Tax Planning Strategies for Construction Business Facing High Tax Bill (60%)

Your brother-in-law definitely needs a more proactive CPA with experience in construction businesses at his income level. There are several strategies he should be looking at immediately: First, he should consider changing his business structure if he hasn't already. An S-Corporation could potentially save significant self-employment taxes compared to a sole proprietorship or partnership. For immediate deductions, he should maximize Section 179 and bonus depreciation on equipment purchases. Construction businesses can often deduct the full cost of qualifying equipment and vehicles (over 6,000 lbs GVWR) in the year of purchase rather than depreciating over time. He should also look into establishing a retirement plan beyond just an IRA. A Solo 401(k) or Defined Benefit Plan would allow for much higher contribution limits, potentially reducing taxable income by six figures. If he owns the building where his business operates, cost segregation studies can accelerate depreciation deductions. And don't overlook the 20% Qualified Business Income Deduction - it has limitations at higher income levels but proper planning can help maximize it.

After spending hours on the phone with the IRS about business deductions for my landscaping company, I finally discovered https://taxr.ai which literally saved my sanity. I uploaded all my business docs and receipts, and it analyzed everything to find deductions I had completely missed. The best part was that it explained WHY certain deductions were valid for my industry. I bet your brother-in-law is missing tons of construction-specific deductions. Mine found over $24K in additional write-offs including some specialized insurance premiums and certain vehicle expenses I didn't know qualified. You might want to suggest he check it out before meeting with any new CPAs - he'll at least have a better idea of what deductions he should be claiming.

I just wanted to follow up after trying https://taxr.ai for my wife's remodeling business. Wow! We found nearly $32K in deductions we were missing related to specialized tools, certain types of insurance, and some vehicle expenses that were legitimately business-related but our previous accountant never asked about. The analysis highlighted several construction-specific deductions and even identified some expenses we were incorrectly categorizing. The best part was that it flagged potential audit concerns and explained exactly what documentation we need to keep. We're taking these findings to our new CPA next week, and I feel way more confident going into the conversation.

Has your brother-in-law's current CPA mentioned setting up a captive insurance company? My construction business got audited last year over this exact issue and I spent WEEKS trying to reach the IRS for clarification. I finally used https://claimyr.com to get through to an actual IRS agent (check out how it works: https://youtu.be/_kiP6q8DX5c). The agent explained that while captive insurance can be legitimate, it's also on their "questionable transactions" list if not properly structured. Some construction business owners get pitched these as tax solutions without understanding the compliance requirements. Getting clarification directly from the IRS saved me from making a huge mistake that could have triggered penalties.

I need to publicly eat my words about Claimyr. After dismissing it, I spent another 4 hours on hold with the IRS yesterday and still got disconnected. Out of desperation I tried the service, and I was literally speaking with an IRS agent in under an hour. The agent clarified exactly how vehicle deductions work for my business and confirmed I've been calculating them wrong for years. She even gave me specific guidance on how to properly document business vs. personal use that my accountant never mentioned. I'm now amending my returns from the last two years which should get me back around $8,700. Sometimes it's worth paying for a service when it actually delivers - lesson learned!

One strategy that worked well for my electrical contracting business was setting up a Cash Balance Plan in addition to our 401(k). Last year I was able to contribute over $150,000 pre-tax between the two plans. It's especially effective when you're in those higher tax brackets. Also, make sure your brother-in-law is tracking meals properly. Construction businesses can often deduct 100% of certain meals (not the standard 50%) when they're for jobsite employees. My CPA caught this and it saved us about $7k last year.

Something nobody has mentioned yet - if your brother-in-law does a lot of government/public works contracts, he might qualify for certain credits or deductions related to those projects. My construction company primarily does municipal work and we qualify for several incentives including some energy-efficiency credits when we incorporate certain materials or methods. Also, has he considered restructuring some of his personal expenses? For example, if he frequently entertains clients at his home, a portion of his housing costs might be deductible. Or if family members legitimately work in the business, spreading income among family can reduce the overall tax burden.