What can I write off as a self-employed contractor?

Short version: anything that is ordinary and necessary to do the work. That is the actual IRS test (Section 162 of the tax code), and for a tradesperson it covers a lot: your tools, your materials, your truck, your insurance, the subs you pay, your phone, and more. Every dollar you deduct is a dollar you are not taxed on, and because you are self-employed it comes off both your income tax and your 15.3% self-employment tax. That makes deductions worth more to you than to almost anyone else.‍‌​‌​​​‌‌​​​​‌‌​‌​​​​​‌‌​‌‌‌‌‌​​​‍

Two habits keep you out of trouble: keep the receipt, and do not get greedy on the two things the IRS watches hardest, your vehicle and your clothes. Both are below.

The deductions that add up

• Tools and equipment. Fully deductible, and you do not have to spread it over years. Section 179 lets you write off the whole cost in the year you buy it, up to a cap in the millions that no one-van outfit will ever reach. A $4,000 table saw is a $4,000 deduction this year.
• Materials and supplies. Everything you buy for the work: lumber, wire, pipe, fixings, blades, equipment fuel, dump fees.
• Your work vehicle. Two methods, pick one. Standard mileage is 72.5 cents a business mile for miles driven from January to June 2026, and 76 cents from 1 July, plus parking and tolls. The IRS raised it mid-year, so a full-year claim is two sums, not one. Or actual costs: the business-use share of gas, insurance, repairs, and depreciation. Driving between job sites in a day counts. Your commute from home to the first site does not. If you run a real work truck (over 6,000 lbs, which most full-size pickups and cargo vans are), the actual-cost method with first-year expensing usually beats the mileage rate by a wide margin.
• Subcontractors you pay. Fully deductible as contract labor. Collect a W-9 from anyone before you pay them, and file a 1099-NEC for any sub you pay $2,000 or more in 2026 (that threshold jumped up from $600). The deduction stands whether or not you file the 1099, but skipping the W-9 can leave you on the hook for 24% backup withholding.
• Insurance. General liability and workers' comp are 100% deductible. Your own health insurance premiums are too, up to 100%, taken straight off your income rather than on Schedule C, as long as you were not eligible for a subsidized plan through a spouse's job.
• Phone and internet. The business-use share only. If your phone is 70% work, deduct 70%. Keep a rough log so you can back it up.
• Home office. Only if you use a specific area regularly and exclusively for the business, like the room where you do all your estimating and invoicing. A workshop at a separate yard is not a home office. If you qualify, the easy method is $5 a square foot up to 300 square feet, so $1,500 at most.
• The rest. Licenses and permits, bond premiums, continuing education and safety training, software, bank and card fees, trade dues, and your accountant's bill.

The two that get people audited

• Vehicle. Claiming 100% business use is almost always challenged, because the IRS assumes everyone runs the truck to the store now and then. Keep a mileage log written at the time, not reconstructed in April.
• Clothing. This one catches people out. Clothes are only deductible if they are required for the work and not suitable for everyday wear. So your hard hat, steel-toe boots, respirator, gloves, and hi-vis are in. Your jeans, t-shirts, hoodies, and even plain overalls are out, even if you only ever wear them on site. "I only wear these for work" does not pass the test. The question is whether you could wear them to the store, not whether you do.

Two quick ones while we are here: business meals are 50% deductible (a lunch where you actually talk shop with a client). Entertainment is zero. Taking a customer to a game buys you nothing come tax time.

Keep the paper

The IRS can look back three years, or six if you understated income badly, so keep receipts, invoices, mileage logs, and W-9s for seven. Construction draws more scrutiny than almost any other Schedule C, because so much of it is cash and self-reported. Clean records are the whole defense.

Common questions

Can I deduct expenses if my business lost money this year?

Yes. A Schedule C loss can offset your other income, like a spouse's W-2 wages, on a joint return. A genuine down year is fine. But show losses year after year and the IRS may call it a hobby and disallow them, so a pattern is the thing to watch, not a single bad year.

Do I deduct my whole truck payment?

No. You do not deduct the loan payment itself. You deduct the truck through either the mileage rate or actual costs including depreciation, plus the business-use share of the loan interest. Writing off the monthly payment is a common mistake that does not hold up.

Are my business start-up costs deductible?

Yes, within limits. You can deduct a portion of your start-up costs in your first year and spread the rest over the following years. Things like initial licensing, tools, and setting the business up can qualify. Verify the current first-year cap at irs.gov.

Can I pay my spouse or kid and write it off?

Yes, if the work is real and the pay is reasonable for it. Wages to family for genuine business work are deductible like any other wages. The IRS looks hard at family pay, so keep records of the hours worked and what they did.

Can I deduct tools I owned before I started the business?

Yes. Tools you already owned can be brought into the business at their fair market value when you started using them for work, then deducted or depreciated from there. Keep some proof of what they were worth at that point.

The honest bit

• These are 2026 federal figures and rules. The mileage rate, the 1099 threshold, and the expensing limits move every year or two. Check the current numbers at irs.gov.
• State income and sales-tax rules sit on top and vary. See Working in Your State.
• This is general guidance, not tax advice for your situation. The vehicle and depreciation choices especially can go several ways, and a good CPA usually saves more than they charge.

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