What can general contractors deduct on taxes?

Contractors can deduct tools and equipment (often fully via Section 179), work vehicle costs (70¢/mile or actual expenses), subcontractor payments, licenses, permits and bonds, liability and workers' comp insurance, job materials, and a qualifying home office.

Do general contractors pay self-employment tax?

Yes. Self-employed contractors and single-member LLCs pay the full 15.3% self-employment tax on net profit plus income tax. Some contractors elect S-corp taxation to reduce SE tax on a portion of earnings — discuss with a CPA whether it fits your income.

Do I have to send 1099s to my subcontractors?

Yes. If you pay an unincorporated subcontractor $600 or more during the year for services, you must issue Form 1099-NEC and file it with the IRS. Collect a W-9 before you pay them so you have their taxpayer info.

Can I deduct my work truck?

Yes. You can deduct business use of a work truck using the standard mileage rate (70¢/mile in 2025) or actual expenses. Heavy vehicles used mostly for business may qualify for large Section 179/bonus depreciation write-offs, but personal use must be excluded.

Self-Employment Tax Calculator for General Contractors (2025)

How much tax does a self-employed general contractor pay? A general contractor earning $150,000 with about $60,000 in business expenses owes roughly $22,567 in total federal tax for 2025 — a 15.3% self-employment tax plus federal income tax — or about $5,642 per quarter. A common rule of thumb is to set aside 25–30% of net income for taxes. Use the calculator below for your own numbers and state.

Self-employed general contractors owe the full 15.3% self-employment tax plus income tax on net profit. This calculator estimates your bill and highlights the construction deductions that cut it.

Annual gross income (before expenses)

Total business expenses (incl. deductions below)

State

This tool provides estimates for educational purposes only and is not tax advice. Tax rules change; figures are based on 2025 federal rules. Consult a tax professional for your specific situation.

Deductions General Contractors often miss

Self-employed general contractors commonly gross $70,000-$200,000+ depending on project volume. You pay 15.3% SE tax on net profit plus income tax — set aside roughly 25-30% and pay quarterly estimates, since materials and subcontractor costs make net profit swing widely.

Tools & equipment (Section 179): Power tools, ladders, scaffolding, generators and heavy equipment are deductible; qualifying purchases can be fully expensed the first year under Section 179 instead of depreciated over time.
Work vehicle & mileage: Deduct business driving at 70¢/mile (2025) or use actual expenses (gas, repairs, insurance, depreciation). A dedicated work truck used only for the business can often be largely written off.
Subcontractor & labor costs: Payments to subcontractors are deductible; issue Form 1099-NEC to any unincorporated subcontractor you pay $600 or more in the year.
Licenses, permits & bonds: Contractor licensing, business permits, city/state registrations and surety/performance bond costs are deductible business expenses.
Insurance & materials: General liability and workers' comp premiums, plus job materials and supplies, are deductible (materials are typically counted as cost of goods/job costs).

Common tax mistakes for general contractors

Not issuing 1099-NEC forms to subcontractors, which can jeopardize the deduction and trigger penalties.
Failing to separate materials/job costs from overhead, distorting true net profit.
Skipping quarterly estimated taxes on high-income projects.
Mixing personal and business vehicle use without a mileage log to back up the deduction.

How self-employment tax works

As a self-employed general contractor, you pay a 15.3% self-employment tax (12.4% Social Security + 2.9% Medicare) on 92.35% of your net profit, plus federal and state income tax. A common rule of thumb is to set aside 25–30% of your net income for taxes.

Quarterly estimated tax deadlines (2025)

If you expect to owe $1,000 or more, the IRS requires quarterly estimated payments. For 2025 income the deadlines are: April 15, 2025; June 16, 2025; September 15, 2025; and January 15, 2026. Missing them can trigger underpayment penalties. The calculator above estimates your quarterly amount.

Frequently asked questions

What can general contractors deduct on taxes?: Contractors can deduct tools and equipment (often fully via Section 179), work vehicle costs (70¢/mile or actual expenses), subcontractor payments, licenses, permits and bonds, liability and workers' comp insurance, job materials, and a qualifying home office.
Do general contractors pay self-employment tax?: Yes. Self-employed contractors and single-member LLCs pay the full 15.3% self-employment tax on net profit plus income tax. Some contractors elect S-corp taxation to reduce SE tax on a portion of earnings — discuss with a CPA whether it fits your income.
Do I have to send 1099s to my subcontractors?: Yes. If you pay an unincorporated subcontractor $600 or more during the year for services, you must issue Form 1099-NEC and file it with the IRS. Collect a W-9 before you pay them so you have their taxpayer info.
Can I deduct my work truck?: Yes. You can deduct business use of a work truck using the standard mileage rate (70¢/mile in 2025) or actual expenses. Heavy vehicles used mostly for business may qualify for large Section 179/bonus depreciation write-offs, but personal use must be excluded.