With an increase in revenue of an estimated .2% from prior years, many in the construction industry are beginning to feel the relief of improved cash flow. But improving overall business structure, particularly in maximizing deductions, remains an essential component for many construction firms throughout the industry.
Growth In The Construction Industry
Although construction has been affected like many industries during the pandemic, the construction industry has shown relatively rapid growth. 110,000 jobs have been added in 2021 alone, recovering roughly 80% of the positions filled before the pandemic began in 2020. Although this growth has been considerable, it is not enough to keep up with the nearly 4.2 million homes that need to be built to keep up with demand. So, for future builders or those in the building trades that are looking to break into the construction industry, future growth prospects are favorable to continue to profit from the construction industry.
Finding The Right Deductions for Construction
For those already in the construction trades, there are a variety of deductions available. Frequent deductions for those in construction include deductions for tools and materials including handheld power tools for carpentry, cement mixers and jackhammers for concrete repair or wiring and pipes for new electrical or plumbing projects; ultimately, all project-related expenses that are properly itemized are eligible for deduction from the overall taxable income. Likewise, safety equipment including steel-toed boots, helmets and safety goggles are also deductible. Other deductible expenses include training and related fees such as subscriptions to work-related journals, tuition for training programs or memberships to construction-related organizations; licensing and renewal fees.
Small Business Tax Deductions for Construction Businesses
Since most construction businesses qualify as small businesses, given that they earn less than $1 million a year and have fewer than 100 employees, it’s important to be aware of a few more small business tax deductions. One deduction that is valuable for those in construction is for mileage driven. This is a valuable deduction given the amount of driving relative to acquiring supplies and finding customers, though proper deduction requires maintaining a record only for work-related trips. Work vehicle-related expenses, including for repairs, parking and fuel, can also be deducted if properly itemized and relative to a work vehicle. While self-employed builders are responsible for contributing to Medicare and social security taxes, they are also eligible for a self employed tax deduction. Marketing and advertising expenses, subcontractor labor costs and purchased material depreciation costs are also eligible for deductions.
Fortunately, although the construction industry is just as liable to market volatility, there are a variety of deductions available that can ease business-related expenses. Sound knowledge of construction-related deductions can help to ensure that burgeoning and pre-existing firms continue to establish a more sound footing in the recovering economy. For an important industry that is showing a pleasant rebound given the surge in housing and building demand, finding appropriate construction-related deductions is an important step in helping to keep the construction industry growing.
The article was contributed by Jennifer Dawson.Tax Deductions