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Contractors and landscapers leave more money on the table than almost any other small business category we work with — not because they're careless, but because the deductions specific to their work are genuinely more complex than a generic small business guide covers. This article walks through the deductions that come up most often in our work with Frederick County contractors and landscapers, and the ones that most commonly get missed.
One of the most practically valuable tax rules for contractors and landscapers is the vehicle weight threshold that determines how aggressively a work vehicle can be depreciated. Vehicles with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds — which includes most full-size pickups, heavy-duty trucks, and larger vans — qualify for Section 179 immediate expensing and 100% bonus depreciation without the per-vehicle limitations that apply to lighter passenger vehicles.
This matters significantly for a contractor buying a $60,000 heavy-duty pickup. Under the standard rules for a lighter vehicle, the annual depreciation deduction is capped at a few thousand dollars. For a vehicle over the threshold, that same $60,000 can be fully expensed in year one under current law. Check the manufacturer's GVWR, not just the gross weight of what you're hauling, that's what the IRS cares about.
100% bonus depreciation was restored permanently under the 2025 tax law, and the Section 179 limit is now $2.5 million. For contractors planning major equipment purchases, this is the best federal depreciation environment in years. See our full breakdown of what 100% bonus depreciation being permanent means for Maryland business owners.
Beyond vehicles, contractors typically have significant depreciable assets, mowers, excavators, compressors, trailers, hand and power tools, scaffolding, and more. Each category has its own depreciation treatment and recovery period, and getting it right from the start matters more than most owners realize.
Here's why: depreciation that gets miscategorized or simply missed on a tax return doesn't disappear. It sits there as a deduction you were entitled to take but didn't, and if that pattern holds for two or more years, amending prior returns isn't even the right fix. The IRS treats it as an accounting method that has to be corrected formally. The good news is that correction doesn't mean years of amended returns, it's one filing that catches up everything at once. We cover exactly how that works in our guide on using Form 3115 to catch up missed depreciation without amending.
For vehicles used in the business, you generally have two options: deduct actual vehicle expenses (fuel, insurance, maintenance, depreciation) or use the IRS standard mileage rate (70 cents per mile for 2025). The right choice depends on the vehicle's value, how many miles you drive, and whether you want the simplicity of mileage tracking over the higher potential deduction of actual expenses.
One hard rule: if you take Section 179 or bonus depreciation on a vehicle in year one, you're locked into the actual expense method for that vehicle going forward. You can't switch back to mileage. This is worth knowing before you elect to expense the full cost of a new truck in year one.
Many contractors and landscapers operate out of their homes, and a legitimate home office deduction is genuinely available, but it has real requirements. The space must be used regularly and exclusively for business, a corner of the kitchen table doesn't qualify. It also has to be your principal place of business, which for most contractors means the administrative work happens there even if the actual work happens at job sites.
The deduction covers a proportional share of home expenses, mortgage interest or rent, utilities, insurance, and depreciation, based on the percentage of the home used for business. There's also a simplified method, $5 per square foot up to 300 square feet, that's easier to calculate but often produces a smaller deduction than the actual-expense method.
One thing worth knowing: if you take the home office deduction using actual expenses including home depreciation, and later sell the home, that depreciated amount is subject to recapture. It's not a dealbreaker, but it's worth factoring into the decision, especially if you're planning to sell in the next few years.
Labor is typically the largest expense for contractors and landscapers, and the tax treatment depends entirely on whether the workers are employees or independent contractors. Getting this wrong is one of the most expensive mistakes in the industry.
The IRS uses a multi-factor test focused on behavioral control, financial control, and the type of relationship. Workers you direct and control closely, who work primarily for you, using your equipment, on your schedule, are generally employees. True independent contractors typically work for multiple clients, use their own tools and equipment, and control how they complete the work.
Misclassifying employees as contractors can result in back payroll taxes, penalties, and interest for all open years, plus Maryland compliance issues on top of federal ones. If there's any ambiguity, the safer move is to treat the worker as an employee, and we help contractors evaluate their specific situations before something becomes a problem.
If you pay a subcontractor $600 or more in a year, you're required to issue a Form 1099-NEC. Missing these has real consequences, both penalties for non-filing and potential loss of the deduction itself. Collect a Form W-9 from every subcontractor before the first payment, not at year-end, when tracking them down is much harder.
Materials and supplies used in the business are generally deductible when purchased, as long as they're for business use. For contractors and landscapers, this covers job-specific materials, plants, seed, mulch, chemicals, small tools, and consumable supplies. A few nuances worth knowing:
General liability insurance, workers' compensation, commercial vehicle insurance, and contractor's bonding are all deductible business expenses. For most contractors, these are significant annual costs, and they're sometimes overlooked when compiling deductions. Commercial umbrella coverage and professional liability coverage for design-build or consulting work are also deductible.
State contractor licenses, Maryland Home Improvement Commission registration, local permits, and any other regulatory licenses required to operate are deductible. So are industry association memberships, trade publication subscriptions, and the cost of continuing education required to maintain your license. Training costs for employees that are directly related to their current work are also deductible as a business expense.
A few Maryland-specific items that come up regularly for Frederick County contractors and landscapers:
Bring us your last return. We'll tell you honestly whether we see anything that was missed, and what it would cost to fix it, before you commit to anything. Call (301) 662-6992.
Book a ConsultationYes, but only the business-use percentage. You'll need mileage records showing total miles and business miles for the year. If the truck is over 6,000 pounds GVWR and used more than 50% for business, you can still take significant depreciation, but it's prorated to the business-use percentage.
This is more common than you'd think, and the fix is usually not an amended return. If the depreciation was missed for more than one year, it's treated as an accounting method change, and the right tool is Form 3115, which lets you catch up all the missed depreciation in one deduction on this year's return, no amendments needed.
Yes, if you paid them $600 or more in the year. Collect a W-9 before the first payment, not at year-end. Missing 1099s creates filing penalties and can put the deduction itself at risk if the IRS questions it.
Possibly, if your net profit is consistently above $80,000 to $100,000 a year. At that level, an S-Corp election typically saves $7,500 to $15,000 or more annually in self-employment taxes. Below that range, the added overhead usually isn't worth it yet. See our S-Corp vs. LLC guide for the full analysis.
By Roy Cogliandolo, CPA · Mercer Flanagan · January 15, 2026
This article is general information, not tax advice for your specific situation. Rules and limits cited reflect federal and Maryland law current as of early 2026 and are subject to change.