Two-truck sub or 40-employee GC. We pick the right §460 method, ride §179 and bonus depreciation on every truck and machine, and keep §199A QBI alive while the sub 1099-NECs file on time so the IRS does not disallow the deduction.
Most trade contractors leave $20K to $80K per year on the table by picking the wrong accounting method, missing §179 on vehicles, or forgetting that QBI is fully available because they are not an SSTB.
Small contractors (under $30M average gross receipts in 2024) can use completed contract or cash method on home construction. Long-term commercial jobs default to percentage-of-completion. We pick the method that defers income into the year you actually have it, then file Form 3115 if a change is needed.
IRC §460(e); §448(c); Rev. Proc. 2023-34; Form 3115Construction is explicitly NOT a Specified Service Trade or Business, so the 20% QBI deduction is fully on the table even above the income thresholds. We model W-2 wages and UBIA so the §199A(b)(2) limit does not strand the deduction. This alone is often a five-figure save for owner-operators.
IRC §199A(b)(2), (d)(2); Treas. Reg. §1.199A-5(b)(2)Pickup over 6,000 lbs GVWR qualifies for §179 up to $30,500 (2024 SUV cap) or full §179 if it has a 6-foot bed. Service vans, dump trucks, lifts, excavators, skid-steers ride §179 + bonus. We document business-use percentage with a mileage log so the auditor cannot haircut the deduction.
IRC §179(b)(5); §168(k); Treas. Reg. §1.274-5TWorkers comp premiums, surety bonds, contractor license renewals, OSHA training, drug screening, CDL endorsements. All deductible ordinary and necessary business expenses. We split owner-only WC (sometimes not allowed) from staff WC so the right portion lands on Schedule C or 1120-S.
IRC §162(a); Treas. Reg. §1.162-1; Rev. Rul. 56-485A roofing crew working two weeks across state lines can create income tax, sales/use tax, and contractor-license obligations in that state. We track job days by state, file part-year or composite returns, and pull the right §164 SALT deduction at the federal level.
IRC §164; state contractor nexus statutes; PL 86-272 (limited)Any sub or 1099 worker paid $600+ in the year needs a 1099-NEC filed by Jan 31. Miss it and the IRS can disallow the deduction under §162 and slap §6721/§6722 penalties. We collect W-9s up front, file the 1099s, and keep the audit trail clean.
IRC §6041; §6721; §6722; Treas. Reg. §1.6041-1Central Florida HVAC contractor, 4 service trucks, 6 employees, $1.1M revenue in tax year 2024. Prior preparer kept the business on a Schedule C and skipped §179 on two new service vans.
$36,000 savedLate S-Corp election under Rev. Proc. 2013-30 with $85K reasonable wage benchmarked against trade comp data, $58K of §179 on two new service vans over 6,000 lbs GVWR, and the full §199A QBI deduction preserved. Combined federal tax reduction vs. prior return.