Tax Deductions for the Tools of the Trade - Polston Tax Resolution & Accounting
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Tax Deductions for the Tools of the Trade

Buying that new drill or new boots for a new project could set you back several hundred dollars in your budget. Luckily for you, you could get some major tax deductions with those purchases. You can usually deduct the cost of some of the tools and equipment you buy for your business. Some items you buy can be fully deducted for that year, others you can deduct over time while the item depreciates.

 

There are items that construction workers can deduct the same year they are bought. This includes items like your car or truck expenses, or the supplies and materials you need for projects. You can also deduct your advertising and marketing expenses for that year. If you pay subcontractors or you have several employees, those salaries are deductible as well. Some tools will fit this tax deduction, if they are expected to last a year or less.

Items that will be deductible for more than one year are a bit trickier to deduct. These are items you buy that you expect to last a few years or more. These items are considered business assets and can be things like a cement mixer, compressor, a ladder, buildings, real estate or heavy machinery. Since you will continue to use these items for multiple years, they must be depreciated during that time. For each year you claim a portion of an item on your taxes, that item’s value will decrease. For instance, say you have a compressor that cost you $50,000 and its depreciation life is 10 years. That means you will need to remove $5,000 from its value each year you claim it. Your first few years of taxes would look like this;

Year one: Value at the Beginning of the year: $50,000
Depreciation amount: $5,000 ($50,000 ÷ 10 = $5,000)
Value at the end of the year: $45,000

Year Two: Value at the Beginning of the year: $45,000
Depreciation amount $5,000
Value at the end of the year $40,000

Steel-toed boots and other clothing and materials are also deductible. Hard hats, boots, tool belts and other clothing are essential to the construction trade and are therefore deductible. These items are considered deductible when they are used for the sole purpose of construction work. This is the clothing you wear on the job and the gear you purchase exclusively for construction work. If your company or owner has already reimbursed you for an item, you cannot deduct that item from your taxes.

Along with your clothing, costs associated with learning, being hired and maintaining a job in the construction industry can be deductible too. As a worker in the industry, there are certain fees you may pay that are tax-deductible. For instance, any trade school tuition or licensing fees you pay can be deducted. Also, you can deduct subscriptions to trade or technical journals along with any membership fees you pay to construction organizations, unions or business associations.

Deductions can be confusing, especially when you’re trying to keep track of all your expenses and what you spent on each item. That’s why Polston Tax is here to help. Our team of tax preparers and accountants can not only help keep track of your expenses, but we can help decide which deductions are right for you. Give us a call at 844-841-9857 or fill out a form online to schedule your free consultation today.