Don’t Miss These Construction Company Tax Deductions

Tax planning often gets pushed to the back burner for construction company owners juggling crews, job sites and project deadlines. That rush at year-end leads to missed deductions and overpaid taxes. In an industry where margins are already tight, every dollar matters.

Construction company tax deductions are among the most valuable tools available for reducing your tax burden. From the heavy equipment sitting on your job sites to the trucks your crews drive every day, nearly every aspect of running a construction business offers potential savings. Knowing which expenses qualify and documenting them properly can make a significant difference in what you owe.

Equipment Purchases And Accelerated Depreciation

For construction companies, equipment represents both a major investment and a major tax opportunity. Section 179 and bonus depreciation allow you to deduct the cost of qualifying purchases in the year you acquire them rather than spreading deductions over several years.

Under IRS Publication 946, which covers depreciation rules, the Section 179 deduction for 2026 allows businesses to deduct up to $2.56 million in qualifying equipment purchases, with the phase-out threshold starting at $4.09 million. Bonus depreciation has also been restored to 100% for qualifying property placed in service in 2026. Heavy machinery like excavators, bulldozers, backhoes and skid steers all qualify. So do work trucks, trailers, generators and specialized tools. Office equipment and certain software used to run your business also fall under this provision.

Bonus depreciation provides additional savings for purchases exceeding Section 179 limits. The equipment must be placed in service before December 31 of the tax year to qualify, meaning it needs to be delivered, installed and ready for use by that date. Planning your equipment purchases with this deadline in mind can result in substantial tax savings.

Vehicle And Travel Expense Deductions

Construction is inherently mobile. Crews travel between job sites, pick up materials from suppliers and meet with clients. All of this driving creates deductible expenses.

The IRS offers two methods for calculating vehicle deductions. The standard mileage rate for 2026 is 72.5 cents per mile for business use. If you drive 20,000 business miles annually, that equals a $14,500 deduction. The actual expense method lets you deduct fuel, maintenance, repairs, insurance, registration and loan interest based on the percentage of business use.

Trucks and vans exceeding 6,000 pounds gross vehicle weight rating receive favorable treatment under Section 179. A $75,000 heavy-duty pickup used entirely for business could be fully deducted in the year of purchase.

Travel for business purposes beyond local driving also qualifies. When you attend industry trade shows, visit out-of-town job sites or meet with suppliers in other cities, transportation, lodging and meal expenses are deductible. Parking fees and tolls incurred for business purposes count as well. Detailed records are essential. Without proper documentation, these deductions will not hold up under scrutiny.

Commonly Overlooked Deductions

Beyond equipment and vehicles, construction companies accumulate smaller expenses that add up over the course of a year. Many contractors forget to track licensing and permit fees. Every contractor license renewal, building permit and specialty certification fee is a deductible business expense.

Safety equipment and protective gear qualify too. Hard hats, steel-toed boots, safety glasses, high-visibility vests and fall protection equipment are all deductible when purchased for your crews.

Subcontractor payments reduce your taxable income when properly documented. Collect W-9 forms and issue 1099s as required to claim these deductions. Materials and supplies used in construction are fully deductible, from lumber and concrete to fasteners and adhesives.

If you handle administrative tasks from a dedicated space in your home, the home office deduction allows you to deduct a portion of your mortgage or rent, utilities, internet and homeowners insurance. Professional fees for accountants, attorneys and consultants are deductible. Insurance premiums for general liability, commercial auto and workers’ compensation coverage reduce your taxable income. Training, seminars, certification courses and industry publications that keep your team current are legitimate business deductions.

Tax Credits Worth Knowing

Tax credits differ from deductions because they reduce your tax bill dollar for dollar. Section 179D, the energy-efficient commercial building deduction, offers up to $5.00 per square foot for buildings meeting specific energy efficiency standards when prevailing wage requirements are met. However, this provision is set to expire for projects beginning construction after June 30, 2026, so contractors should act quickly if pursuing these savings.

The Work Opportunity Tax Credit reduces your tax liability when you hire employees from certain targeted groups. Hiring a qualified veteran can result in a credit of up to $9,600.

Take The Next Step Toward Smarter Tax Planning

Construction company tax deductions cover a wide range of categories. The contractors who benefit most plan ahead rather than scrambling at year-end. Implementing systems to track qualifying expenses throughout the year positions your company for meaningful tax savings.

Tax codes change regularly, and construction-specific provisions require specialized knowledge to apply correctly. Working with a CPA who understands the construction industry ensures you capture every deduction and credit available while staying compliant. At James Moore, our construction accounting professionals bring decades of experience helping contractors reduce their tax burden and strengthen their financial position. Contact a James Moore professional to discuss how strategic tax planning can benefit your construction company.

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