Cabinet Shop Deductions: The CNC Router, the Saws, the Sheet Goods, and the Install Van

Cabinet work sits between manufacturing and construction, and its deductions borrow from both. The shop equipment: the CNC router (the largest single purchase most shops make), the sliding table saw, the edge bander, the wide-belt sander, the line boring machine, the spray booth and finishing equipment, dust collection, and the hand and power tools — all depreciable business property, with three ways to recover the cost: section 179 expensing (the annual limit and its phase-out — US$2,560,000 for 2026, reduced dollar-for-dollar once equipment purchases exceed US$4,090,000, both raised and made permanent by the 2025 law — let a shop expense most or all of a year's equipment purchases in the year placed in service, limited to the business's taxable income), bonus depreciation (the special depreciation allowance — restored to 100% and made permanent for property acquired after January 19, 2025 — with no taxable-income limit, so it can create a loss), and regular MACRS depreciation over the equipment's recovery period (seven years for most woodworking machinery) where the shop prefers to spread the deduction; the choice is made asset by asset on the first return after purchase, with the year-one write-off usually right for a profitable shop and the spread usually right for a shop in a low-income year that will be in higher brackets later. The de minimis safe harbor: items under the per-invoice threshold (US$2,500 per invoice or item for a business without an applicable financial statement) are expensed outright with the annual election on the return — router bits, clamps, jigs, blades, small tools, and the shop's consumables never touch the depreciation schedule. The materials — the cabinet shop's distinctive question: sheet goods (plywood, MDF, melamine), solid lumber, hardware (hinges, slides, pulls), finishes, and adhesives run 40% to 60% of revenue on custom work, and they are either job-specific (bought for a job and consumed on it — supplies expensed against that job's revenue, coded to the job in the job-cost system the construction bookkeeping guide describes) or stock (the sheet goods and hardware kept on hand across jobs — inventory in principle); a shop under the small-business gross-receipts threshold may treat inventory as non-incidental materials and supplies (deducted when used or consumed) or conform to its book method, so most shops expense materials as consumed and take a year-end count of stock to reconcile — the count matters because a shop that buys heavily in December for January jobs and expenses it all has deducted January's materials in the prior year, a timing position the small-business method permits but the shop should understand. The install side: the install van or truck (standard mileage or actual expenses — the vehicle method choice the home office guide covers, with actual expenses and section 179 or bonus depreciation for a newly purchased work vehicle over 6,000 pounds gross vehicle weight rating, which escapes the passenger-vehicle depreciation caps), the install tools (a second set of levels, drills, and clamps that live in the van — expensed under the de minimis election), and the mileage between the shop and job sites (business mileage from the shop as the business location). The shop space: a rented shop is rent (deductible as paid); an owned shop is a building depreciated over 39 years (nonresidential real property — no bonus or 179 on the structure itself) with its improvements analyzed separately (some interior improvements qualify for faster recovery; a cost segregation study on a purchased building can reclassify components — the FIRPTA cost-seg guide's principle applied domestically); a shop in a building attached to the owner's home (a garage or outbuilding) is the home office rules' separate-structure case, deductible on the business-use percentage. Labor and subcontractors: shop employees on payroll (with the workers' compensation that a woodworking shop's injury profile makes expensive and mandatory), installers who may be employees or subcontractors (the classification tests — an installer who works only for the shop, on its schedule, with its van, is an employee; an independent installer with their own business and other clients is a subcontractor with a W-9 and a 1099 — the subcontractor guide), and the finishing subcontractor many shops use. Other deductions: liability insurance and the shop's property coverage; software (design and CNC programming subscriptions — expensed as paid); the showroom or samples (display cabinets built for the showroom are business property; sample doors and finish boards are supplies); vehicle and equipment loan interest; licensing (the contractor's license where cabinet installation requires one); marketing (the website, the design-center listings); and waste disposal (the dumpster contract). Sales tax: cabinets are tangible personal property until installed — and the sales tax treatment of installed cabinets varies by state (the construction sales tax guide) between the contractor-as-consumer rule (tax paid on materials, none charged) and treatment of the installed cabinets as a retail sale in some states — a shop that sells cabinets uninstalled (to a contractor or homeowner who installs) is a retailer collecting sales tax on those sales regardless. Entity and self-employment: a cabinet shop is not a specified service trade, so the qualified business income deduction applies at all income levels (subject to the wage-and-property limitation, which a shop with payroll and equipment usually satisfies); the S election arithmetic (the entity guide) turns on profit above a reasonable salary for a cabinetmaker-owner. The bookkeeping that supports all of it: job costing with materials coded to jobs, a fixed asset schedule with each machine's method and recovery period, the year-end stock count, the installer classification documented, and the sales tax status by sale type.

