Construction businesses can write off a lot of business use expenses. When you work with a tax professional, you can get the most accurate, personalized advice for your unique expenditures. The following tax breaks are some of the biggest deductions and credits you can claim on your tax return. For the most comprehensive advice, speak with a tax professional.
Construction companies do a lot of driving. You visit different construction sites, pick up equipment, conduct business at the bank, pick up supplies, meet with partners, and much, much more. According to the IRS, businesses can claim a standard mileage rate of $0.56/mile. Log your miles according to IRS standards to ensure your numbers are accurate.
2. Business Travel Expenses
Travel is one of the joys of working out in the field. Not only can you deduct mileage on your return, but you can also write off other business travel costs. This can include:
- Up to 50% of meal costs
- Vehicle purchases
- Parking fees at the job site
- Vehicle maintenance
This can be difficult to prove without ample documentation, so keep proof that the expenses are related to vehicles and machinery used exclusively for your business. Writing off these necessary expenses can improve the outcome of your income tax bill.
3. Losses From Theft or Damage
If your construction business experiences theft or damage, then you may claim these losses as business expenses. There are limitations on what can be claimed, so speak to your financial advisor for specifics.
4. Self-Employment Tax
If your operations classify as a small business, you are self-employed, which makes you eligible for the self-employment tax deduction. When you pay toward Social Security and Medicare taxes, the IRS allows you to write off these taxes to give you extra savings.
5. Advertising and Marketing
Marketing is essential for builders, and sometimes you need to pay to get the best results. If you pay toward advertising expenses, whether it’s via a digital or traditional channel, you can claim these construction industry expenses on your taxes.
6. Employees & Independent Contractors
It takes many skilled laborers to make a house. Whether you have permanent hires or get the help of contractors and subcontractors, you may deduct what you pay them on your year-end taxes.
Since the IRS has strict rules about who classifies as a full-time employee vs. a self-employed construction contractor, speak with your CPA to determine how to file paperwork for each hired hand. Generally, if you pay anyone over $600 per tax year, you must report it.
7. Insurance Premiums
Any insurance plan premiums related to your business can be deductible expenses. For example, under the right conditions, you can deduct health insurance and workers comp for employees.
8. Depreciation Costs
Construction involves large, costly material and equipment purchases, like cement mixers, big trucks, and other sophisticated tools. When these purchases age, they begin to lose value or depreciate. Thankfully, the depreciation of these business assets is a common tax deduction you can take advantage of. Just check with your CPA to make sure that the asset in question qualifies. Recently, the Tax Cuts and Jobs Act changed depreciation rules. For more information, consult Section 179 from the IRS.
9. Professional Fees
You need more than skilled laborers to keep your construction business running smoothly. Hiring tax pros, marketing agencies, and legal assistance is part of the standard business owner’s expenses. Therefore, check with your CPA about what legal fees, accounting fees, and other business expenses related to building can be deducted as professional services fees.
10. Home Office
You can deduct part of your home expenses if you manage your construction business in a home office that is not used for any other purpose. If you use your home office frequently, this can become one of your best tax breaks!
- Note: Claiming a home office allows you to write off a percentage of utilities and mortgage interest, plus much more. It’s an excellent tax deduction that you must include on your schedule c!
Get Every Dollar During Tax Time
Builders can reap a lot of tax write-offs when they keep records of all expenses. If you spend money for business purposes, save every receipt for tax time. Even an ordinary expense like gas spent to visit a job site can add up to considerable savings in April.
Alicia Persson is the official in-house content writer for Marketplace Homes. She has several years of experience working in real estate teams that specialized in investments and property management. Before she joined MH, she was a freelance writer for 7 years, providing real estate and home living content for boutique digital marketing agencies.
She is a proud University of Virginia Masters graduate and enjoyed her undergraduate years at the University of Mary Washington. When she is not writing, she is playing keyboard in a local 90’s band in central Virginia or spending time with her amazing family.