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Most trades contractors think about taxes twice a year: April 15th and whenever something goes wrong. July doesn’t make that list, and that’s exactly the problem. By the time Q4 rolls around, the moves that actually save money are mostly off the table.
If you run an HVAC, plumbing, or electrical business in the DFW area, mid-year is the most useful tax window you’re not using. Here’s what a real mid-year tax check-in for HVAC, plumbing, and electrical contractor looks like and what to actually do with the results.
July sits at the halfway point of the year with enough actual data to make real projections and enough time left to act on them. That combination doesn’t exist in October.
For HVAC contractors, July is usually peak revenue season. That’s a good thing for the business and a tricky thing for the tax bill. High-revenue months mean your full-year income estimate is probably higher than what you filed last year, which means your Q3 estimated payment (due September 15) needs to reflect that, not just mirror last year’s number.
Plumbers and electricians tend to have steadier year-round revenue but face the same timing problem: if you wait until Q4 to check your position, you’re left with fewer deduction opportunities and less time to make equipment purchases that affect this year’s return. A July check-in keeps you from making those decisions in a panic.
The IRS requires self-employed contractors and business owners to pay taxes quarterly rather than once at filing. Q3 covers income earned from June 1 through August 31, with the payment due September 15, 2026.
The safe harbor rules matter here. If you pay at least 100% of last year’s total tax liability across four equal payments, the IRS won’t charge an underpayment penalty even if you end up owing more when you file. That threshold rises to 110% of last year’s liability if your adjusted gross income was over $150,000. Paying last year’s number on time protects you from penalties but doesn’t protect you from a large balance due in April.
If your revenue this year is meaningfully higher than last year, using only the safe harbor amount and ignoring the rest is a strategy that ends with a surprise bill in April. July is when you recalculate based on actual year-to-date numbers.
Pull your year-to-date profit and loss statement through June 30. That’s the foundation. From there, a rough year-end projection isn’t complicated: annualize your first-half net income, apply your effective tax rate from last year, and compare that number to what you’ve actually paid in estimated taxes so far.
For most sole proprietors and single-member LLCs, self-employment tax alone runs 15.3% on net earnings (covering both the employee and employer share of Social Security and Medicare), on top of ordinary income tax. S-corp owners pay SE tax only on their salary, not on distributions, which is one reason the S-corp election comes up so often for trades businesses clearing $80,000 or more in profit.
If that conversation is relevant to your situation, our S-corp tax calculator gives you a starting point for what the split might save.
Let’s look at an example. A Fort Worth plumber running as a single-member LLC nets $180,000 through June. Annualized, that’s $360,000 in profit. At a combined federal effective rate of around 28% plus SE tax, the full-year liability could easily run $120,000 or more. If they’ve only made two $15,000 estimated payments, they’re looking at a $90,000 shortfall heading into Q3. Catching that in July means time to adjust.
Any equipment, vehicle, or tool your business buys and places into service before December 31 counts for this tax year. That means July, August, September, and October are all live windows for depreciation planning.
Section 179 lets qualifying businesses deduct the full cost of eligible equipment in the year of purchase rather than depreciating it over several years. The annual deduction limit is over $1 million for most small businesses (the exact figure is inflation-adjusted each year by the IRS). Qualifying purchases include new and used equipment, service vehicles, and most business machinery.
Bonus depreciation is a separate first-year expensing option that has been phasing down under current federal tax law. The rate that applies to your 2026 purchases depends on when the equipment is placed in service and whether any recent legislation has changed the schedule. This is worth a direct conversation with your CPA before you buy, because the answer affects how much of that purchase hits your 2026 return versus future years.
For HVAC, plumbing, and electrical contractors, the most common mid-year purchase decisions involve service trucks, diagnostic equipment, and job-site tools. If you’ve been delaying a purchase you actually need, check the depreciation implications before December to make the timing work in your favor.
A clean P&L through June gives you three numbers that matter for tax planning: gross revenue, cost of goods sold (parts, materials, and direct labor), and net operating income. The gap between gross revenue and net operating income is where most trades businesses have the most leverage.
Gross margin for HVAC service businesses typically runs between 45% and 55% on labor and 20% to 30% on parts and equipment. If your mid-year gross margin is sitting below those ranges, the issue is usually pricing, parts markup, or both, and fixing it in July has a bigger effect on annual profit than fixing it in November.
For electricians and plumbers, a useful mid-year check is comparing job cost per project to bids. If actual job costs are consistently running 10% to 15% over estimates, that’s a bidding problem, not just a cost problem. It shows up in the P&L as compressed margin that looks normal until you run the comparison.
Several legitimate deductions require action before year-end, not just documentation at tax time. A mid-year review is the right moment to confirm those are on track.
Home office deduction: if you run dispatch, scheduling, or administrative work from a dedicated space at home, that square footage may qualify. The deduction requires the space be used regularly and exclusively for business. If you’ve been using it but haven’t been documenting it, fix that now.
Vehicle mileage and actual expense tracking: the IRS standard mileage rate for 2025 was 70 cents per mile for business use (the 2026 rate is set annually by the IRS and may differ slightly). You have to choose between the standard mileage method and the actual expense method at the start of the year and stick with it. If you haven’t been tracking mileage for a vehicle used for work, you’re leaving a deduction behind.
Retirement contributions: SEP-IRA contributions for self-employed contractors can be made up to the filing deadline (including extensions), but planning for them mid-year prevents the cash-flow surprise of funding one in April. A SEP-IRA allows contributions up to 25% of net self-employment income, with a 2025 limit of $70,000. That’s a meaningful deduction for a high-earning trades business.
If you want to run the numbers on deductions for your specific situation, our deduction decision tool is a useful starting point.
None of the planning above works if the books aren’t current. This sounds obvious, but most of the trades contractors who reach out to us in October with tax questions are working from books that haven’t been reconciled since February.
A mid-year check-in requires reconciled bank and credit card accounts through at least May, all job costs matched to the right revenue, vehicle and equipment purchases coded correctly (because they hit depreciation, not just expenses), and owner draws or payroll recorded accurately. If your books are behind, the first step is catching up before doing any tax projection.
Our Fort Worth bookkeeping team handles exactly this kind of catch-up work for trade businesses.
Finding out your tax bill is going to be larger than expected in July is a good thing compared to finding out in April. There’s still time to act.
If you’re projected to owe significantly more than your estimated payments cover, you can increase your Q3 and Q4 payments to close the gap, evaluate whether an equipment purchase makes sense before year-end, look at retirement contribution options that reduce taxable income, and revisit your entity structure if you’re still operating as a sole proprietor or single-member LLC at meaningful income levels.
If you’re projected to overpay, that’s worth knowing too. Overpaying estimated taxes is an interest-free loan to the IRS. You can reduce your Q3 payment, put that cash to work in the business, and still come out flat at filing.
The contractors who end April with no surprises are almost always the ones who did this check-in in July. If you want to run through your numbers with us, we’re available for exactly this kind of mid-year conversation.
Reach out to our team at Adam Traywick and we’ll take a look at where you actually stand.
Adam Traywick, CPA is the President and founding CPA of Adam Traywick, LLC, a Adam Traywick CPA small-business accounting firm. He has over 20 years of experience helping small business owners across home-services trades, hair salons, real estate, and insurance agencies optimize taxes, run cleaner books, and avoid the surprises that come from once-a-year accountants.
