{"id":6950,"date":"2019-05-28T07:50:52","date_gmt":"2019-05-28T12:50:52","guid":{"rendered":"http:\/\/taxprocenter.proconnect.intuit.com\/?p=6950"},"modified":"2019-08-09T16:01:11","modified_gmt":"2019-08-09T21:01:11","slug":"self-employed-tax-tips-for-construction-contractors","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/self-employed-tax-tips-for-construction-contractors\/","title":{"rendered":"Self-Employed Tax Tips for Construction Contractors"},"content":{"rendered":"

Because lots of construction workers are classified as independent contractors, they are seen as self-employed professionals and don\u2019t have taxes withheld from their paychecks like traditional employees. This means they can claim business-related expenses as tax deductions, have more of a tax preparation burden and have the potential need to see a tax professional.<\/p>\n

These construction contractors are naturally quite busy on their projects and don\u2019t have the time or expertise to devote to tax preparation and planning. As a trusted advisor, a tax professional can advise them on some easy-to-digest tax topics, and help them save vital tax dollars and improve their cash flow. The following deductions are claimed on Schedule C and can help these contractors lower their tax burden and keep more money. They are written for the contractor, so pass the tips on to your clients by email, post them on your website or distribute through social media.<\/p>\n

New Deduction for Self-Employed Workers and Small Business Owners<\/b><\/p>\n

Under the Tax Cuts and Jobs Act<\/a>, there is a new 20 percent deduction on business income for small business owners who report their operations on Form 1040, such as sole proprietors who use Schedule C. Income from partnerships, S corporations and limited liability companies is also included. This is a windfall for small business owners because $20,000 of $100,000 of business income would not be taxed! There are some calculations and limitations surrounding this deduction, including a phase-out of the deduction for high-income earners \u2013 over $160,700 for single filers, $321,400 for joint filers, and $160,725 for married, filing jointly.<\/p>\n

Transportation Expenses<\/strong><\/p>\n

When you\u2019re deducting transportation costs, you can\u2019t deduct the commute between your home and the jobsite. You can, however, deduct trips between multiple job sites, as well as those made for business-related trips throughout the day, such as traveling to get supplies or attending meetings offsite.<\/p>\n

You also have to choose between two methods of tax deduction: the actual expenses method or the standard mileage method. The standard mileage rate for 2019 is 58 cents per mile. This figure is meant to reflect each of the following expenses: gasoline, lease payments, insurance, maintenance and repairs, vehicle registration, and depreciation. On the other hand, the actual cost method entails deducting each and every business-related car expense by itself. This includes gasoline, insurance, maintenance, depreciation and lease payments. Claiming actual costs requires solid recordkeeping and keeping receipts. You can do this manually with pen and paper, or automatically track and categorize expenses using, for example,\u00a0QuickBooks\u00ae Self-Employed<\/a>.\u00a0Some expenses, such as gas and maintenance, are relatively easy to track as long as you hold on to your receipts. Other actual costs, such as depreciation, are more complicated.<\/p>\n

Parking and Tolls<\/strong><\/p>\n

If your business meetings or supply runs require you to pay for parking or a toll, those expenses can be claimed as tax deductions. For example, if your local hardware store doesn\u2019t validate parking while you\u2019re picking up supplies, you can deduct that parking expense. You can also deduct tolls on roads and bridges. Be aware, however, that if you\u2019re taking a break for lunch, you cannot expense the parking because it is not business related.<\/p>\n

Public Transportation\u00a0<\/strong><\/p>\n

If you use municipal bus or rail to get around, then those expenses are also deductible. But, just as with car-based deductions, you cannot claim either leg of your commute to, or from, home.<\/p>\n

Advertising<\/strong><\/p>\n

You can deduct any materials you use to market your business. This includes not only flyers and branded promotional items, but also the cost of hiring someone to design and make them for you. Just remember that \u201cadvertising\u201d doesn\u2019t apply to things such as\u00a0business gifts, holiday party fare or anything that isn\u2019t branded.<\/p>\n

Business Insurance<\/strong><\/p>\n

The cost of insurance premiums related to running your business is entirely deductible. This can include contractor general liability insurance, property insurance and others. This doesn\u2019t, however, include your personal health, auto or disability insurance.<\/p>\n

Contract Labor<\/strong><\/p>\n

If you made payments to any subcontractors who have worked with you on a job, those payments are deductible. Note that those contractors, unless they\u2019re employees, will be seen as \u201cindependent contractors\u201d for tax purposes. Employees have their own deduction, which is listed in the \u201cWages\u201d section below.<\/p>\n

Health Insurance Deduction (Form 1040, Schedule 1, Line 29)<\/strong><\/p>\n

You can deduct the costs of your personal health insurance premiums as a self-employed person, as long as you meet certain criteria:<\/p>\n