Construction and real estate businesses rarely operate on a simple, predictable schedule—and neither do their expenses. Material costs rise and fall. Projects stretch across multiple months or even years. Equipment is bought, financed, or sold as needs change, and subcontractors rotate from job to job. That complexity can make tax planning feel overwhelming without the right systems in place.
The good news is, these industries also come with some of the most valuable deductions available—if you track them correctly.
Below are key tax deductions to in 2026, along with practical tips to make tax time smoother and more profitable.
Construction and real estate businesses frequently rack up legitimate business driving: job sites, supplier runs, inspections, client meetings, property visits, and more—but they are often missed or under-tracked.
Common deductible vehicle expenses include:
Tracking tip: Keep a mileage log (there are apps for this if you do not want to hand-write them) that records date, destination, purpose, and miles. The IRS is strict here.
No matter how big or small, equipment costs add up fast—and they are often deductible in powerful ways.
You may be able to deduct:
In many cases, businesses can use Section 179 or bonus depreciation to accelerate deductions, depending on the asset and current-year rules.
Tracking tip: Keep invoices and note when equipment was placed into service, not just when it was purchased.
Construction businesses often have expenses that do not fit neatly into a standard chart of accounts.
Examples include:
Tracking tip: Code these expenses by job/project whenever possible. This improves profitability reporting and supports deductions.
Materials are one of the largest expense categories in construction—and one of the easiest to misclassify.
Deductible items may include:
Tracking tip: Keep vendor receipts and match purchases to the correct project. Also watch for personal/non-business purchases at big-box stores.
This is a big one—subcontractors come with compliance requirements.
Track:
If you pay a subcontractor $600 or more in the year (and not via credit card platforms that issue their own tax forms), you may need to issue a 1099-NEC.
Tracking tip: Do not wait until January. Collect W-9s before the first payment.
If you use part of your home regularly and exclusively for business, you may qualify for a home office deduction.
This can apply to:
Potential deductible costs include:
Tracking tip: Keep a floor plan or square footage estimate, plus proof the space is used only for business.
Marketing is deductible, and in 2026 many businesses spend more here than they realize.
Common deductible items:
Tracking tip: Watch for personal charges on marketing platforms—especially if ads are run through personal accounts.
Insurance is often a major (and fully deductible) expense.
This can include:
Tracking tip: If you pay annually, make sure the expense is recorded in the correct year based on accounting method.
For construction contractors, real estate agents, and property managers, professional licensing costs add up.
Deductible costs may include:
Tracking tip: Save receipts for training courses and keep a record of what the training was for.
This area is one of the most common audit triggers—so documentation matters.
Potential deductible expenses:
Tracking tip: Save receipts and write down who you met with and the business purpose, that way you do not have to try and remember later.
For rental property owners, one of the biggest tax issues is correctly separating repairs from improvements.
Repairs (often deductible now) might include:
Improvements (typically depreciated) might include:
Tracking tip: Keep invoices detailed. “General renovation” is vague and can cause problems later.
For real estate investors, these are foundational deductions.
Track:
Tracking tip: Do not rely only on year-end lender forms—some deductible expenses will not appear there.
Depreciation is one of the biggest tax advantages in real estate—and one of the most misunderstood.
For real estate investors, depreciation may apply to:
For contractors, depreciation may apply to:
Tracking tip: Maintain an asset list with purchase date, cost, and service date. This makes tax planning far easier.
Even job-site-heavy businesses still run on admin systems.
Deductible expenses include:
Tracking tip: Keep subscriptions organized and review them annually.
For growing businesses, employee-related deductions can be significant.
Track:
Tracking tip: Make sure payroll reports match your bookkeeping totals—misalignments are common.
A tax deduction is not just about what you spent—it is about what you can document.
In 2026, the IRS continues to focus heavily on:
Good records do not just reduce taxes—they also make your business easier to run.
Every construction company and real estate portfolio is different. If you would like help organizing deductions, improving job costing, or creating a tax-ready bookkeeping system, we can help.
*The information provided in this blog post is for general informational purposes only and does not constitute accounting, tax, financial, or legal advice. It is not intended as a substitute for professional consultation tailored to your specific circumstances.*
~ the addtech crew
At adding technology, we know you want to focus on what you do best as a contractor. In order to do that, you need a proactive back office crew who has financial expertise in your industry.
The problem is that managing and understanding key financial compliance details for your business is a distraction when you want to spend your time focused on building your business (and our collective future).
We understand that there is an art to what contractors do, and financial worries can disrupt the creative process and quality of work. We know that many contractors struggle with messy books, lack of realtime financial visibility, and the stress of compliance issues. These challenges can lead to frustration, overwhelm, and fear that distracts from their core business.
That's where we come in. We're not just accountants; we're part of your crew. We renovate your books, implement cutting-edge technology, and provide you with the real-time job costing and financial insights you need to make informed decisions. Our services are designed to give you peace of mind, allowing you to focus on what you do best - creating and building.
Here’s how we do it:
Schedule a conversation today, and in the meantime, download the Contractor’s Blueprint for Financial Success: A Step by-Step Guide to Maximizing Profits in Construction.” So you can stop worrying about accounting, technology, and compliance details and be free to hammer out success in the field.
