Construction Tax Planning methods matched to your contracts.
For contractors who want their accounting methods, equipment purchases, and entity structure working together before year-end.
Construction tax planning starts with method, not deductions. Long-term contracts generally use the percentage-of-completion method, which taxes income as the work progresses. Smaller contractors that meet a gross receipts test may qualify for an exception that opens other methods, such as completed-contract, for qualifying contracts. Equipment purchases, owner pay, and entity choice add more moving parts. TreeStar reviews your contracts, job data, and growth plans, helps you choose methods and timing that fit, and models the federal and California results before you commit.
Where it gets complicated
- 01 Contract method choice
Whether you use percentage-of-completion, completed-contract, or another permitted method changes when income is taxed. The right answer depends on your size and contract types.
- 02 Crossing the size line
Growth can push a contractor past the gross receipts test, which may require a different method for new contracts. Planning ahead avoids a scramble.
- 03 Billing does not move income
Under percentage-of-completion, holding invoices until January generally does not change when income is taxed. Owners who expect it to are often surprised.
- 04 Equipment and vehicles
Trucks, excavators, and tools may qualify for immediate federal expensing under 2025 law, while California depreciation follows its own rules. Large purchases need both returns in view.
- 05 Entity and owner pay
Many contractors operate as S corporations, which raises reasonable compensation questions and shapes how profit flows to owners.
How TreeStar helps
We review your contract types and gross receipts to identify the methods available and whether a change makes sense.
→ tax_planning Project year-end resultsWe project taxable income from your WIP and job data and test timing choices before December closes.
→ growth_capital_planning Plan equipment purchasesWe model the tax and cash effects of buying, financing, or leasing equipment across your federal and California returns.
→ s_corporation_tax Fit the entity to the businessWe evaluate S corporation status, owner compensation, and multi-entity structures such as a separate equipment company.
→What you can expect
Contract methods reviewed against your size and work
Year-end choices made with job data in hand
Equipment plans that account for both returns
Common questions
Do all contractors have to use percentage-of-completion?
No. It is generally required for long-term contracts, but smaller contractors that meet a gross receipts test, and certain home construction contracts, may qualify for other methods. Eligibility depends on your facts, which we review with you.
Can we change our accounting method?
Often, yes. Method changes generally require IRS consent, usually requested on Form 3115, and some changes qualify for automatic consent. We assess whether a change helps before anything is filed.
Should we buy equipment before year-end?
It depends on your income, your cash, and whether you need the equipment. Expensing can lower this year's federal tax, but a purchase should make business sense first, and California treats depreciation differently.
Need a referral?
We work alongside the attorneys, consultants, and other specialists your industry relies on. Tell us what you need and we will make an introduction.
Bonding capacity, bid bonds, and performance bonds.
→ request_referral Construction attorneyContracts, liens, disputes, and licensing questions.
→ request_referral Contractor insurance brokerGeneral liability, workers' comp, and builder's risk.
→ request_referral Contractor licensing consultantLicense applications and classifications.
→Construction & Trades insights
A contractor's guide to California public works: DIR registration, prevailing wage rates, certified payroll, eCPR filing, apprentices, and clean books.
→
How a WIP schedule is built, what over and under billings signal, why sureties and banks read it closely, and a monthly routine to keep it current.
→