General contractor taxes and deductions

Subcontractors decide this return. Pay anyone $600 or more in a year and you have to issue them a 1099-NEC, and treating someone as a subcontractor when the law says employee is the most expensive mistake available in this trade.

Materials you buy and bill on are income and a deduction both, book only one and your return is wrong in a way that is obvious from the outside. Retainage held back by a customer is not yours until released, so on the cash basis it is not income until you actually receive it.

The deductions with a rule attached

These are the lines where the answer is not simply "keep the receipt"each has a cap, a percentage or a test that decides how much of the spend you actually get:

Tools: Section 179 property. Deduct the whole cost in the year it goes into service rather than spreading it over the asset's life, up to $2,560,000 a year, and 100% bonus depreciation is now permanent. The catch is the business-use test: anything used more than 50% for the business qualifies, and you deduct at that percentage rather than the full price. So anything you also use at home comes off at the share that is genuinely work, not the whole invoice.
Vehicle: Business driving counts; commuting does not. The rate changed mid-year: 72.5 cents a mile to June 30, 2026 and 76 cents from July 1, so a full year has to be split at that date rather than multiplied by one figure. A hundred business miles a week across the whole year is about $3,861 off your profit. You cannot use the standard rate at all on a vehicle you have already claimed MACRS depreciation, Section 179 or bonus depreciation on.

The rest of the general contractor deduction list

Ordinary and necessary business expenses, deductible in full in the year you pay them, provided they are genuinely for the business:

Subcontractors you pay
Liability insurance
Permits and licenses
Materials and supplies
Equipment you hire rather than buy
Workers’ compensation insurance
Travel between job sites
Safety equipment

Worth knowing

The line that decides a contractor's return is subcontractors. Pay anyone $600 or more in a year and you must issue a 1099-NEC, and misclassifying a worker who should have been an employee is the most expensive mistake in the trade. Materials you buy and bill on are both income and a deduction, never one without the other.

That is what is specific to this trade. The larger deductions are the universal ones, see the full checklist.

What each deduction is worth to you

On $100,000 of profit with no state income tax, $1,000 deducted saves $305, 30.5%, because it comes off self-employment tax and income tax together:

Net profit	Saved per $1,000 deducted	Effective
$40,000	$231	23.1%
$100,000	$305	30.5%
$200,000	$297	29.7%

The last row is worth less than the one above it, and that is not a mistake: past the Social Security wage base the self-employment part of the saving drops from 15.3% to 2.9%, and the higher income-tax bracket does not quite make up the difference. A deduction is worth most in the middle.

Add a state income tax and every row rises. The 1099 calculator applies that layer.

What these words mean

1099-NEC: The form a client sends you, and the tax office, when they have paid you $600 or more in a year for work. You owe the tax on that income whether or not the form ever arrives.
Section 179: A rule letting you deduct the whole cost of equipment in the year you start using it, instead of spreading it over the years you own it.
Depreciation: Spreading the cost of something long-lasting, a vehicle, a camera, a tractor, across the years you use it, rather than deducting it all at once.
MACRS: The standard federal timetable for depreciation, the schedule that decides how much of an asset’s cost you deduct in each year of its life.

General information about how these deductions work, not tax advice. Whether a particular expense is deductible for you depends on facts this page does not have, check with a tax professional before claiming anything listed here.