Tax Deductions and Construction: What Can Be Written Off?
Construction companies often have to deal with large expenses, either for materials, tools, the use of vehicles or any potential business costs they may need to support without being able to charge their clients for them.
The good news is, in many cases, these can be written off as a tax deductions, so that you’ll pay a lot fewer taxes at the end of the fiscal year than you’d normally expect.
Partial and Complete Business Related Expenses
The IRS will usually allow you to get tax deductions on ordinary and necessary expenses for the construction industry. Buying power tools, trucks or other equipment your employees will need to do their job is a good example of an ordinary expense that’s common in the industry.
Necessary expenses, on the other hand, have to do with additional costs that may not help you build a better home or a sturdier wall, but will provide your workers with indispensable advantages for running the operation safely and efficiently (for instance, the purchase of safety equipment).
Partial tax deductions can also apply to the use of personally supported services for business purposes. For instance, if you use your cell phone or a car to facilitate running your business, with careful recordkeeping, you can provide the IRS with the information on the amounts you’ve paid when using that particular item or service, and you will get a tax deduction on that amount.
Accounting for Depreciation
An important part of selecting deductible expenses has to do with depreciation. The concept of depreciation describes the rate at which the value of a specific item (such as a truck or an old construction tool) diminishes over time.
Aside from regular expenses like the purchase of power tools, the IRS will also allow for tax deductions calculated on the depreciation of business assets. Whether you own an old jackhammer or a vehicle you used 30 years ago when you started your business, you can get specific deductions on your aging item