Top 5 Write-Offs Every Builder Should Know in 2025

Introduction

Builders and construction business owners face a harsh reality: overpaying taxes due to missed deductions can drain profits. Inexperienced CPAs often fail to identify critical tax breaks, leaving you frustrated and shortchanged. Are you claiming every deduction available to your construction business? At Kewal Krishan & Co, our expert tax advisors help builders save an average of $50,000 annually, potentially totaling $1 million over a decade. This blog unveils the top five tax write-offs for builders in 2025, backed by Internal Revenue Code (IRC) provisions, with actionable steps and examples to slash your tax bill. From equipment depreciation to home office deductions, these strategies are tailored to your industry’s unique needs. Start saving now with insights linked to Our Tax Planning Services.

Top 5 Write-Offs for Builders in 2025

Under IRC § 162, business expenses must be ordinary and necessary. Below are the top deductions builders should leverage, reported on Schedule C (Form 1040) for sole proprietors or Form 1120 for corporations, with depreciation detailed on Form 4562.

1. Materials and Supplies

Costs for construction materials (e.g., lumber, concrete) are fully deductible under IRC § 162. These expenses, critical to your trade, reduce taxable income directly.

2. Vehicle and Equipment Depreciation

New or used equipment qualifies for bonus depreciation (40% in 2025 under IRC § 168(k)) or Section 179 expensing (up to $1.22 million, adjusted for inflation). Vehicles used over 50% for business also qualify.

3. Home Office Deduction

A dedicated home office space used exclusively for business qualifies for deductions under IRC § 280A. Claim utilities, rent, or mortgage interest proportional to the office’s square footage.

4. Employee Wages and Benefits

Wages, health insurance, and retirement contributions for employees are deductible under IRC § 162, provided they’re reasonable and tied to services rendered.

5. Insurance Premiums

Premiums for liability, workers’ compensation, and equipment insurance are deductible under IRC § 162, safeguarding your business while lowering taxes.

For detailed rules, see IRS Publication 535.

Detailed Example: Maximizing Builder Deductions

Consider John, a sole proprietor builder with $600,000 in 2025 gross income. His expenses include:

• Materials: $200,000 for lumber and concrete.
• Equipment: $50,000 for a new excavator, claiming 40% bonus depreciation ($20,000) under IRC § 168(k), plus standard depreciation on the remainder.
• Home Office: $10,000 (10% of home expenses, based on office space).
• Wages: $150,000 for two employees.
• Insurance: $20,000 for liability and equipment coverage.

Total deductions: $200,000 (materials) + $20,000 (bonus depreciation) + $6,000 (standard depreciation, assuming 7-year property) + $10,000 (home office) + $150,000 (wages) + $20,000 (insurance) = $406,000. After deductions, John’s taxable income drops to $194,000. Factoring in self-employment tax (15.3% on net earnings, half deductible under IRC § 164(f)), his tax liability at a 24% bracket is approximately $46,560, versus $144,000 without deductions—a savings of over $97,000.

Alternative Scenario

If John elects Section 179 to expense the full $50,000 excavator, his deductions rise to $430,000, reducing taxable income to $170,000 and taxes to ~$40,800, saving an additional $5,760.

Step-by-Step Guide for Taxpayer Compliance

To claim these deductions and comply with IRS rules, follow these steps:

1. Track Expenses: Use software or logs to record materials, equipment, and other costs per IRC § 6001.
2. Verify Eligibility: Ensure expenses are business-related and meet IRC § 162 criteria.
3. Calculate Depreciation: Use Form 4562 to compute bonus depreciation (IRC § 168(k)) or Section 179 expensing (IRC § 179).
4. Document Home Office: Measure the office space and calculate proportional expenses per IRC § 280A. Retain utility bills and lease agreements.
5. File Returns: Report deductions on Schedule C (sole proprietors) or Form 1120 (corporations), attaching Form 4562. File by April 15, 2026, or extend with Form 4868.
6. Retain Records: Keep receipts, invoices, and logs for at least three years to audit-proof your return (IRC § 6001).

Explore Our Business Tax Services for tailored strategies.

Common Pitfalls to Avoid

• Mixing Personal and Business Expenses: Only business-related costs qualify under IRC § 162. Separate accounts prevent disallowed deductions.
• Home Office Missteps: The space must be exclusively business-use per IRC § 280A; personal use disqualifies it.
• Missing Depreciation: Failing to claim bonus depreciation or Section 179 limits savings. Use Form 4562 accurately.
• Inadequate Records: Lack of receipts or logs can trigger IRS audits, risking penalties under IRC § 6001.

Why Work with a Tax Expert?

Construction tax rules are complex, and generic preparers may overlook deductions or misapply IRC provisions, costing you thousands. Kewal Krishan & Co’s expertise ensures every eligible write-off is claimed, maximizing savings while ensuring compliance. Our clients benefit from personalized plans, as highlighted in Our Tax Litigation Services.

Conclusion

Leveraging these top five write-offs—materials, depreciation, home office, wages, and insurance—under IRC provisions can significantly reduce your 2025 tax burden as a builder. With proper documentation and strategic planning, you can retain more profits for growth. Don’t let missed deductions erode your earnings—act now to optimize your tax strategy.

Call to Action

Schedule a consultation with Anshul Goyal, CPA EA FCA, a licensed U.S. CPA and Enrolled Agent, admitted to practice before the IRS, specializing in tax litigation and cross-border tax for U.S. businesses and Indians in the U.S. Contact us at Kewal Krishan & Co to maximize your deductions.

About Our CPA

Anshul Goyal, CPA EA FCA, is a licensed U.S. CPA and Enrolled Agent, representing clients in IRS tax litigation and assisting with cross-border tax compliance for U.S. businesses and Indians in the U.S. His expertise ensures tailored strategies that maximize savings and ensure compliance.

Disclaimer

This blog provides general information for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and individual circumstances vary. Consult a qualified tax professional before making decisions. The author and firm disclaim liability for actions taken based on this content.

FAQs

1. What expenses can builders deduct in 2025?

Materials, depreciation, home office, wages, and insurance, if ordinary and necessary (IRC § 162).

2. What is bonus depreciation for 2025?

40% of the cost of qualifying equipment placed in service, per IRC § 168(k).

3. Can I deduct my entire home office?

Only the portion used exclusively for business, based on square footage (IRC § 280A).

4. How do I claim Section 179?

Elect on Form 4562 to expense up to $1.22 million of equipment costs (IRC § 179).

5. What records must I keep?

Receipts, invoices, and logs for at least three years to substantiate deductions (IRC § 6001).