Plumbing Company Deductions: The Van Stock, the Water Heaters You Resell, the Camera and Jetter, and the Permits

Plumbing is a parts-and-tools trade with a resale line, and its deductions follow the van and the water heater. The van stock — the trade's inventory question: fittings, valves, supply lines, traps, washers, cartridges, wax rings, PEX and copper by the length, and the common repair parts every service van carries — inventory in principle, expensed as consumed under the small-business method with a year-end count of the vans and the shop (the electrical deductions guide's van-stock discipline applies — a plumbing company's stock across three vans and a shop runs to tens of thousands at cost, and the distributor's year-end statement plus a shop count set the figure); job-specific parts (a faucet ordered for a job, a repipe's materials) are supplies expensed against the job, coded in the job-cost system (the construction bookkeeping guide). The resale line — fixtures and water heaters: plumbers sell and install water heaters, faucets, toilets, disposals, softeners, and filtration systems at a markup — the resale item's price is revenue when billed and its cost the expense, on separate lines, never netted (the HVAC deductions guide's equipment rule — a return showing "water heater margin" understates both revenue and cost and misstates the gross receipts every threshold runs on); a company that stocks water heaters (a few common sizes for same-day replacements) has them in inventory with the count; and the manufacturer and distributor programs (volume rebates as cost reductions or income; spiffs to technicians as payroll) follow the HVAC guide's treatment. The specialized equipment — the trade's expensive tools: drain cameras and locators (four-figure to five-figure systems), jetters (trailer-mounted or cart), cable drain machines, pipe threaders, press tools and jaws (a press tool system is a four-figure investment), pipe freezing kits, leak detection equipment (acoustic, thermal), trenchers for sewer replacements, and the hand tools — recovered by section 179 (income-limited; US$2,560,000 for 2026, phasing out above US$4,090,000 of purchases), bonus depreciation (100% for property acquired after January 19, 2025; no income limit), or MACRS (five or seven years), with the de minimis election for the hand tools and small items (items up to US$2,500 per invoice or item for a business without an applicable financial statement); a plumbing company's camera-and-jetter purchase is typically expensed in the year, and the equipment rental for a one-off job (a large excavator for a sewer line) is a job cost. The vans: outfitted service vans on actual expenses (a van carrying stock, a cable machine, and a press tool kit never favors standard mileage; over 6,000 pounds gross vehicle weight rating escapes the passenger caps; fleets of five or more must use actual), the outfitting (shelving, bins, the pipe rack) as equipment, and the log or tracker for business use. Licensing, permits, and inspections: the master and journeyman plumbing licenses and their renewals (state or local), the contractor's license, the continuing education the licenses require (the plumbing code cycle, backflow certification, medical gas where the company does it), the backflow tester certification and its test equipment, and — per job — the plumbing permits and inspections (job costs coded to the job, including the re-inspection when the first fails); the license bond. Labor: journeymen and apprentices on payroll (the plumbing entity guide — an apprentice is an employee by definition; a journeyman on the company's van and schedule is an employee), with workers' compensation at the trade's rate (trenches, sewer gas, lifting water heaters), the helper's classification, the after-hours and on-call pay for emergency service (overtime computed correctly on the technicians' pay structure — flat-rate and commission-paid technicians are employees with overtime obligations the payroll system must handle, the carpet cleaning classification guide's percentage-pay point), and subcontracted specialties (excavation, concrete cutting) with W-9s and 1099s. Emergency service and the pricing structure: after-hours calls at premium rates are revenue like any other; the flat-rate pricing book (a subscription) is software; and the technician's commission on the ticket is payroll. Disposal: old water heaters, fixtures, and excavated material — disposal and scrap fees as job costs, and the scrap value of copper and brass recovered from jobs is income (a company that sells scrap copper to a recycler has receipts to book — the trade's overlooked income line). Insurance: general liability with completed operations (a water heater installation that floods a home, a repipe that leaks behind a wall, a sewer replacement that fails — the trade's claims are water damage), the vans' commercial policies, tool and equipment coverage (theft from vans), workers' compensation, and the license bond — all deductible. Software and services: dispatch and scheduling, the flat-rate pricing platform, the camera inspection software (recordings for customers), the permit-tracking tools, and the payment processing. The shop: rent, or a thirty-nine-year building with improvements; the home-based plumber's exclusive garage or shop as a separate structure (the contractor home office guide), and the exclusive home office for dispatch and the books. Sales tax: the plumbing contractor is the consumer of materials in most states (tax paid on parts and fixtures at purchase; none charged on the installed work — the construction sales tax guide), with the fixtures-and-appliances line as the exception to know (a water heater, a disposal, or a faucet sold and installed may be tangible personal property taxed to the customer in some states, and the repair-versus-installation distinction some states draw applies), the retailer-rule states, and the exempt-entity certificates on institutional work. Entity and self-employment: plumbing is not a specified service trade — the QBI deduction applies at all income levels, with the wage-and-property limitation satisfied by any company with crew payroll and vans (the plumbing entity guide). The bookkeeping: vans on the fixed asset schedule with method and log; equipment on the schedule or under de minimis; parts inventory with the year-end van-and-shop count; resale items' revenue and cost on separate lines; permits and inspections as job costs; licenses and continuing education tracked; payroll with the technicians' pay structure and overtime handled; scrap income booked; disposal as job costs; insurance by policy; sales tax by sale type and state. The deductions plumbers miss or misbook: the water heater margin netted; the van stock expensed at purchase with no count; the camera system depreciated over seven years in a year that could have expensed it; scrap copper sold for cash and never booked (income the recycler's records show); permits in overhead; and the flat-rate technician's overtime computed wrong — or not at all.

