Tax for Builders
Self-employment tax, quarterly payments, 1099s and deductions, without the jargon.
If you work for yourself in the trades, the IRS treats you as a business. That means self-employment tax on top of income tax, paying four times a year instead of once, and keeping records that hold up if you are ever asked. Get the system right early and it stops being scary. These guides cover what to set aside, what you can deduct, and how to handle it when the money is tight.
Set aside the right amount
Self-employment tax is 15.3% on top of income tax, so a safe rule is to hold back 25 to 30% of every payment. Work out your number, then pay the IRS four times a year with Form 1040-ES.
Claim every deduction you are owed
Mileage, tools, your truck, the home office, phone and insurance. The deductions are real, but only if you can back them up. Big equipment can often be written off in full the year you buy it under Section 179.
1099s and paying subs
If you pay a subcontractor $2,000 or more in 2026, you generally have to file a 1099-NEC. Get their W-9 before you pay them, not after.
Structure, and when it changes
Most start as a sole proprietor. Once profit climbs, an S-corp can cut your self-employment tax, but it adds cost and paperwork. Know the break-even before you switch.
When you owe and cannot pay
Do not ignore it. File on time even if you cannot pay, because the failure-to-file penalty is ten times the failure-to-pay one. Then set up a payment plan or look at an offer in compromise.