Here’s a stat that should bother you: the average self-employed contractor overpays their taxes by $3,000-$8,000 per year. Not because the tax code is unfair, but because they’re not tracking their deductions properly.

If you’re tossing receipts in a shoebox and hoping your accountant sorts it out in April, you’re leaving money on the table. Let’s fix that.

The Deductions That Matter Most

Vehicle and Mileage

This is usually the single biggest deduction contractors miss — or undercount. You have two options:

  • Standard mileage rate: 70 cents per mile in 2026. If you drive 25,000 business miles a year, that’s a $17,500 deduction.
  • Actual expenses: Gas, insurance, maintenance, depreciation, registration. Better if you have an expensive truck or van dedicated to work.

The key is tracking. Every trip to a job site, supply run, or client meeting counts. But “I drive a lot for work” doesn’t hold up in an audit — you need a log with dates, destinations, and mileage.

Most contractors dramatically underestimate their business miles because they don’t track them in real time. A mileage tracking app or logging your trips through your job management software makes this automatic instead of a guessing game at tax time.

Tools and Equipment

Every tool you buy for work is deductible. This includes:

  • Power tools, hand tools, and safety equipment
  • Tool replacement and repair costs
  • Tool storage (toolboxes, truck organizers, job site lockboxes)
  • Software and apps you use to run your business

Items under $2,500 can usually be deducted in full the year you buy them (the de minimis safe harbor election). Bigger purchases — a new truck, a skid steer, a trailer — can be depreciated or fully deducted under Section 179.

Pro tip: Keep a running inventory of your tools with purchase dates and costs. If tools are stolen or damaged, you can deduct the loss.

Home Office

If you run your business from home — even partially — you can deduct a portion of your housing costs. This includes:

  • Rent or mortgage interest
  • Utilities (electric, gas, internet, water)
  • Property taxes
  • Home insurance
  • Repairs to the office area

The simplified method gives you $5 per square foot, up to 300 square feet ($1,500 max). The regular method calculates the actual percentage of your home used for business. If your office is 200 square feet in a 2,000 square foot house, you deduct 10% of all qualifying expenses.

You don’t need a separate room with a door. A dedicated desk area in a corner counts, as long as you use it regularly and exclusively for business.

Insurance Premiums

Every insurance premium you pay for your business is deductible:

  • General liability insurance
  • Workers’ compensation
  • Commercial auto insurance
  • Professional liability / errors and omissions
  • Inland marine (tool and equipment coverage)
  • Health insurance premiums (this one surprises people — self-employed individuals can deduct 100% of health, dental, and vision premiums)

Materials and Supplies

This seems obvious, but many contractors only track materials billed to specific jobs. Don’t forget:

  • Consumables (blades, bits, tape, caulk, fasteners)
  • Safety supplies (gloves, glasses, hard hats, first aid kits)
  • Cleaning supplies for job sites
  • Office supplies (printer ink, paper, stamps)

Subcontractor Payments

Every payment to a subcontractor is deductible. Just make sure you collect W-9s and file 1099s for anyone you pay $600 or more in a year. Missing this step won’t just cost you a deduction — it can trigger IRS penalties.

Phone and Internet

If you use your phone for business (and you do), you can deduct the business-use percentage. Most contractors use their phone 60-80% for work — that means 60-80% of your phone bill is deductible. Same goes for your internet if you do any business from home.

Continuing Education and Licenses

  • Trade certifications and renewals
  • License fees (contractor’s license, business license)
  • Training courses and trade school
  • Industry conferences and trade shows
  • Professional association dues

Retirement Contributions

This isn’t a business deduction technically, but it reduces your taxable income the same way. A SEP-IRA lets you contribute up to 25% of net self-employment income (up to $69,000 in 2026). A Solo 401(k) offers similar limits with more flexibility.

If you’re making $100,000 in net income and contributing $20,000 to a SEP-IRA, you just cut your taxable income by 20%. At a 24% tax bracket, that’s $4,800 saved — and the money is still yours, just growing for retirement.

The Tracking Problem

Here’s the real issue: most contractors know about these deductions in theory. They just don’t track them consistently. A receipt fades. A mileage log gets forgotten. A tool purchase goes on a personal credit card and disappears.

The fix is simple but requires discipline: separate your business and personal finances completely, and use software that categorizes expenses as you go. CrewRivet tracks job costs, materials, and expenses in one place — so when tax season comes, your numbers are already organized instead of scattered across bank statements and crumpled receipts.

What to Do Right Now

  1. Open a separate business bank account if you don’t have one
  2. Start a mileage log today — not January 1st
  3. Save every receipt digitally — snap a photo and tag it to a job or expense category
  4. Meet with a CPA who specializes in contractors at least once a year (that meeting fee is deductible too)
  5. Set aside 25-30% of every payment for taxes so you’re never surprised

The contractors who pay the least tax aren’t the ones making the least money. They’re the ones who track everything.

Keep your expenses organized year-round. Try CrewRivet free for 60 days — job costing, expense tracking, and invoicing in one place.