Which Expenses Are Tax Deductible?

As a contractor, you can deduct ordinary and necessary business expenses from your taxable income. Here is a practical guide to what qualifies.

Almost Always Deductible

Job materials — Everything you buy to complete jobs: lumber, wire, pipe, paint, fasteners, fixtures.

Tools and equipment — Hand tools, power tools, ladders, testing equipment. Small tools (under ~$2,500) are typically deducted immediately. Larger equipment may need to be depreciated over several years.

Vehicle expenses — Either actual expenses (gas, repairs, insurance, depreciation) or the standard mileage rate ($0.70/mile for 2025). Keep a mileage log.

Business insurance — Liability insurance, workers comp, bond premiums.

Subcontractor labor — Payments to other tradespeople you hired for a job.

Phone and internet — The business-use percentage of your phone bill and internet service.

Marketing — Business cards, website, uniforms, advertising.

Professional services — Accountant fees, legal fees related to your business.

Licenses and permits — Your contractor license fee, permit costs for jobs.

Partially Deductible

Home office — If you use a dedicated space at home for business administration, a portion of your rent/mortgage may be deductible. Strict IRS rules apply.

Vehicle purchase — If you bought a truck for work, you may deduct some or all of the purchase price via Section 179.

Not Deductible

• Personal meals (unless with a client for business purposes)
• Personal clothing (unless a uniform with your business name)
• Commuting from home to your regular work location
• Personal entertainment

Important: This is a general guide. Consult a CPA for your specific situation. Tax law changes frequently.