5 Tax Tips Contractors in the DMV Should Know Before Year-End
Running a plumbing, HVAC, pool, or general contracting business in the DMV is no small feat. Between managing crews, chasing payments, and bidding for new jobs, tax planning often gets left behind. Yet a proactive strategy can save contractors thousands each year.
At Shahbaz & Associates, CPAs, we work with contractors across DC, Maryland, and Virginia to stay compliant, reduce tax liabilities, and improve profitability. Here are five critical tax tips to review before year-end.
1. Deduct Everyday Business Expenses
Contractors pay out for tools, trucks, and supplies daily. Many of these are deductible:
- Vehicles & Mileage: Deduct actual expenses or the IRS mileage rate for every job run across Fairfax, Bethesda, or DC.
- Tools & Equipment: From HVAC compressors to plumbing gear, these qualify as business expenses. Larger purchases may even qualify for immediate write-offs.
- Office Costs: Even home-based contractors may deduct a portion of utilities and internet under the home office deduction.
👉 DMV Tip: Because many contractors work across state lines, tracking expenses by job location is critical for proper tax reporting.
2. Avoid Payroll & Subcontractor Pitfalls
Worker classification is a hot issue in the DMV, especially with Maryland and DC’s aggressive enforcement.
- If you control how someone works, they’re likely an employee, not a 1099 contractor.
- Issue Form 1099-NEC to subcontractors earning $600+.
- File state payroll taxes on time to avoid penalties.
3. Use Section 179 & Bonus Depreciation
Large purchases—vans, trailers, or heavy equipment—may qualify for accelerated deductions. In 2025, Section 179 allows up to $1 million in deductions, and bonus depreciation remains at 80%.
💡 Example: A pool builder in Montgomery County buying excavation equipment can deduct most of the cost immediately instead of spreading it over years.
4. Keep Organized Records
Deductions don’t count without documentation. Invest in software like QuickBooks or ServiceTitan to:
- Assign expenses to jobs.
- Keep digital receipts.
- Reconcile monthly instead of scrambling at tax time.
5. Plan Ahead for Estimated Taxes
Contractors must pay quarterly, not annually. Missed deadlines create penalties. Set aside cash during busy months—like summer for HVAC and pool contractors—to cover leaner winter months.
Don’t Forget DMV Local Taxes
Contractors must navigate three overlapping tax systems:
- DC: Franchise tax applies even if incorporated elsewhere.
- Maryland: Personal property return required annually.
- Virginia: BPOL (Business, Professional, and Occupational License) taxes apply in many counties.
Why DMV Contractors Need a Local CPA
Navigating multi-state rules is tricky. At Shahbaz & Associates, CPAs, we:
- Specialize in plumbing, HVAC, pool, and general contractors.
- Stay up-to-date on local DMV tax codes.
- Help maximize deductions and plan for long-term growth.
Contact Shahbaz & Associates, CPAs today to review your year-end tax strategy and see how much you could save."