Running a contracting or trade business in North Carolina isn’t easy. Between unpredictable income, rising material costs, and constant compliance challenges, taxes often take a back seat—until it’s too late.
Whether you’re an electrician in Huntersville, a general contractor in Charlotte, or a one-person plumbing operation in Asheville, Polaris Tax & Accounting is here to help you plan smarter, stay compliant, and keep more of what you earn.
1. Choose the Right Entity for Your Business
Many contractors default to sole proprietorships or LLCs without understanding the long-term tax impact.
Here’s the truth: Once you’re consistently netting $50,000+ in profit, staying as a sole prop or single-member LLC could be costing you thousands in unnecessary self-employment taxes.
Recommended structure:
- LLC taxed as an S Corp
- Pay yourself a reasonable salary
- Take additional income as distributions (not subject to SE tax)
✅ Schedule a consultation to see if S Corp status makes sense for your NC contracting business
2. Track Your Expenses the Right Way
You likely have dozens of deductible expenses:
- Tools and equipment
- Jobsite mileage and travel
- Materials not reimbursed by clients
- Home office (if you store inventory or dispatch from home)
- Subcontractor labor
- Business insurance
- Cell phone and data usage
But if you can’t back it up with receipts and records, the IRS won’t let you deduct it.
📌 Explore our NC bookkeeping services for trades
3. Use a Real Payroll System (Not Cash or Zelle)
If you’re paying workers “under the table” or through apps like Venmo/Zelle without issuing proper 1099s or running payroll, you’re sitting on a tax time bomb.
Risks include:
- IRS penalties for misclassifying employees
- No deduction for labor without proper documentation
- State reemployment tax audits (North Carolina is aggressive)
Let us help you set up compliant payroll through Gusto or QuickBooks.
4. Don’t Forget Quarterly Estimated Taxes
Contractors with variable income often forget to pay quarterly. That leads to big surprises (and penalties) at tax time.
Rule of thumb:
- Pay 25% of your expected annual tax liability each quarter
- Use your YTD profit to estimate
Need help calculating it? 📘 Learn the difference between tax projections and tax prep
5. Vehicle Deductions Done Right
Work trucks, vans, and SUVs over 6,000 lbs may qualify for accelerated depreciation under Section 179. But the IRS is cracking down on abuse.
To deduct vehicle expenses, you must:
- Log mileage (business vs. personal)
- Prove business use over 50%
- Keep purchase, loan, and insurance records
We’ll help you evaluate whether to use the actual expense method or standard mileage.
6. North Carolina Tax Trends to Watch
State Income Tax Rate Decrease:
- 2024: 4.5%
- 2025: 4.25%
- 2026: 3.99% (planned)
Contractors with pass-through entities like S Corps will directly benefit from these reductions. Planning ahead can help you reinvest more in your business.
📘 Get the full breakdown of NC income tax changes
7. Avoid These Common Mistakes
- Paying subcontractors without issuing 1099-NECs
- Not separating business and personal accounts
- DIY bookkeeping with no audit trail
- Waiting until tax season to figure out your numbers
Build a Business That Doesn’t Break You at Tax Time
You work hard on the job site. Let Polaris make sure that effort translates into smart financial decisions and lasting tax savings.
With clients across North Carolina—including general contractors, roofers, plumbers, and HVAC pros—we know the trades and how to support them.
📅 Schedule a strategy session today
Let’s make 2025 your most profitable and organized year yet.