Key takeaways

• Shop machinery is recovered by section 179 (income-limited), bonus depreciation (no income limit — 100% and permanent under the 2025 law), or seven-year MACRS — chosen asset by asset on the first return after purchase, with year-one write-offs for profitable shops and spreading for low-income years.
• Small tools and consumables are expensed under the de minimis election (US$2,500 per invoice or item); they never touch the depreciation schedule.
• Materials are 40–60% of revenue and mostly expensed as consumed under the small-business inventory method, coded to jobs, with a year-end stock count to reconcile — understanding the December-purchase timing position.
• The install van and tools follow the vehicle rules (method chosen in year one; heavy work vehicles escape the passenger caps); an owned shop is a 39-year building with improvements analyzed separately.
• Installers are classified honestly: employees on payroll with workers' comp, or genuine subcontractors with W-9s and 1099s.
• Not a specified service trade — the QBI deduction applies at all income levels; sales tax on installed cabinets varies by state and uninstalled sales are retail sales.

The cabinet shop's year-end checklist

Fixed asset schedule: every machine with method and recovery period; new purchases with the 179/bonus/MACRS decision. De minimis election on the return; small-tool receipts filed. Materials: job-coded consumption reconciled; year-end stock count. Van: method, mileage log, outfitting. Shop: rent or depreciation and improvements. Payroll and workers' comp; installer classification documented; 1099s for subcontractors. Sales tax status by sale type. QBI wage-and-property limitation inputs. The schedule and the count are the two items a preparer can't build in April.

Worked example

A two-person custom cabinet shop grosses US$620,000: materials US$290,000, one employee, an independent installer, a rented shop, and this year's purchases — a CNC router (US$68,000) and a new install van (US$52,000, over 6,000 pounds). Equipment: the router is expensed in full (bonus depreciation, no income limit needed — the shop is profitable, so section 179 would also work; bonus is chosen to avoid the 179 recapture rules if business use ever drops); the van is expensed under actual expenses with bonus depreciation on the business-use percentage (95%), the heavy-vehicle rating escaping the passenger caps; router bits, blades, clamps, and the second install toolset (US$6,100 across many invoices) expensed under the de minimis election. Materials: coded to jobs, expensed as consumed; the December stock count (US$14,000 of sheet goods and hardware for January jobs) is reconciled and the timing position understood. Shop rent deducted; the employee's payroll and workers' compensation deducted; the installer — his own business, three other shops as clients, his own tools and truck — a subcontractor with a W-9 and a 1099-NEC. Sales tax: the shop's state follows the consumer rule for installed work (tax paid on materials) and treats the occasional uninstalled sale to a contractor as a retail sale with tax collected — both tracked by sale type. Net profit after the equipment write-offs lands in the low six figures with a loss avoided; the QBI deduction applies in full (not a specified service trade; payroll and equipment satisfy the limitation); the S election analysis, run against a cabinetmaker-owner's reasonable salary, says elect next year when the equipment write-offs stop depressing profit. His preparer's prior-year note — the router bits had been capitalized and depreciated over seven years, and the installer had been paid without a W-9 — is the reason the checklist exists.

Official sources

Publication 946 states that "this publication explains how you can recover the cost of business or income-producing property through deductions for depreciation (for example, the special depreciation allowance and deductions under the Modified Accelerated Cost Recovery System (MACRS))," and covers the section 179 election and its limits. — Internal Revenue Service, Publication 946, How To Depreciate Property, https://www.irs.gov/publications/p946

The IRS states that under the de minimis safe harbor, "if you don't have an applicable financial statement (AFS), you may use the safe harbor to deduct amounts up to $2,500 ($500 prior to Jan. 1, 2016) per invoice or item (as substantiated by invoice)," with the election made annually on a timely filed return. — Internal Revenue Service, Tangible property final regulations, https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

Practitioner note

Cabinet shops are manufacturers on one wall and contractors on the other, and their deductions split the same way — machinery recovered by the election that fits the year, materials expensed as consumed with a December count, and an install side that runs on the vehicle and classification rules. Our shop files carry a fixed asset schedule with every machine's method, a de minimis election every year, and an installer classification memo — because the router bits capitalized over seven years and the installer paid without a W-9 are the two errors we inherit most.

See also: For related guidance, see the cabinet installation entity decision (S corporation or Schedule C); and browse every small business tax guide, by situation.

Next step

Fairlight handles cabinet and millwork shop returns and bookkeeping — equipment depreciation elections, job-coded materials with inventory method, vehicle and shop space treatment, installer classification, and sales tax by sale type. See pricing or book a call.