On top of dealing with the hard labor that comes with being a self-employed construction worker, you'll need to deal with filing your own taxes. Yes, paying Uncle Sam is not the most pleasant experience...
But with tax deductions, you can make it a little more bearable.
One of the first steps in estimating your taxable income for the year is calculating your adjusted gross income (AGI). Adjusted gross income is defined as gross income minus adjustments to income aka after deductions.
According to the IRS, you can deduct business/ work-related expenses if they are both ordinary and necessary. In your trade or business, an ordinary expense is one that is typical and recognized. A necessary expense is one that is beneficial to your profession or industry. When it comes to your income tax, you would want to maximize your deductions and pay Uncle Sam as little as possible.
In this article, we'll go over the top ((11)) tax deductions for construction workers.
Note: If you want an automatic way to track construction worker tax deductions, try Bonsai Tax. Our tax app automatically scans your credit cards/bank statements to discover potential deductions. On average, our software saves users $5,600. Claim your 7-day free trial today.
Tax Deductions For Construction Workers
Keep detailed records of your receipts for each of these work-related expenses. Remember, the IRS states you must store receipts for a minimum of three years if you are audited. Expenses reimbursed by your employer cannot be claimed as tax deductions.
Without further ado, let's jump into our handy checklist of tax deductions for 1099 construction workers.
1. Safety Equipment /Uniforms
If you purchase any safety equipment related to construction work, they may qualify as a deduction. Here are some examples of equipment that you may be able to claim.
- Steel-toed boots
- First aid kits
- Safety glasses
- Hard hats
- Gloves
- Road cone
- Construction vest
- Gloves/hand protection
The clothing must be specific to your job and cannot be used for everyday wear. For example, although you wear jeans on your job site, since it is suitable for everyday wear, you cannot deduct the fees of this clothing. If your job requires you to have specific protective clothing or a uniform, those costs can be deducted.
Since most people would wear logo clothing only on the job, the shirts, hats or other items you provide for employees are deductible.
2. Business Travel Expenses
If your job requires you to go outside of town, any travel expenditures you incur can be claimed as a tax deduction. If you have to travel to see aclient or travel between jobs, that would qualify as a write-off.
In other words, any business travel expenses are tax-deductible.
Travel expenses you can take advantage of are:
- Public transportation costs i.e. buses
- Uber/Lyft expenses
- Lodging i.e. hotels and AirBNBs
- Business meals
- Cost of business calls
It should be noted that you can deduct the costs affiliated with showing up to the event. For example, if you had to attend a conference or a trade show in Las Vegas, and you decide to stay after the event, you cannot deduct any of the expenses beyond the days of the event. Also, if you bring your family along for the trip, you cannot deduct any of their expenses.
3. Vehicle Expenses
There are two IRS-approved methods to deduct the business use of vehicle expenses: miles and the actual expenses.
Mileage
As an independent contractor or employee, you need to get reimbursement for the miles driven for work purposes.
You can deduct mileage for other work-related travel such as: from one work location to another. to meet with clients or to purchase building gear and materials. All you need to do is keep track of your miles driven for work (go here to download a mileage log template). After you calculate your total miles, multiply it by the IRS's standard mileage rate. In 2021, the mileage rate is 56 cents per mile.
Actual Vehicle Expenses
If you claim the actual expenses method for vehicle costs from your taxes, then here are the deductions you may qualify for.
- Gasoline
- Lease payments
- Car insurance
- Maintenance/repair costs
- Tire purchases
- Car washes
- Depreciation
- Car registration.
- Parking fees
You can only deduct the business-related portion of these expenses. Records to keep to claim vehicle expenses may include preparation receipts or mileage logs.
Note: if you need help tracking all of the car expense receipts and all your other work-related expenses, try Bonsai Tax. Our app automatically discovers all the deductions you qualify for and easily saves you money during tax time. In fact, users typically save at least $5,600. Claim your 7-day free trial today.
4. Education Expenses
If you invest in courses or education related to construction work, then the expenses are tax-deductible. They must be directly related to your line of work. For example, a construction worker who enrolls in a first aid certification course may deduct the cost of the seminar and all of the related expenses i.e. textbooks.
Again, you may to claim any self-education directly related to your current employment and income if it improves your skills or increases your income for your current role.
You cannot claim tax deductions for education expenses where you are trying to be promoted to a new employment position or changing jobs.
5. Home Office Expenses
Construction workers with a home office space may qualify for a home office deduction. Just like vehicle expenses, you can get a home office reimbursement for related fees with two methods: the regular and the simplified method.
Regular Method
For the regular method of deducting home office fees, you'd be able to write off things like:
- utilities like water bills or electricity
- mortgage interest
- insurance
- office repairs
- depreciation.
Take note of all these fees and you can deduct the business-related use percentage for your home office.
Note: An easy way to record tax deductions for construction workers, is with our software. Construction workers can sit back and relax as our software records all the potential deductions and saves you money from your tax bill. Users typically save $5,600 from their tax bill. Try a 7-day free trial today.
Simplified Method
As the name states, this method is fairly easy to calculate. You simply deduct $5 for each square foot of your home office when using this method. However, because the deduction is limited to $1,500 per year, it can only be used for workplaces that are less than 300 square feet.
6. Tools For The Trade/ Equipment
In order to do construction work and deliver on your service, you may have to purchase construction equipment or other tools. Tools or equipment used solely for business purposes is tax-deductible.
Here is a list of tools you can deduct at the end of the tax year:
- Hammer
- Electric drills
- Wheelbarrows
- Saws
- Screwdrivers
- Work phone
- Shovels
- Nail pullers
- Wrenches
- Ladders
You can deduct the depreciation of heavy machinery or tools you purchase. Tools that last for more than a year are considered business assets.
7. Advertising
Any money spent to advertise your services is tax-deductible. What falls into this category are online advertising expenses like Google Adwords, Facebook ads, and even physical billboards.
8. Phone Bill
When it comes to deducting your phone bill, you can only deduct the business use portion percentage from your tax bill. For example, let's say you use your cell phone 85% of the time for personal reasons and 15% of the time for business. You'd only be able to deduct 15% of the expense from your tax bill.
9. Legal Fees
As a construction worker, Iif you had to pay any legal fees related to your self-employed business, you can wrtie-off the cost as an expense from your tax return. The costs associated with hiring an accountant for tax advice or filing your tax return can also be written off.
10. Meals For Work
If you discuss work with a coworker, employer, employee or even friend over a meal, the cost of the food paid can be deducted from your taxes. Typically the meal deduction is 50%. However, Biden recently passed a 100% meal tax deduction law in 2021.
11. Labor Costs
If you subcontract other employees to complete your services, you can deduct the costs. As a self-employed construction worker, you are allowed to hire other contractors to complete your job.
We always recommend you seek the help of a professional for advice and assistance for filing your tax returns. Our software can help you manage your taxes and save money, but it is your responsibility to complete your tax return properly.
