What Expenses are Tax-Deductible for Construction Businesses?

1. Cost of Goods Sold (COGS)

The Cost of Goods Sold is one of the largest expenses construction companies face. Materials, supplies, and direct labor costs required to build homes, commercial buildings, or other structures are deductible. If your business manages inventory in Idaho, tools and machinery used directly for construction projects can also be included under COGS.

2. Employee Wages and Contractor Payments

Labor is a major expense in the construction industry, and wages paid to employees are tax-deductible. Payments to independent contractors are also deductible, provided that accurate IRS 1099 forms are filed. In Idaho, don’t forget that state-mandated payroll tax contributions, such as Idaho income tax withholding, are factored into your deductions.

3. Vehicle Expenses

Vehicles used for business purposes, such as transporting materials or traveling to job sites, are deductible. Keep detailed records of mileage, fuel, and maintenance expenses to maximize this deduction. If you have a fleet of vehicles, consider whether the actual expense method or the standard mileage rate offers a greater deduction.

4. Equipment Purchases and Depreciation

Heavy machinery, tools, and other construction equipment often represent significant costs. While smaller purchases may qualify for immediate deductions under Section 179 of the IRS code, more expensive items are often depreciated over time. In Idaho, be sure to track these assets carefully for both federal and state tax filings.

5. Office Expenses

Even if much of your work is done at construction sites, expenses for a home office or leased office space are deductible if they are used exclusively for business purposes. Utilities, rent, office supplies, and software are all eligible.

6. Business Insurance

Various types of business insurance are deductible, including general liability insurance, workers’ compensation insurance, and tools or equipment insurance. In Idaho, additional regional policies, like those for environmental risks or wildfire damages, can also be written off.

7. Marketing and Advertising

Expenses for advertising your construction business—such as creating a website, producing promotional materials, or running online ads—are fully deductible. This includes locally targeted campaigns to attract customers in regions like Southeast Idaho.

8. Idaho-Specific State Taxes

While federal taxes often overshadow state-specific deductions, construction businesses in Idaho should pay attention to their unique state obligations. Deductions are available for state employment taxes, including unemployment contributions, and Idaho Business Personal Property Tax exemptions for qualifying machinery and tools.

9. Training and Licensing

In order to operate legally and efficiently in Idaho, construction companies will have to pay for licenses, certifications, or training programs. These costs, including certifications for electricians, plumbers, or general contractors, are deductible as a business expense.

10. Travel and Lodging

For out-of-town projects, construction companies often have travel costs, as well as lodging and meals for workers. While business travel is deductible, make sure you distinguish these from personal expenses. Idaho-based businesses working across state lines should account for any differences in tax regulations.

Maximize Your Deductions

Idaho construction businesses have unique opportunities to reduce their tax burdens by understanding which expenses qualify as deductible. From equipment costs to state taxes and marketing campaigns, every deduction helps your bottom line. Keeping detailed records and consulting with a tax professional familiar with Idaho’s tax codes will help your business remain compliant and maximize savings.

If you’re a construction business owner in Idaho and need expert advice, Cooper Norman is here to assist as we specialize specifically in the construction industry. Remember, the better you manage your expenses, the better equipped your business is for growth.

Need help streamlining your business operations or navigating local tax regulations? Contact us today!