If you run a construction or contractor business, there's a good chance that most of your actual work happens somewhere other than your home. You're at jobsites, meeting customers, checking on crews, picking up materials or handling everything else that comes with running the business.

But you may still be doing quite a bit of the administrative side of the company from home.

If you have a small home office that qualifies as your principal place of business, there may be more tax benefit to that office than simply deducting a portion of your household expenses. One of the bigger benefits can be the treatment of your business mileage.

A Small Home Office Can Still Qualify

You don't necessarily need an entire room dedicated to the business. Your office can be a smaller, separately identifiable area of your home, and it doesn't need to be separated by a permanent wall. The important part is that the area is used regularly and exclusively for your business.

For example, maybe you run an HVAC, plumbing, electrical or construction company and spend most of the day out in the field. At home, you have a small office where you regularly handle estimates, scheduling, ordering materials, reviewing the books, paying bills and working through the administrative side of the company.

Those are the types of administrative and management activities the IRS looks at when determining whether your home office can qualify as your principal place of business. You generally also can't have another fixed location where you conduct substantial administrative or management work.

If you have a shop or warehouse, that doesn't necessarily mean the home office is out. The details of what you're actually doing at each location matter a lot, though.

Additional Tax Savings Opportunity

The home-office deduction itself allows you to deduct qualifying expenses related to the business portion of your home. If the office is fairly small, that deduction may not be huge.

An additional, sometimes substantial, deduction for you can come down to your vehicle mileage. Normally, driving from your home to your regular place of work is considered commuting and is not deductible travel. But if your home office qualifies as your principal place of business, travel from that home office to another work location in the same business can generally be treated as business transportation.

For example, let's say you start your morning in your home office, drive 20 miles to a project and eventually drive 20 miles back home.

If the home office qualifies and those 40 miles are business transportation, the IRS standard mileage rate of 76 cents per mile (the rate for July 1 through December 31, 2026; the first half of the year is 72.5 cents) would equal a $30.40 business mileage deduction for that day. Over 100 similar workdays, that's $3,040 of additional business mileage.

What if Your Construction Company Is an S Corporation?

For many of our construction and contractor clients, the business is operating as an S Corporation.

If that's you, the particulars are a little different. You generally aren't simply taking an employee home-office deduction on your personal tax return. Instead, your accountant may have the S Corporation reimburse qualifying business expenses through an accountable plan.

An accountable plan basically means you document the business expenses, submit them to the company and have the business reimburse you properly. When the rules are followed, those reimbursements aren't treated as taxable wages to you.

Summary

Although the home office deduction itself may provide some tax savings, the additional mileage deductions unlocked can really add up.

This doesn't mean that putting a desk in your house automatically makes every drive deductible. For a construction business owner, it's important to ensure you have a legitimate home office that you're regularly using to run the administrative side of your company.

If you do, making sure it's set up and documented correctly may help you capture home-office expenses and potentially a much larger amount of legitimate business mileage.

Make sure you talk with your tax preparer or accountant before changing how you're treating your home office or vehicle mileage. There are details that aren't all covered here, and your business structure and how you use each location can change the answer.