Key takeaways

• Van and shop stock is inventory expensed as consumed with a year-end count; job-specific parts are job costs coded to the job.
• Fixtures and water heaters are a resale line — revenue and cost on separate lines, never netted; stocked heaters in the count; rebates as cost reductions, spiffs as payroll.
• The camera, jetter, press tools, and threaders are expensed in the year bought (section 179 or bonus) or depreciated; hand tools under de minimis; one-off equipment rentals as job costs.
• Vans on actual expenses (an outfitted van never favors standard mileage; heavy vans escape the caps; fleets of five or more must use actual), with the outfitting as equipment.
• Licenses, code-cycle continuing education, backflow certification, permits, and inspections are deductible compliance — permits as job costs, not overhead; scrap copper is income; disposal is a job cost.
• Not a specified service trade; the consumer rule governs sales tax in most states, with installed fixtures and appliances as the tangible-property exception.

The plumbing company's deduction file

Fixed asset schedule: vans (method, log, outfitting), cameras, jetters, press systems, threaders. De minimis election; hand-tool receipts. Inventory: parts by van and shop; stocked heaters; year-end count; distributor statement. Resale: revenue and cost by item; rebates; spiffs through payroll. Permits and inspections as job costs. Licenses, CE, backflow certification. Payroll: technicians' pay structure with overtime; apprentice and helper classification; sub W-9s and 1099s. Scrap income; disposal costs. Insurance by policy (completed operations, tools). Software. Shop or separate structure. Sales tax by sale type and state. The count and the resale lines are the two items that misstate a plumbing return most.

Worked example

A service-and-repipe plumbing company grosses US$980,000 with the owner, three journeymen, two apprentices, four vans, and a rented shop. Inventory: the December van-and-shop count — US$42,000 of parts and six stocked water heaters at cost, reconciled to the distributor's statement — sets cost of goods sold at parts consumed. Resale: US$186,000 of water heaters, fixtures, and softeners sold and installed — revenue and cost on separate lines (the prior owner's returns showed "fixture margin," understating gross receipts by six figures); a US$9,000 distributor rebate as a cost reduction; US$6,000 of manufacturer spiffs to technicians through payroll. Equipment: a new drain camera and locator system (US$14,500) and a press tool kit (US$4,200) under section 179; a trailer jetter bought last year on the schedule; cable machines and hand tools (US$5,800) under de minimis. Vans: four on actual expenses (a fleet of four — actual chosen; one bought this year over 6,000 pounds, expensed under bonus depreciation — 100% for property acquired after January 19, 2025 — with the shelving and pipe rack as equipment). Licensing: the master license renewal, the code-cycle continuing education for the owner and three journeymen, two backflow tester certifications with the test kit, the state contractor license and bond. Permits and inspections: US$21,000 coded to jobs (the repipe line's re-inspections visible in the job cost report). Labor: three journeymen and two registered apprentices on payroll with workers' compensation at the trade's rate, the flat-rate technicians' commission pay run through a payroll system that computes overtime on it; an excavation sub for two sewer replacements with a W-9 and a 1099. Scrap: US$4,100 of copper and brass sold to a recycler — booked as income (the prior owner had pocketed it). Sales tax: consumer rule; the state treats installed water heaters as real property improvements, but disposals sold and installed as tangible personal property taxed to the customer — tracked by item. Net profit lands in the low six figures — an S corporation with the owner's salary from a master plumber's wage plus management (the entity guide), the QBI deduction in full.

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 — frequently asked questions, https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations-frequently-asked-questions

Practitioner note

A plumbing company's return is a van stock that has to be counted, a resale line that must never be netted, and a scrap pile that is income whether or not it went through the bank — and the errors we inherit are all three. Our plumber files count the vans and the shop in December, put water heaters and fixtures on separate revenue and cost lines, expense the camera and the press tools in the year bought, and run the flat-rate technicians' commission through a payroll that computes overtime on it — because the fixture margin netted on the prior owner's return understated gross receipts by six figures.

See also: For related guidance, see plumbing estimated taxes, from the freeze week to the van-and-jetter year; and browse every small business tax guide, by situation.

Next step

Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk handles plumbing company returns and bookkeeping — van stock inventory with counts, resale fixture and water heater accounting, equipment elections, vehicle method, licensing and permit treatment, technician payroll with overtime on flat-rate pay, scrap and disposal, and sales tax by item. See pricing or book a call.