Coffee grounds have a high carbon content similar to grass clippings and make an excellent composting material, according to Washington State University Extension. As the coffee grounds decompose, they become a rich soil amendment that can improve your garden's soil and feed your plants. You can compost old coffee grounds using a traditional compost pile or by mulching.
Mark off a composting area on a flat, bare area of soil. For easy management, limit the compost pile's area to 3 to 5 square feet.
Put down a 3- to 4-inch layer of dried, coarse material, like leaves.
Pile 6 inches of moist, green composting material on top of the dried material. This includes the coffee grounds--you can also add the used paper coffee filters, according to the University of California--and any chopped up pieces of vegetation from your landscape or garden, like pruned foliage and lawn clippings.
Pour an inch of soil on top of the organic material, then repeat the stacking of dried material, green material and dirt until the pile is 3 to 5 feet high.
Mix the pile once a week with a spade or garden fork. The compost will be ready within six months, according to the University of California Extension.
Spread 1 to 2 inches of coffee grounds onto the bare soil.
Cover the coffee grounds with 3 inches of mulching material. This includes shredded leaves, wood chips and grass clippings.
Tap down the mulch slightly to help it settle. The mulch keeps weeds from invading the area and also conserves soil moisture while the coffee grounds slowly compost and decompose into the underlying dirt.