Updated: Oct 23, 2022
In this guide, we’ll take a closer look at construction tax savings you can use to help your company to capitalize on any available tax write-offs.
1. Mileage costs
As a construction contractor, driving is an essential part of your job, so you may be qualified to deduct the costs on your federal income tax return.
Driving to and from construction sites or jobs
Trips to meet with potential clients
Diving between your home and workplace
Depending on your personal situation, you may be qualified to claim mileage on gas or taxes. You can claim The federal tax deduction for mileage is 58.6 cents per business mile during 2022. To take full advantage of the standard deduction, you can use mobile apps to track and calculate your miles and travel time from the beginning to the end of the year. This way, you can provide documents as supportive evidence in the event your taxes are audited. If you choose to claim gas, you must keep track of all the records, bills, and receipts.
2. Advertising and Marketing
Construction companies often use advertising to find new work and build their reputation. Fortunately, you can deduct any associated fees or materials that you use to market your construction company. To take full advantage of this write-off, be sure to track:
Money spent on digital channels
Investments made in print media and advertising
Costs associated with the production of marketing material
3. Depreciation Cost
In construction, you’ll likely need to make large purchases such as ladders, cement mixers, and other heavy machinery. These types of equipment are expected to last more than one year and are considered business assets. Since these items begin to lose value more they’re in use, they must depreciate over time.
Claiming depreciation can be one of the most significant factors that decrease construction tax liabilities. For a detailed guide on how this process works, you can explore Section 197 from the IRS.
4. Subcontractor Labor Hours
Construction companies typically use hired independent contractors to perform new projects. These subcontractors are often brought in for specialty or highly technical aspects of the job. Provide that you follow the appropriate steps and classify each construction worker or self-employed contractor, the cost of this labor is generally deductible.
5. Home Office Expenses
The IRS allows you to claim office tax deductions. If you are a small construction company and using a part of your home for business, you can save a big money on their taxes by taking the home office deduction. Home office deduction must follow the principle place of business. Particularly, if you use your home space for administrative or management activities, including meeting your clients, and storing inventory, you may be qualified to claim a home office tax deduction.
Once you get the hang out of the most common tax deduction, you can know what to look out for throughout the year and learn how to reap the benefits of construction tax deductions.