The Construction Subcontractor's 1099 Tax Guide

The drive to the job site is usually deductible. Most subs never claim it.

You assume it is commuting because it starts at your house. It generally is not. A job site you expect to finish inside a year is a temporary work location, and driving to one is business travel - worth $3,780 in real tax on the 18,600 miles in this book's worked year. There are three separate routes that make it deductible and you only need one.

What you'll learn

• Which of your miles count — the temporary work location rule, the one-year test, and the three routes that make the drive from home deductible
• Retainage is not income until you get it — reporting what you billed instead of what you were paid cost $2,927 in the worked year, on money sitting in the general's account
• Why the cargo bed decides your truck write-off — over 6,000 lbs with a 6-foot bed has no cap; the same truck with a 5.5-foot bed stops at $32,000
• What the 1099 from the general actually reports — labour, materials, permits and pass-throughs, all of it, and why the number is not your profit
• Tools under $2,500 come off in full — the safe harbor, and the one-paragraph policy it needs
• When you put someone on — W-9 first, 1099 in January, and why skipping either destroys your best defence
• Protective gear versus clothing — one is deductible and one never is, however hard the job is on it
• Why showing profit sometimes beats reducing it — bonding capacity and credit are based on the return you file

New for 2026

• Two mileage rates — 72.5 cents through 30 June, 76 cents from 1 July
• Section 179 at $2,560,000 and 100% bonus depreciation — and why 179 cannot create a loss while bonus can
• 1099-NEC threshold now $2,000 — up from $600, and homeowners still issue none at any amount
• Penalties of $60, $130, $340 and $680 per form — for late or missing information returns
• Construction is not a "specified service business" — the 20% deduction is yours at any income

Who this guide is for

• Specialty subcontractors in any trade, working for general contractors
• Tradesmen who just went out on their own and have seen their first 1099
• Anyone about to put a helper on the payroll, or thinking of calling him a sub
• Subs who have never claimed a single job-site mile

Who it is not for

It will not teach you to bid, schedule or run a crew. And it covers federal tax - licensing, liens and workers' compensation are state law.

Why this one is different

It shows a full year end to end - $214,000 received, $124,300 of costs, taxed on $89,700 - then puts that same year on Schedule C line by line, cost of goods sold included. And where a common piece of advice is wrong, it prints the table: the S corporation saving at real subcontractor incomes is a few hundred dollars, and at some levels it is negative.

Use it as an educational companion throughout the year, then bring your organized records and specific questions to a qualified tax professional when your situation calls for personalized advice.

Read on this subject

Free articles on the questions this guide covers, each one checked against IRS sources.

• The $2,500 line that decides your tool deductions Expense tools outright — with a policy set before the year starts.
• Retainage is money you earned and have not received. That difference is the whole question. Withheld draws are not income until you can actually get at them. The test is narrower than it sounds.