What can plumbers deduct on their taxes?
If you spend money to run your plumbing business, it’s probably deductible. The challenge most plumbers face isn’t a lack of deductions but a lack of documentation. Here’s what you should be tracking.
Vehicle expenses are typically one of your largest deductions. Your service van, the gas, oil changes, tires, repairs, insurance, and registration are all deductible. You can either deduct actual expenses or use the standard mileage rate. For most plumbers running a loaded work van, actual expenses tend to produce a bigger deduction. Either way, you need a mileage log. The IRS will deny your vehicle deduction entirely if you can’t back it up.
Tools and equipment are fully deductible. Pipe wrenches, threading machines, drain cameras, press tools, hand tools, cordless drills, soldering equipment. Smaller tools can be expensed in the year you buy them. Bigger purchases like a sewer camera or a jetter machine can be deducted immediately using Section 179 or depreciated over time. Keep receipts for everything, even the $30 wrench from the supply house.
Parts and materials you buy for jobs are deductible as cost of goods sold. Copper pipe, PEX, fittings, valves, water heaters, garbage disposals. If you keep inventory on your van, those parts are deductible when they’re used on a job. This is an area where a lot of plumbers lose track because they’re buying parts multiple times a day at different suppliers and not every receipt makes it home.
Insurance premiums are deductible. General liability, commercial auto, workers’ comp, bond premiums, and professional liability. If you’re a sole proprietor, your health insurance premiums are deductible too, though that gets handled on the personal side of your return.
Licensing and continuing education costs are deductible. Your California contractor’s license renewal, journeyman or master plumber certification fees, trade school courses, code update classes, and any required continuing education. These are ordinary and necessary costs of maintaining your ability to work.
Work clothing and safety gear count if they’re not suitable for everyday wear. Steel-toe boots, hard hats, safety glasses, gloves, and uniforms with your company name on them are all deductible. Regular clothes you happen to wear on the job are not.
Marketing and advertising expenses are deductible. Your website, Google ads, truck wraps, business cards, Yelp ads, yard signs, and sponsoring the local Little League team in Long Beach. Anything you spend to get the phone ringing counts.
Your phone bill is partially deductible based on business use. Same with your internet if you use it for scheduling, invoicing, or running your business. Software subscriptions like ServiceTitan, Housecall Pro, or QuickBooks are fully deductible.
Subcontractor payments are deductible, but you need to issue 1099s to anyone you pay $600 or more during the year. Missing this creates problems with the IRS and can cost you the deduction.
Office expenses, even a home office, can be deductible if you use part of your home exclusively for business. This includes a proportional share of rent or mortgage interest, utilities, and internet. Many skilled trades business owners overlook this one.
The deductions exist whether you track them or not. The difference is that untracked deductions don’t end up on your tax return. A shoebox of receipts dumped on someone’s desk in March means things get missed. Proper bookkeeping and tax services for contractors throughout the year means every legitimate deduction gets captured, categorized, and ready when it’s time to file. That’s where the real tax savings come from.
Long Beach's CPA for Contractors and Trades
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More Questions
What's the easiest way to run payroll for a few employees?
Use a cloud payroll service like QuickBooks Payroll or Gusto. They calculate taxes, file returns, and handle direct deposits. The key is getting it set up correctly from the start, especially in California.
Read answerWhat's the difference between a personal and business tax return?
A personal tax return reports all your individual income. A business tax return reports your company's revenue, expenses, and profit. Most trades business owners file both, and the two returns are directly connected.
Read answerShould I track mileage or use actual vehicle expenses?
It depends on the vehicle and how you use it. For contractors and trades businesses driving trucks, actual expenses often save more. But both methods require solid mileage records.
Read answerDo I need a local bookkeeper or can I use someone remote?
Either can work, but industry expertise matters more than geography. A remote bookkeeper who understands trades and construction will serve you better than a local generalist who doesn't know job costing or contractor deductions.
Read answerWhat is a balance sheet and do I need one?
A balance sheet shows what your business owns, what it owes, and what's left over as equity. If you're a trades or construction business, you absolutely need one for taxes, bonding, loans, and understanding your financial position.
Read answerHow do I set up QuickBooks for my construction business?
Start with a construction-specific chart of accounts, enable Projects for job costing, and build out your items list to match how you estimate and invoice. Generic setup won't give you the reporting contractors actually need.
Read answer