Deductions by trade
What a handyman or building contractor can deduct.
For sole proprietors, single-member LLCs and small construction companies filing in the United States. Everything here assumes you are self-employed rather than an employee with a W-2 — if you receive a W-2 from a builder, the answer is different and much shorter.
Tax year 2026
Start here
Buying materials in December does not lower a December tax bill.
Materials are not deducted when you pay for them. They are deducted the later of when you pay and when they go into a job. A pallet of tile bought on 28 December and laid in February is a February deduction. This is the single most common mistake in the trade, and it runs both ways: materials already installed on a job you have not yet been paid for are already deductible, this year, whatever the invoice says. The count that decides it is the one you take of the truck and the garage on 31 December.
Only what went into a job before 31 December counts this year. An illustration, not your numbers.
Truck, van and mileage
2026 is a year with two mileage rates. A log that is not split at the end of June is a log that understates the second half.
- A mileage log with three totals: all miles driven, business miles, and commuting milesAn app running in the background is worth more than good intentions. A log reconstructed in March convinces nobody.Tax tip. The standard rate for 2026 is 72.5 cents a mile from 1 January to 30 June and 76 cents from 1 July to 31 December. Split the log at 30 June. A driver claiming one rate for the whole year is leaving the second half short.
- Actual costs, if you use those instead of the rate: fuel, insurance, repairs, tyres, registration, lease payments or loan interestGoing this way means keeping every receipt for the year, and the total, business and commuting mileage on top, because actual costs still have to be split.Tax tip. The first year decides more than it looks. Start with the standard rate and you may switch later; start with actual costs and depreciation locks that vehicle out of the rate for good. Ask before the first return, not the second.
- Parking and tolls on the way to sitesDeductible on top of the mileage rate — the rate does not include them.
- A work truck or cargo van bought for the businessA pickup with a bed of at least six feet, or a van with no seating behind the driver, is not caught by the $32,000 cap that applies to SUVs between 6,000 and 14,000 pounds.Tax tip. Writing the whole truck off in year one is not free money. Sell it three years later and the deduction comes back as ordinary income in the year of sale. Decide against the years you expect to keep it, not against this April.
- A trailer, and what is bolted into itA trailer is its own asset with its own depreciation. The mileage rate covers the truck pulling it and nothing else.
- Vehicle lettering and wrapsThe lettering is advertising. The vehicle underneath is still a vehicle.
Materials and job costs
The section that decides your profit. Costs recorded against the job they belong to are also the only ones you can defend a year later.
- Materials bought for customer work: lumber, drywall, tile, paint, fixtures, fasteners, wire, pipeDeducted the later of when you pay and when they go into a job. What is still on the truck at 31 December belongs to next year.
- A count of materials on hand at 31 December — truck, trailer, garage, storage unitTax tip. One afternoon of counting is what turns the materials line from a guess into a number. It is also the only record that survives a question about a December purchase.
- Dump fees, disposal, skip and dumpster hire, portable toilet on site
- Equipment rental: lifts, excavators, compactors, scaffolding, floor sanders
- Permits and inspection feesA permit you pay for and re-bill to the customer is a cost and the re-billing is income. Both belong in the books; netting them out hides the job cost.
- Sales tax paid on materialsPart of the cost of the material when you pay it.Tax tip. Most states treat material installed for a customer as a resale. A resale certificate can prevent tax from being paid twice. List materials and labor separately because states may tax them differently, while a single combined charge may be taxed under the less favorable rule.
- Subcontracted trades on a job: electrical, plumbing, HVAC, roofing
Tools and equipment
- Hand tools and consumables: blades, bits, fasteners, abrasives, adhesives, tape, blades, caulk
- Power tools, batteries, compressors, generators, nail guns, mixers, mitre sawsAnything expected to last beyond the year is normally depreciated. The de minimis safe harbor lets you expense an item costing $2,500 or less instead, if you make the election on the return — so keep invoices with the per-item price visible.Tax tip. Adopt a written $2,500 de minimis policy before the year begins and a tool under that amount is an expense instead of a depreciation schedule. One page, signed once, settles the argument every year after.
- Ladders, staging, planks, jacks, shores and site fencing
- Tool repair, blade sharpening and calibration
- Tool insurance, and cover for tools stolen from a vehicle overnightA personal auto policy does not cover the tools inside the van. Most claims in this trade are exactly that.
- A job-site box, van racking and storage
Subcontractors and crew
The most expensive thing in this trade to get wrong, and the cheapest to get right if it is done before the first payment rather than in January.
- Payments to subcontractors, with a signed Form W-9 collected before the first paymentFor 2026 a Form 1099-NEC is required once you pay someone $2,000 or more in the year, up from $600.Tax tip. No taxpayer number means you are required to withhold 24 percent from the payment. Getting the W-9 first costs a minute; chasing it in January costs the deduction.
- A certificate of insurance from every sub, current for the dates they workedTax tip. This one is not a tax rule and it costs more than one. At the annual audit a liability or workers compensation carrier treats an uninsured sub as your payroll and bills you the premium for them. Collect the certificate with the W-9 and file them together.
