Tax Deduction Checklist for Trade Contractors

Tax season doesn’t have to be stressful. With the right tax deduction checklist for contractors, you can keep more money in your business and less in the IRS’s hands.

As a trade contractor, you face unique expenses (vehicles, equipment, crew wages, and materials) that deserve special attention.

No matter how many crews you manage, this contractor tax deduction checklist helps you:

Track every possible deduction year-round
Reduce overpayment risks
Simplify tax prep with accurate records

Why Every Contractor Needs a Year-Round Tax Deduction Checklist

According to the IRS, businesses miss out on billions of dollars in legitimate deductions each year simply due to poor recordkeeping. A solid tax deduction checklist helps you document expenses as they happen, not months later when tax time rolls around.

For trade contractors like yourself, deductions pile up fast:

Driving from job to job
Purchasing tools and materials
Managing licenses and crew insurance

Each activity creates tax-saving opportunities (but only if you track them).

Fun Fact: The average small business owner overpays their taxes by $11,000 per year, simply by missing common deductions.

Vehicle and Travel Deductions for Contractors

Your work truck or van isn’t just transportation—it’s one of your biggest business write-offs. For 2025, the IRS allows you to deduct 70 cents per mile for business use of your vehicle.

You have two choices for vehicle deductions:

Standard mileage rate: Track miles × IRS rate
Actual expenses: Track fuel, repairs, insurance, and depreciation

Most contractors find the standard mileage method easier. But if you drive a heavy-duty truck with high maintenance costs, actual expenses might save you more. Your tax deduction checklist should include:

Mileage logs for every job site visit
Gas and maintenance receipts
Vehicle registration and insurance
Lease or loan payments (business portion)
Parking fees and tolls

Home Office and Shop Deductions Contractors Often Miss

Even if you have a shop or office space, a dedicated home workspace may qualify for a deduction. The IRS home office rules say the space must be used regularly and exclusively for business.

You can deduct $5 per square foot up to 300 square feet using the simplified method. Or you can deduct the actual percentage of your home expenses. This includes:

Mortgage interest or rent
Property taxes
Utilities (electric, gas, water)
Internet and phone service
Home maintenance andinsurance

Add these items to your tax deduction checklist, even if they seem small. A $150 monthly internet bill adds up to $1,800 per year. If 50% is business use, that’s $900 in deductions.

Fun Fact: According to Global Workplace Analytics, businesses save an average of $11,000 per year for every person who works remotely half the time, thanks to reduced overhead costs and tax benefits.

Tools, Equipment and Software Deductions That Scale

Trade contractors need tools to work. The tax code understands this. Section 179 of the tax code lets you deduct the full cost of equipment and tools in the year you buy them, up to $1.22 million according to IRS Publication 946.

Here’s what belongs on your tax deduction checklist for equipment:

Deductible Equipment	Examples	Average Annual Savings
Power Tools	Drills, saws, grinders	$2,000 – $5,000
Large Equipment	Excavators, lifts, generators	$10,000 – $50,000
Safety Gear	Harnesses, boots, helmets	$500 – $1,500
Hand Tools	Wrenches, hammers, levels	$300 – $800
Technology	Tablets, computers, field service software	$1,500 – $3,000

Don’t forget about smaller items. That $20 tape measure counts. So do work gloves, safety glasses and extension cords. These small purchases add up quickly across a year.

Materials you use on customer jobs are also deductible. Keep receipts for lumber, pipes, wire, concrete, paint and everything else you install. Your tax deduction checklist should have a category just for materials.

Employee Wages and Benefits

For multi-truck businesses, payroll is often your largest expense—and one of your biggest deductions. According to the Bureau of Labor Statistics, total compensation costs average $43.78 per hour for private industry workers.

Your tax deduction checklist for employee expenses should include:

Wages, salaries and overtime
Bonuses and commissions
Health insurance premiums
Employer-paid retirement contributions
Workers’ comp and payroll taxes
Training, uniforms and safety equipment

The Small Business Administration reports that businesses can often deduct 100% of employee health insurance premiums. This is a huge benefit that shouldn’t be missed on your tax deduction checklist.

Insurance and Professional Services

Running a contracting business means protecting yourself with insurance. The good news? Insurance premiums are fully deductible business expenses. Your tax deduction checklist needs these items:

General and professional liability insurance
Property, vehicle, and umbrella policies
Business interruption insurance

Professional services also count as deductions. This includes:

Accounting and bookkeeping
Legal services
Consulting and tax preparation
Software subscriptions for financial tracking

Licenses, Permits, and Continuing Education

Trade contractors need special licenses to work. These aren’t cheap, but they’re 100% deductible. Your tax deduction checklist should track:

Business licenses and renewals
Trade-specific licenses (electrical, plumbing, HVAC)
Building permits
Association memberships
Continuing education and certification fees
Trade show registrations

Contractors spend significant funds annually on licenses and permits. Make sure these show up on your tax deduction checklist.

Marketing and Advertising Expenses

You need customers to stay in business. Everything you spend on marketing to attract new customers is deductible. This includes:

Website hosting and domain costs
Social media and Google Ads
Printed materials and vehicle wraps
Yard signs, sponsorships and local events
CRM or marketing automation software

The Small Business Administration recommends spending 7-8% of revenue on marketing. For a $500,000 business, that’s $35,000-$40,000 in deductible marketing expenses. Don’t leave these off your tax deduction checklist.

Commonly Missed Deductions

Even experienced contractors miss deductions. Here are items that often fall through the cracks but belong on every tax deduction checklist:

Bank and credit card processing fees
Office supplies and postage
Shop cleaning supplies
Meals with clients (50% deductible)
Travel expenses for out-of-town jobs
Cell phone (business portion)
Interest on business loans
Bad debts from unpaid invoices
Business-related charitable donations

Fun Fact: The IRS allows you to deduct 50% of business meal costs even if you eat alone while traveling for work.

Using Technology to Track Deductions

A paper tax deduction checklist works, but software works better. Field service software like FieldEdge can help you track expenses automatically. Every invoice, every purchase, every mile driven gets recorded in real time.

The QuickBooks instant sync shares data instantly in real-time.

Digital tracking reduces errors. You won’t forget expenses or lose receipts. When tax season arrives, your tax deduction checklist is already complete. Many contractors save countless hours at tax time by using software throughout the year.

Book a FREE demo of FieldEdge today to experience how the best service software will BOOST your business growth!

Check Off Tax Deductions for Contractors This Season

A complete tax deduction checklist is your secret weapon for keeping more of what you earn. Trade contractors have more deduction opportunities than most businesses, but only if you track them properly. From your work truck to your tools, from employee wages to marketing costs, every business expense deserves attention.

The contractors who save the most are the ones who stay organized all year long. They use a tax deduction checklist to capture expenses when they happen, not months later when memories fade. They understand that saving on taxes isn’t about tricks or loopholes. It’s about claiming every legitimate deduction you’ve earned through hard work.

Key Takeaways:

Start using your tax deduction checklist today, not just at tax time
Vehicle expenses are often your biggest deduction opportunity
Don’t overlook small purchases like tools and supplies—they add up fast
Employee costs, insurance and licenses are fully deductible
Digital tracking saves time and catches more deductions
Work with a tax professional who understands contractor businesses
Keep receipts and records for everything on your tax deduction checklist
Review and update your tax deduction checklist monthly for best results

Remember, the goal isn’t to pay zero taxes. The goal is to pay exactly what you owe and not a penny more. A good tax deduction checklist helps you hit that target every single year.