Tax Deductions for Contractors: What Owners Commonly Miss
Last updated: October 17, 2026Written by Shane Atkins, founder of TaxSaver Pro
Contractors juggle job sites, suppliers, and a truck that doubles as a mobile office, so receipts scatter and personal-versus-business use blurs. That mix is exactly where legal write-offs slip through the cracks. This guide walks through the deduction categories contractors most often overlook.
Commonly missed deductions
01Vehicle and mileage
- What qualifies
- Work truck fuel, maintenance, and miles driven between job sites.
- What doesn't qualify
- Commuting between your home and a regular workplace, personal errands and trips, the personal-use share of a mixed-use vehicle, traffic tickets and fines, and claiming both the standard mileage rate and actual expenses for the same vehicle in the same year.
- Records to keep
- A mileage log kept as you go, showing date, destination, business purpose, and miles for each trip; odometer readings at the start and end of the year; parking and toll receipts; and receipts for gas, repairs, and insurance if you use the actual expense method.
02Tools and equipment
- What qualifies
- Power tools, ladders, and gear that wear out or get replaced.
- What doesn't qualify
- The personal-use share of tools you also use at home, tools a client reimburses you for, and items already billed into a job and counted as cost of goods.
- Records to keep
- The receipt or invoice showing date, vendor, item, and amount. For larger equipment, also record the date you started using it in the business and its business-use percentage.
- Current rate
- See the current Section 179 limit on IRS.gov.
03Home office
- What qualifies
- The dedicated space where you handle bids, billing, and scheduling.
- What doesn't qualify
- Space also used for personal or family purposes, occasional or incidental work at home, and costs for parts of the home not used for business. W-2 employees working from home generally can't take this deduction on their federal return.
- Records to keep
- Measurements of the office and of the whole home, a photo or floor plan of the space, and, if you use the regular method, rent or mortgage interest statements, utility bills, homeowner's or renter's insurance, and repair receipts.
04Licenses and insurance
- What qualifies
- Contractor bonds, liability coverage, and required permits.
- What doesn't qualify
- Personal insurance (life insurance for your family, personal auto or homeowner's policies), insurance that replaces your own lost income, your personal driver's license, and fines or penalties for violations.
- Records to keep
- Policy declaration pages, premium invoices, license and permit renewal notices, bond documents, and proof of payment for each.
- IRS source
- IRS Publication 535 — Business Expenses
05Job-site supplies
- What qualifies
- Materials, fasteners, and consumables bought for each job.
- What doesn't qualify
- Materials for personal projects, materials a client paid for directly, and materials already counted in cost of goods sold (don't deduct them twice).
- Records to keep
- Receipts or invoices listing the items, and a note of the job or project they were used on.
- IRS source
- IRS Publication 535 — Business Expenses
06Phone and software
- What qualifies
- Calls, estimating apps, and scheduling tools used for work.
- What doesn't qualify
- The personal-use share of your phone and internet, the basic charge for the first landline into your home, and personal subscriptions such as streaming or personal apps.
- Records to keep
- Monthly phone and internet bills, a written basis for your business-use percentage (such as a review of a typical month), and invoices or account statements for each software subscription.
- IRS source
- IRS Publication 535 — Business Expenses
Records checklist
A summary of every record mentioned on this page. Keep these with your tax return.
- Vehicle and mileageA mileage log kept as you go, showing date, destination, business purpose, and miles for each trip; odometer readings at the start and end of the year; parking and toll receipts; and receipts for gas, repairs, and insurance if you use the actual expense method.
- Tools and equipmentThe receipt or invoice showing date, vendor, item, and amount. For larger equipment, also record the date you started using it in the business and its business-use percentage.
- Home officeMeasurements of the office and of the whole home, a photo or floor plan of the space, and, if you use the regular method, rent or mortgage interest statements, utility bills, homeowner's or renter's insurance, and repair receipts.
- Licenses and insurancePolicy declaration pages, premium invoices, license and permit renewal notices, bond documents, and proof of payment for each.
- Job-site suppliesReceipts or invoices listing the items, and a note of the job or project they were used on.
- Phone and softwareMonthly phone and internet bills, a written basis for your business-use percentage (such as a review of a typical month), and invoices or account statements for each software subscription.
Related guides
Go deeper on the rules behind these deductions
Educational guidance only, not tax advice. Talk to a tax professional about your situation.