- Wages, payroll taxes and workers compensation, if they are employeesWhat decides employee or contractor is control — over the schedule, the method, the tools — not what the agreement is called. In construction this comes back as back taxes, interest and penalties for every year involved.
- Day labor paid in cashCash is not the problem; no record is. A name, an address, a date and an amount make it a deduction. Nothing makes an unrecorded payment one.
- Protective gear and uniforms you buy for the crew
Home office, shop and storage
The section most contractors skip, and the one that decides whether the first drive of the day is a deduction.
- The space used regularly and only for the business: estimating, invoicing, ordering, recordsExclusive use is the hard part. A desk in the corner of a spare room can qualify; the kitchen table cannot.Tax tip. A qualifying home office makes your home the principal place of business — and that turns the first drive of the day and the last one home from commuting into business miles. Across a working year that one change is usually worth several times the office deduction itself.
- Square footage of that space and of the whole home
- The year's rent or mortgage interest, property tax, utilities, insurance and repairsOr use the simplified method: $5 per square foot up to 300 square feet, with no receipts to keep. Usually smaller, always faster.
- Rent on a shop, yard, container or storage unit
- The garage bay or yard where materials, the trailer and the tools live between jobs
Insurance, licensing and bonding
- General liability insurance
- Contractor license, renewals, and required continuing education
- Surety, performance and payment bonds
- Builder's risk and installation floater cover
- Workers compensation premiums, including the audit adjustment
- Commercial auto, and a tools-in-transit rider
- Business license, state registration and the annual report fee
Running the business
- Phone and internet, at the business-use shareThe whole bill is not deductible when the phone is also personal. A defensible percentage, applied consistently, is.
- Estimating, takeoff, scheduling and invoicing software
- Payment processing fees from Stripe, Square or a card terminalThe fee is an expense; the gross sale is income. Both belong in the books.
- Interest on a business loan, line of credit or business cardInterest on the card you also buy groceries with is deductible only on the business share, and only if the split is real.
- Bank charges on the business account
- Advertising: website and hosting, truck signage, yard signs, flyers, Google Local Services, Angi and Thumbtack leads
- Bookkeeping, tax preparation and legal fees
- Trade association dues and licensing-board fees
Clothing and safety gear
The test is not whether you wear it at work. It is whether you could wear it anywhere else.
- Hard hats, harnesses, respirators, safety glasses, hearing protection, knee pads, cut-resistant gloves
- Hi-vis vests and flame-resistant clothing required on a site
- Steel-toe boots rated for the work
- Uniforms carrying the company name or logo, and the cost of laundering them
Your own taxes and benefits
- Health insurance premiums you pay for yourself and your family
- Contributions to a SEP IRA, SIMPLE or solo 401(k)Tax tip. The one deduction you can still create after the year has ended: a SEP can be funded up to the filing deadline, extensions included. Everything else on this page had to happen by 31 December.
- Estimated tax payments made during the year, with dates and amounts
- The qualified business income deductionTwenty percent of the profit, now permanent, and from 2026 a minimum deduction of $400 for anyone with at least $1,000 of income from a business they actively run. It comes off the return, not the books — but it is a reason the profit figure has to be right.
- Startup costs, if this was the first yearUp to $5,000 may be deductible in the first year, with the remainder amortized. Costs paid before the first job may still qualify.
Training and certification
- OSHA 10 and 30, fall protection, first aid and site safety training
- Lead-safe RRP certification and renewal, and any state trade certification
- Manufacturer and supplier training on products you install
- Trade publications, code books and course materialsTraining that keeps or improves the skills of the business you already run is deductible. Training that qualifies you for a different trade is not.
What you cannot deduct
The list nobody publishes, and the reason most letters from the IRS get written. None of these become deductible because the business paid for them.
- Materials still on the truck, in the trailer or in the garage at 31 DecemberPaid for, yes. Deducted this year, no — they go in the year they go into a job.
- The drive from home to the first site and home from the last oneUnless a qualifying home office makes your home the principal place of business.
- Ordinary clothes — jeans, t-shirts, work boots you would wear anywhereSteel toes and flame-resistant gear are different. Comfort is not the test; whether you could wear it off the job is.
- Your own unpaid time: the warranty callback, the estimate you did not win, the favour for a neighbour
- Tools and materials bought for work on your own house
- Lunch on your own on an ordinary working dayA meal needs a business guest and a business reason, and even then only half of it.
- The full phone bill, when the phone is also your personal one
- Money you pay yourselfAn owner's draw is not an expense. It does not reduce the profit you are taxed on.
- Fines and penalties: parking tickets, stop-work orders, code violations, late-permit charges
- A payment to a sub you cannot name, date and document
- Work done for family at no charge
Before you file
Three records decide most of this page: costs booked against the job they belong to, a count of what was still on the truck at 31 December, and a mileage log split at the end of June. Receipts can be rebuilt. Those three cannot.
Open the business checklistNot sure which of these apply to you?
A list is a starting point, not an answer. Bring your own numbers to a free intro call and we will work out which of these belong on your return and what is missing from your records.
This page is general information for the 2026 tax year, not advice about your business. A deduction has to be ordinary and necessary for your own trade, and your records have to support it. Amounts and rules are current as of the date of publication and can change.