What expense category is Waste Removal or Trash Service?

Every business, from a retail store to a manufacturing plant, generates waste and requires regular trash removal services. The fees paid for these essential services are a routine cost of maintaining a business property and are fully deductible for tax purposes.

For accountants and business owners, it's important to categorize these costs correctly to ensure accurate financial records and tax compliance. This guide will clarify how the IRS treats waste removal fees, what records you need to keep, and how you can automate the tracking of these recurring expenses.

Waste Removal or Trash Services Category

The fees you pay for waste removal and trash services are an ordinary and necessary business expense. While the IRS does not provide a specific line item for Waste Removal, these costs are best classified under one of two general categories:

1. Utilities: IRS Publication 535 lists utilities as a deductible business expense, including services such as heat, electricity, power, and water. Commercial trash service is a similar and essential utility for any business premises.
2. Other Expenses: These costs can also be categorized more broadly as a general business expense and listed under Other Expenses on your tax return.

Important Considerations When Classifying Waste Removal Costs

The key to deducting these costs is to properly allocate them between business and personal use if applicable.

Business vs. Personal Use

If you have a business that operates out of your home, you can only deduct the portion of your household expenses that relates to the business use of your home. As explained in IRS Publication 535, this principle applies to all shared utilities. If your trash service covers both your home and your qualified home office, you must allocate the cost and can only deduct the business percentage.

One-Time vs. Recurring Services

• Recurring Service Fees: Regular monthly or quarterly fees for trash pickup are a currently deductible expenses.
• One-Time Demolition/Removal: It is essential not to confuse regular trash service with the costs associated with hauling away debris from a major demolition project. IRS Publication 535 states that costs to demolish a structure must be capitalized and added to the land's basis, not deducted as a current expense.

Tax Implications and Recordkeeping

To deduct the cost of waste removal services, you must report them correctly and maintain the required documentation.

How to Report the Deduction

For a sole proprietor filing a Schedule C (Form 1040), fees paid for waste removal services are deducted under Part II, Line 25, Utilities. Alternatively, they can be listed under Line 27a, Other Expenses, with a clear description, such as Waste Removal.

What Records to Keep

You must have documentary evidence to substantiate your expenses. Your records for waste removal services should include:

• The service agreement with the waste management company.
• Monthly or quarterly invoices detailing the service dates and charges.
• Proof of payment, such as canceled checks or credit card statements.

How Fyle Can Automate Tracking for Waste Removal Services

Fyle helps you manage and document recurring utility payments, such as trash services, ensuring every invoice is captured and coded correctly.

• Centralized Invoices: Have your waste removal provider email invoices so that they can be sent directly to Fyle for automatic and accurate data capture.
• Automate Recurring Expenses: Fyle’s real-time credit card feeds can instantly capture recurring monthly payments made on a business card.
• Create a Clear Audit Trail: Fyle consolidates the service agreement, invoices, and proof of payment into a single, easily accessible digital record.
• Automate Your Accounting: Sync the categorized utility expense directly to the correct GL account in QuickBooks, Xero, NetSuite, or Sage Intacct.