleaning Businesses?
Business is not just about passing the time and earning money! A running business or a start-up-whatever it is-the owner only knows how he or she has to spend here.
A cleaning business, whether it provides residential, commercial, or specialized janitorial services, must deal with substantial daily expenses.
The tax deduction, therefore, into this business comes in the form of God’s blessing! Yes, in the cleaning business, many expenses are deductible, allowing you to claim a tax deduction on your total spending.
In short, many of the costs associated with the cleaning business are now tax-deductible.
When your taxable amount is reduced, you can keep more of what you earn from your business, only when you know what you can legally deduct from your cleaning business. And if you can properly store all your receipts and other documents, only then can you earn a profitable amount by paying less tax.
The gist is that tax deductions are a matter for cleaning businesses because the owner can claim a reduced tax per year, and also save more money on their total earnings.
Common Tax Deductions for Cleaning Businesses/Tax-Deductible Expenses You Should Track
Are you eligible to get the tax deduction? Well, suppose you are running your cleaning business from home or a corporate setup, and you are doing business as a sole proprietor, LLC, partnership, or corporation. In that case, you have a lot of scope to claim higher tax deductions. The key is understanding what’s deductible for you! Especially if you want to reduce tax liability in home cleaning services or a growing janitorial operation, it is essential to understand the details.
Let’s get the common tax deduction aspects for your cleaning business.
Supplies and Equipment
A cleaning business means you have to rely heavily on various supplies and equipment. You just have to keep all receipts and a log of each purchase or usage of those supplies. Below is the list of expenses from which you can deduct tax:-
- Cleaning solutions and disinfectants.
- Brushes, mops, buckets, vacuums, and other cleaning tools.
- Protective gear like gloves and masks.
- Office supplies like pens, paper, and files.
Vehicle Expenses
You must use a vehicle for your cleaning business purposes. Typically, people use vehicles because they need to visit a client’s location, pick up supplies, or make marketing drops. And the good news is that if you have a vehicle to meet these cleaning business purposes, you can deduct some related expenses.
These may include:
- Mileage (use the IRS standard mileage rate)
- Gas, oil changes, and maintenance
- Car insurance (pro-rated for business use)
Lease payments or depreciation
Employee Wages and Benefits
You can also receive a tax deduction on your staff payment or subcontractor payment. However, before claiming a tax deduction, you must ensure that your organisation or company is fully compliant with federal and state labor laws. Here is the tax deduction scope in case of employees’ wages and benefits-
- Employee salaries and hourly wages
- Bonuses and commissions
- Payroll taxes (Social Security, Medicare)
- Health insurance or other benefits
Home Office Deduction
We previously mentioned that when you operate your cleaning business from home, you may be eligible for certain tax deductions. However, you need to have a dedicated home space to use as an office, and the space should be used exclusively and regularly for office purposes. Home office deduction includes-
- A percentage of rent or mortgage interest
- Utilities like electricity and the internet
- Repairs and maintenance for the office space
- Homeowners’ or renters’ insurance
Marketing and Advertising
The good news is, you can deduct your taxes for promoting your cleaning business. Following marketing and advertising action, you can get a reduced tax for your cleaning agency.
- Business cards, flyers, and brochures
- Website development and hosting
- Social media ads and promotions
- Lead generation services (like home cleaning leads)
So, promoting your learning business will not only help you get new clients. Also, it will help you lower your taxable income. To make your business more effective, you simply need to diversify your marketing and advertising strategy, both online and offline.
Business Insurance and Licensing
In our country, most states demand to have general liability insurance for the cleaning business. You can also receive a reduced tax on your renewal fees. Just carefully store all policy documents online (in a digital format, Google Drive, Dropbox). However, in those areas, you can get a reduced tax.
- Business liability insurance
- Workers’ compensation
- Surety bonds (if required)
- Business licenses and permits
Training and Certification
There are several certification programs & training programs available for cleaning agencies, which can result in reduced tax expenses. Such as-
- OSHA safety training
- Chemical handling certifications
- Workshops on advanced janitorial techniques
However, expert janitorial industry networking tips emphasize that continuous training and certification are key. These can also be tax-deductible, allowing you to focus on training and certifying your team in in-depth janitorial practices.
Professional Services
Hiring professionals may seem more expensive due to high taxes and fees. However, the real fact is that hiring professionals is also a tax-deductible and financially beneficial investment in the long run. You just have to schedule your annual reviews to avoid penalties. So when you need help for a book or a legal setup, you can get the tax deduction in the following scopes-
- Accountants and tax professionals
- Business consultants
- Lawyers or compliance experts
Utilities and Rent
You may think only the home office offers you a tax deduction. Nope, your corporate office also lets you enjoy a low expense! Even if you rent a commercial space for storage, office work, or employee training, you can deduct the following taxes.
- Rent
- Water and electric bills
- Internet service
- Trash collection fees
Never forget to collect all utility bills. Also, take photos of the place you have used for your business documentation purposes. To know more, know our expert Janitorial Business Tips and take action accordingly.
Recordkeeping Tips to Maximize Deductions
‘Good data drives good decisions-especially when it comes to taxes. Businesses with organized financial records are 2x more likely to claim all eligible deductions successfully.’
–IRS Small Business and Self-Employed Tax Center, 2023
The more records you can show to the tax authority, the more tax reduction you can get. Therefore, it is essential to keep all records related to your cleaning business in a secure location.
Online sites such as Google Drive and Dropbox are good places to store all your receipts and official documents, but in addition to these, you also need to keep all your printed documents safe.
So, use a meticulous data saving procedure and follow the tips below-
- Use one or two of the best accounting software programs. I prefer QuickBooks or Wave as my best recordkeeping tool.
- Keep all receipts, invoices, and contracts in a secure location.
- Never forget to count and track mileage with a dedicated and authentic app.
- Of Course, try to maintain a separate business bank account, dedicated solely to your business purposes.
- I have already said this several times: Upload documents to a secure cloud-based storage.
- Hire a tax advisor before tax season. Try to hire an experienced one, because he/she will never put you down with the highest tax.
Final Note
No doubt, taking the full advantage of the tax deduction can help your company earn a more significant amount of money. In the tax deduction process, everything counts, from supplies to staff wages and even advertising and promotional purposes.
So, if you also want to take advantage of tax deductions for a cleaning business, stay organised and keep all documents safe and secure.
Additionally, consult with a renowned tax lawyer to ensure that you are not leaving your money on the table for the government.
That’s all on tax deduction for cleaning businesses.
Any queries? Contact us!
