Tax Deductions for Transporting ‘Tools of the Trade’

Deducting commuting costs is generally not allowed. However, there is an exception carved out by the courts for the required transportation of work equipment and tools. The additional cost -- incurred strictly to carry the work implements back and forth -- is deductible as an employee business expense. (Self-employed individuals write off the cost as a business expense on Schedule C.)

Example: Joe works at a construction site in the city. Previously, he took public transportation to work at a round-trip cost of $5 per day. Now, however, he is required to transport equipment back and forth from the job site in a trailer. It costs him $7 a day to drive his car each day and an additional $15 a day for the trailer rental.

According to the IRS, the $15 daily cost of the trailer rental is deductible, but Joe cannot deduct the extra $2 per day cost of driving his car. Reason: Only the additional cost for the same mode of transportation is deductible, even if a less expensive mode of transportation is available.

On the other hand, suppose Joe owns a truck and is able to transport the equipment without renting a trailer. In this case, Joe can deduct the additional cost of $2 per day if he can prove that he would have commuted by public transportation if he was not required to transport the work equipment.

Want more information on ways to reduce your construction business tax bill? Contact us.

About the Author(s)

Mike is a Principal in the Youngstown, Ohio office of HBK CPAs & Consultants and has been with the firm since 2001. He is the National Director of the firm's Construction Solutions Group.

In 2008, Mike received the designation of Certified Construction Industry Financial Professional (CCIFP) from the Institute of Certified Construction Industry Financial Professionals, Inc. (ICCIFP). ICCIFP is a not-for-profit corporation established to promote the highest standards of construction financial management through the credentialing of construction financial professionals. Mike works closely with dozens of construction clients helping them achieve their financial goals.

In addition to his CCIFP distinction, Mike is a member – of the Builders Association, serves as Treasurer of the Construction Accounting Network and is a member of the Ohio Contractor’s Association. He has been published in the national construction magazine “Breaking Ground” as a subject matter expert on Financial Perspective in an article titled “Give Your Workforce the Financial Tools to Manage a Successful Project” in 2019. He also attends several national construction conferences each year to always stay ahead of industry trends and regulatory changes.

During his career, Mike has gained expertise in accounting work related to Construction through many applications. Among his industry distinctions are:

  • Experience assisting clients with cash flow projections and financial statement projections. In one case, it helped lead to a contractor client obtaining more than $100M in a single contract bond.
  • Helping a contractor secure a line of credit with a financial institution at seven times the level they had prior
  • Assistance negotiating a settlement of sales tax liability, which resulted in a reduction of more than $200,000 from the original assessment
  • Aiding a contractor client in claim negotiations resulting in more than $1M of additional revenue
  • Providing expert witness testimony on behalf of a contractor, resulting in a successful lost revenue claim
  • Helping develop a training program for the management team of a contracting firm, to improve internal communication and overall profitability

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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