Every year I sit down with Montana contractors who are leaving money on the table. Not because they’re doing anything wrong. They just don’t know what counts as a deduction.
The IRS lets you deduct ordinary and necessary business expenses. For contractors, that list is longer than most people realize. And in Montana, where you’re paying both federal and state income tax, every deduction counts twice.
Here’s what you can write off—and what most people miss.
Your Work Truck (This Is the Big One)
Montana contractors drive constantly. To job sites, to suppliers, between jobs. All those miles are deductible—if you track them.
You have two options:
Standard mile age rate.
Track your business miles and multiply by the IRS rate. For 2025, that’s 70 cents per mile. Drive 20,000 business miles in a year? That’s a $14,000 deduction.
Actual expenses.
Deduct the business percentage of gas, insurance, repairs, registration, and depreciation. This often works better for newer trucks with high payments or older trucks with big repair bills.
You can’t switch back and forth freely between methods, so pick the one that makes sense for your situation. If you’re not sure which saves you more, bring me your numbers and we’ll figure it out.
The key:
You need a mileage log. An app like MileIQ runs in the background and tracks automatically. Without documentation, you can’t claim the deduction—even if you drove 30,000 business miles.
Tools and Equipment
That new impact driver, the sawzall, the tool chest, the compressor. If you buy it for work, you can deduct it.
Small tools and supplies get deducted in the year you buy them. Pretty straightforward.
Bigger equipment might qualify for Section 179, which lets you deduct the full purchase price in the year you buy it instead of depreciating over time.
Section 179 limits change each year, so check with your tax professional on specifics. But the point is: that equipment purchase can reduce your tax bill now, not five years from now.
Montana timing tip: If you’re planning a big equipment purchase for early 2026, consider whether buying before December 31, 2025 makes sense. You’d get the deduction a full year earlier.
Home Office
This one trips people up. You can’t deduct your kitchen table where you sometimes do paperwork.
But a spare bedroom set up as your office? That could work. A corner of your garage where you store tools and handle your books? Maybe.
The IRS wants to see a space used regularly and exclusively for business. If your kids do homework there, it doesn’t qualify. If it’s dedicated to your business, it might.
The deduction is based on the square footage. A 200 square foot office in a 2,000 square foot house means you can deduct 10% of your mortgage interest, property taxes, utilities, insurance, and repairs.
In Montana, where heating bills run high in winter, that utility deduction adds up.
Phone and Internet
You use your phone for work. Calls with customers, texts with your crew, looking up specs, getting directions to job sites, ordering materials.
You can deduct the business portion. If 70% of your phone use is work-related, you can deduct 70% of your bill. Same goes for internet if you use it for invoicing, email, or ordering supplies.
Keep it reasonable and documentable. The IRS won’t believe 100% business use if you have a family.
Work Clothes and Safety Gear
Here’s where it gets specific.
Not deductible:
Regular clothes you could wear anywhere, even if you only wear them to job sites. Jeans, t-shirts, regular boots.
Deductible:
Steel-toed boots, hard hats, safety glasses, high-vis vests, work gloves, Carhartt coveralls, uniforms with your company logo.
The test is whether you could reasonably wear it somewhere other than work. Jeans fail that test. A hard hat passes it.
Insurance Premiums
The premiums you pay to protect your business are deductible:
• General liability insurance
• Commercial auto insurance
• Workers comp (required in Montana if you have employees)
• Tools and equipment coverage
• Bonding costs
If you’re self-employed, you may also be able to deduct health insurance premiums for yourself and your family. The rules are specific, so ask about your situation.
Other Deductions Montana Contractors Miss
Licenses and permits.
Your Montana contractor license, building permits, professional certifications—all deductible.
Continuing education.
Classes, certifications, trade publications that keep you current in your field.
Subcontractor payments.
What you pay subs is a business expense. Just make sure you’re issuing 1099s for anyone you pay $600 or more.
Bank fees and interest.
Business account fees, credit card processing fees, interest on business loans or your truck loan.
Advertising.
Your website, business cards, truck lettering, Home Advisor fees, Google ads—all deductible.
What Montana Contractors Miss Most
After 30 years of doing this, here’s where I see the most money left on the table:
Mileage.
Contractors drive constantly but don’t track it. A simple app fixes this, but most people don’t set one up until it’s too late.
Small purchases.
The $47 at Home Depot and $63 at the parts store add up to thousands over a year. But receipts get lost and expenses get forgotten.
Home office.
People assume they don’t qualify. Many do.
Retirement contributions.
You can contribute to a SEP IRA or Solo 401(k) and deduct it from your taxable income. This is one of the biggest tax advantages available to self-employed people, and most contractors aren’t using it.
The Bottom Line
You earned that money working in Montana’s heat and cold, on roofs and in crawl spaces. You shouldn’t pay more in taxes than you have to.
If you’re not sure what you can deduct—or you want someone to look at your situation and make sure you’re not missing anything—that’s what I’m here for.
Schedule a consultation: https://abundantskiestax.com/contact
Or call: (406) 609-4567
No judgment, no pressure. Just an honest look at what you might be leaving on the table.
Sue Thompson
Abundant Skies Tax & Accounting
Kalispell, Montana