If you are self-employed, business deductions are not something you deal with once a year and then forget about. They show up quietly in your day-to-day work. Fuel stops between jobs. Materials picked up on the way to a site. Software subscriptions that keep your schedule moving. Insurance bills, shop rent, and tool purchases make it possible to get the work done.
For many owners in construction and the trades, deductions feel abstract because they are often discussed at tax time, long after the work has already happened. In reality, deductions are created by how well your expenses are tracked and categorized throughout the year. Clean books are what turn everyday spending into accurate, defensible deductions.
This guide walks through the most common categories of business deductions for self employed owners in 2026.
How Business Deductions Work
The IRS allows you to deduct expenses that are ordinary and necessary for running your business. In simple terms, that means costs that are common in your line of work and helpful for earning income.
Just as important as the expense itself is how it is recorded. Business and personal spending must be clearly separated, and every expense needs documentation. A receipt, a mileage log, or a note explaining the business purpose can make the difference between a clean set of books and a messy one.
From an accounting perspective, deductions are not about squeezing in write offs at the end of the year. They are the natural result of consistent tracking and accurate categorization.
1. Materials, Supplies, And Job Costs
For contractors and trades owners, materials and supplies are often the largest expense category.
This includes items purchased specifically for jobs, as well as consumables like fasteners, adhesives, safety gear, and protective equipment. Delivery charges and freight tied to materials also fall into this category.
From a bookkeeping standpoint, it helps to separate job specific materials from general shop supplies. When materials are assigned to jobs where possible, your job profitability reports become far more useful. Instead of guessing where margins are going, you can see it clearly in the numbers.
2. Labor Costs And Subcontractors
Payments to subcontractors, specialty trades, and temporary labor are a core part of many self employed businesses.
Keeping this category clean starts with consistency. Vendor names should match across your bank account, accounting system, and year-end reporting. Labor costs should be clearly separated from owner draws and payroll so reports reflect true operating costs.
Well-organized labor records make it easier to understand where your money is going and help your financials tell a clear story.
3. Vehicles And Business Driving
Vehicles are one of the most common and most misunderstood expense areas.
Business use of trucks and vans may include fuel, repairs, maintenance, insurance, and registration, depending on how the vehicle is used. What matters most from an accounting perspective is that usage is tracked throughout the year.
A mileage log or usage tracker works best when it becomes a habit rather than a reconstruction exercise months later. Many owners find it helpful to note the purpose of trips, such as jobsite visits, supply runs, or estimates, so records stay complete.
4. Tools And Equipment
Tools and equipment purchases range from small hand tools to larger items used over multiple years.
Accurate recordkeeping means noting when the item was purchased, how much it cost, and where it is used. Keeping a simple equipment list can go a long way toward maintaining clean books and avoiding confusion later.
When tools and equipment are tracked consistently, your financial reports better reflect the true cost of running the business.
5. Shop, Warehouse, And Storage Costs
Many self-employed owners operate out of a shop, yard, or storage space.
Rent, utilities, internet, basic services, and maintenance related to these spaces are common business expenses. Keeping shop costs separate from job costs helps maintain clarity around overhead versus project expenses.
This separation becomes especially important as businesses grow and overhead starts to increase.
6. Insurance Expenses
Insurance is a necessary cost of doing business and often a significant one.
Common policies include general liability, workers’ compensation, commercial auto, and coverage for tools and equipment. From an accounting standpoint, it is important that policies are recorded under the correct business entity and matched to the appropriate time period.
Clear insurance records help ensure your books stay accurate month to month.
7. Phones, Software, And Office Tools
Phones and software keep modern trade businesses moving.
Mobile phones used for scheduling, dispatch, and customer communication are common expenses. Software for accounting, estimating, time tracking, and job management also falls into this category.
When devices or plans are used for both business and personal purposes, it helps to be consistent about how business use is allocated and recorded.
8. Advertising And Marketing
Marketing expenses include websites, online advertising, vehicle wraps, signage, and local sponsorships.
Grouping marketing costs consistently allows you to review spending over time and understand what supports growth. Clean categorization also makes it easier to compare months and spot trends without digging through individual transactions.
9. Travel And Meals Related To Business
Travel expenses tied to jobs, training, or required meetings are generally deductible when they are properly documented. This includes transportation, lodging, and other costs that are directly connected to business activity. From a bookkeeping perspective, the key is recording when the expense occurred, where you went, and the business reason for the trip, so it aligns with what is shown in your books.
Meal deductions deserve extra attention in 2026, as the tax rules around meals have continued to evolve. Whether a meal is deductible now depends heavily on the situation and how it is categorized. Because of this, it is especially important to record meals accurately at the time of purchase. Notes should clearly state who was involved and the business purpose. When meals are tracked consistently and matched to the correct category in your accounting system, your records stay clean, and your checklist remains reliable without needing to reinterpret expenses later.
| Business meals and travel deductibility checklist | |
| Business meals | |
| Lunch and dinner provided at or near cost to employees at the employer-operated cafeteria | 0% |
| Employee recreation (picnics, holiday parties, etc.) is primarily for the benefit of employees, other than highly compensated employees | 0% |
| Meals are treated as employee compensation | 100% |
| Lunch with the employee, infrequent meetings, business discussed | 100% |
| Meals sold to employees at fair market value | 100% |
| Meals eaten alone while traveling for business purposes | 50% |
| Lunch with a customer on your road trip, no business discussed: Your meal | 0% |
| Lunch with customer on your road trip, no business discussed: Customer’s meal | 0% |
| Transportation and lodging expenses for a business trip | 50% |
| Lavish and extravagant meal | 0% |
| Transportation to/from the restaurant for a business meal | 0% |
| Travel expenses | |
| Lunch with an employee or customer, no business discussed | 100% |
| Per diem reimbursement up to the federal limit | 100% |
| Expenses for travel as a form of education | 100% |
| Transportation, living, and attendance expenses for an investment seminar where investment-related business is not your trade or business | 0% |
| Expenses for travel as form of education | 0% |
| Travel for charitable purposes with some personal pleasure: Charitable deduction | 0% |
Source: https://www.bakertilly.com/insights/guidance-for-2026-deductions-entertainment-expenses
10. Home Office Expenses
Some self-employed owners qualify for home office expenses, but the rules are specific.
The space must be used regularly and exclusively for business. A kitchen table or shared living space generally does not qualify. When a home office does meet the requirements, basic square footage notes and consistent expense tracking help support clean records.
Why Clean Books Matter More Than The Deductions Themselves
Deductions are only as good as the system behind them. When expenses are miscategorized or mixed with personal spending, financial reports become unreliable. Profit looks higher or lower than it really is. Job performance becomes harder to evaluate. Decisions start being made on incomplete information.
Clean books create clarity. They allow deductions to flow naturally from your everyday activity and support accurate reporting at the end of the year.
How Atlas Accounting Group Supports Clean, Deduction-Ready Books
Atlas Accounting Group works with construction companies, plumbers, electricians, and HVAC owners who want their financials to reflect reality.
We provide ongoing accounting built for trades businesses, job cost tracking that mirrors real workflows, and payroll and accounting systems that stay organized as the business grows. The result is financial reporting that is accurate, timely, and easy to understand.
If you want business deductions in 2026 to feel straightforward rather than stressful, it starts with clean books.
Atlas is here to help you build and maintain a recordkeeping system that supports your work all year long.