Pest Control Business Tax Deductions

As a provider of pest control services, you’re responsible for ensuring the health and safety of your client’s homes and businesses.

This responsibility is not just limited to pest control services but also extends to managing your finances and taxes.

Following are tax hacks that can help you minimize your tax liabilities and maximize your profits.

1. Claim your eligible tax deductions for pest control services

Tax deductions are expenses that the IRS allows to be subtracted from your taxable income, thereby reducing your tax liability.

The most frequently used tax deductions small businesses can claim are their business expenses.

Business expenses may include costs such as equipment, supplies, advertising, and travel. These expenses are typically accepted by the IRS as deductible so long as they aren’t out of the ordinary and are necessary for your business.

Some other deductions may include the cost of operating your vehicle for business purposes. Or, if you use a portion of your home exclusively for your business, you can claim a deduction for the expenses associated with that space. These expenses include rent, utilities, and insurance.

2. Claim your ERC tax credit for pest control service

The Employee Retention Credit (ERC) is a tax credit introduced by the government in response to the COVID-19 pandemic.

The ERC is available to businesses that have experienced a significant decline in revenue due to the pandemic but retained their employees on the payroll. If you’re a pest control service provider and this described your situation during the pandemic—you may be eligible for it.

To qualify for the ERC, you must have experienced a significant decline in revenue in 2020 and/or 2021. The maximum credit you can get for 2020 is 50% of employee wages, and for 2021 it’s 70%. You may be eligible for up to $5,000 per quarter, per employee during the last three quarters of 2020 and $7,000 per quarter, per employee in 2021. 

This ERC credit can be used to offset your payroll taxes or be claimed as a refund.

3. Hire employees the right way: W2 or 1099?

As your pest control business grew last year, you may have needed to hire employees to help you manage the workload.

When hiring employees, you have two options: W2 or 1099.

W2 employees are considered traditional employees and are subject to payroll taxes, while 1099 employees are considered independent contractors and are responsible for paying their taxes.

While hiring independent contractors may seem like a good idea, it’s important to ensure they meet the criteria for independent contractors.

The IRS uses a set of criteria to determine whether your worker will be classified as an employee or an independent contractor. If you misclassify your worker as an independent contractor, you could be subject to penalties and fines.

4. Switch from sole proprietor or LLC to S Corp

If you run your pest control service as a sole proprietor or LLC, you are considered a pass-through entity, meaning your business income is reported on your personal tax return. This choice can result in a higher tax liability as your business grows.

However, by switching to an S Corp, it’s possible to reduce your tax liability by paying yourself a reasonable salary and taking the rest of your income as distributions.

An S Corp is a particular type of corporation that is taxed like a partnership. It offers the liability protection of a corporation while providing the tax benefits of a partnership. To become an S Corp, you must file Form 2553 with the IRS.

5. Vehicle and mileage deduction

If you use your vehicle for business purposes, you can claim a deduction for the expenses associated with that vehicle. These expenses include fuel, maintenance, and insurance. You can also claim a deduction of the mileage you drive for business purposes.

To claim this deduction, you must keep accurate records of your business mileage. You can use a mileage log or a mobile app to track your mileage.

The IRS allows you to include the actual expenses associated with your vehicle or the standard mileage rate as a deduction—currently 65.5 cents per mile when you file 2023 taxes

6. Deduct startup costs

Starting a pest control business can be expensive, but you can deduct some of those costs on your tax return.

Startup costs include expenses such as market research, legal fees, and advertising. You can deduct up to $5,000 in startup costs in your first year of business. Any costs that exceed $5,000 must be amortized over 15 years.

7. Contribute to a retirement plan

Contributing to a retirement plan can help you save for retirement while reducing your taxable income.

As the owners of a pest control service (or any small business), you have the choice of retirement plan options, including a SEP IRA, a SIMPLE IRA, and a 401(k). These plans offer tax benefits such as tax-deferred contributions and tax-free withdrawals in retirement.

8. Tax advantages of owning your own home

If you own a home, you may be eligible for several tax advantages. These include the mortgage interest deduction, the property tax deduction, and the home office deduction.

The mortgage interest deduction allows you to use the interest you pay on your mortgage to lower your tax bill. The property tax deduction allows you to deduct the property taxes you might pay on your home.

Furthermore, the home office deduction allows you to deduct the expenses associated with a home office.

Pro Tip: Many pest control business owners are considered self-employed and are worried about qualifying for a mortgage—afraid they write off too many expenses.

These no-tax-return mortgages and refinance programs are meant to help self-employed individuals:

• Bank Statement Mortgage – Qualify showing deposits into 12-24 months of business or personal bank statements, not tax returns
• 1-year Self Employed Mortgage – Qualify showing just the first 12 months of bank statements, even if you’ve only been self-employed one year.
• Bank Statement 2nd mortgages – A secondary mortgage where you use bank statements to qualify instead of tax returns
• No-Doc Liquidity-Based loans
• 1099 Mortgage
• DSCR Loans – No-tax-return investment property loans

9. See if you qualify for Section 199A Qualified Business Income deduction

Section 199A Qualified Business Income Deduction is a tax deduction introduced in the Tax Cuts and Jobs Act of 2017. This deduction allows eligible businesses to deduct up to 20% of their qualified business income.

To qualify for this particular deduction, you must have a qualified business, which includes most businesses other than those in the service industry.

10. Working with a tax professional for your pest control business

While these tax hacks can help you minimize your tax burden, it is important to work with a tax professional to ensure you take advantage of all available tax deductions and credits.

A tax professional can also help you plan for the future by developing a tax strategy that considers your business goals and objectives.

Conclusion—be smart with your income

As a pest control service provider, you work hard to ensure the continuing health and safety of your client’s homes and businesses. By implementing these tax hacks, you can also work smart to minimize your tax burden and maximize your profits.

Remember to keep accurate records, work with a tax professional, and stay up-to-date on tax law and regulation changes. With these tips, you can be well on your way to financial success.