Contractors have access to a long list of deductions, but the ones that save the most money are often the ones that get missed. Here are the major categories worth knowing about.

Vehicle expenses are usually one of the largest deductions. You can either deduct actual costs like gas, maintenance, insurance, and depreciation, or use the standard mileage rate. Either way, you need a log of business miles. Driving between job sites counts. Driving from home to a permanent office does not. Most contractors are better off tracking actual expenses, but it depends on your situation.

Tools and equipment purchased for work are deductible. Small tools you buy regularly get expensed in the year you buy them. Larger equipment like trucks, trailers, skid steers, or generators may qualify for Section 179 expensing, which lets you deduct the full purchase price in the year you buy it instead of depreciating it over several years. This is one of the biggest tax savings opportunities for construction and contracting businesses, and it requires planning to use it well.

Materials and supplies used on jobs are deductible. Lumber, pipe, fasteners, concrete, paint, whatever you’re buying for projects. If you’re purchasing materials for a specific job, those costs reduce your taxable income.

Subcontractor payments are deductible as long as you issue 1099s to anyone you paid $600 or more during the year. Skipping the 1099 filing doesn’t just create a compliance problem. It can also cause the IRS to question whether those payments were legitimate business expenses.

Insurance premiums are deductible. General liability, workers comp, commercial auto, inland marine coverage on your tools, and professional liability all count. If you’re self-employed, you can also deduct health insurance premiums for yourself and your family, which is a deduction many contractors overlook.

Licensing and permit fees are deductible. Your contractor’s license renewal, building permits, trade certifications, bonding costs, and continuing education to maintain your license all qualify.

Home office deductions apply if you have a dedicated space in your home used exclusively for business. This includes a proportional share of rent or mortgage interest, utilities, and insurance. Contractors who run operations from home but never claim this are leaving money on the table.

Phone and internet bills are partially deductible based on business use percentage. If you use your phone 80% for work, 80% of the bill is deductible. Same principle applies to your internet if you do any administrative work from home.

Retirement contributions to a SEP IRA or Solo 401(k) reduce your taxable income and build long-term wealth at the same time. A SEP IRA lets you contribute up to 25% of net self-employment income. This is one of the most effective ways to lower your tax bill, especially in a profitable year.

Other commonly missed deductions include advertising costs, software subscriptions, bank fees, accounting and legal fees, meals with clients or subs (at 50%), and interest on business loans or equipment financing.

The real issue for most contractors is not a lack of eligible deductions. It’s a lack of documentation. If you pay for materials in cash and don’t keep the receipt, that deduction is gone. If you drive 25,000 business miles but don’t track them, you can’t claim them. A Long Beach bookkeeper who understands the trades can set up systems to capture everything throughout the year so you’re not scrambling in April trying to reconstruct what you spent. The contractors who save the most on taxes are the ones who track expenses consistently, not the ones who try to remember everything at the end of the year.