--- title: "What Your CPA Isn't Telling You If You Own an HVAC or Roofing Business" meta_title: "What Your CPA Isn't Telling HVAC and Roofing Owners" feed_title: "What Your CPA Isn't Telling You If You Own an HVAC or Roofing Business" date: "2026-06-30T08:00:00Z" updated: "2026-06-30T08:00:00Z" reviewed: "2026-06-30T08:00:00Z" author: "Mia Anne Pham Reeves, CPA" description: "Six tax conversations HVAC and roofing owners should have with a CPA: S Corp timing, reasonable salary, equipment write-offs, clean books, and exit planning." tags: ["HVAC business taxes", "roofing business taxes", "trades businesses", "S Corp election", "reasonable compensation", "Section 179", "bonus depreciation", "bookkeeping", "exit planning", "tax strategy"] sources: - "IRS Self-Employment Tax (Social Security and Medicare Taxes): https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes" - "IRS About Form 2553 - Election by a Small Business Corporation: https://www.irs.gov/forms-pubs/about-form-2553" - "IRS S Corporation Compensation and Medical Insurance Issues: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues" - "IRS Publication 946 - How To Depreciate Property (Section 179 and bonus depreciation): https://www.irs.gov/publications/p946" - "IRS Publication 583 - Starting a Business and Keeping Records: https://www.irs.gov/publications/p583" - "IRS Data Book (examination coverage by return type): https://www.irs.gov/statistics/soi-tax-stats-irs-data-book" - "IRS Instructions for Schedule D (Qualified Small Business Stock, Section 1202): https://www.irs.gov/instructions/i1040sd" canonical: "https://www.havenstoneadvisory.com/resources/blog/what-your-cpa-isnt-telling-you-hvac-roofing" --- > If you own an HVAC, roofing, or trades business, how your company is structured and how you pay yourself can change your tax bill by tens of thousands of dollars a year. Most of it is decided long before you file. **Watch the video above**, then use this guide to have the six conversations your CPA should be starting with you. Want to compare structures side by side first? Open the **[Entity Structure Matrix](/resources/guides/entity-matrix)**. --- # The quick take Filing your return documents what already happened. Protecting your money happens earlier, during the year, through decisions your accountant should be raising with you: - **Your LLC is a legal shell, not a tax plan.** An **S Corp** election, when your numbers support it, can lower self-employment tax. - **How you pay yourself matters.** A reasonable salary plus distributions is treated differently than one lump of profit. - **Trucks, trailers, tools, and equipment** may qualify for a first-year deduction, and the timing of the purchase changes the year you get it. - **Clean books** are what let anyone plan ahead instead of cleaning up last quarter. - **A sale is a tax event.** Buyers want clean accrual books, and the biggest exit savings need years of runway. - **A preparer files; a strategist plans.** If you only hear from your CPA in April, you have the first, not the second. If your business clears a million dollars in revenue and nobody has walked you through these, that is the gap this guide is meant to close. Build the year-round version with a **[proactive business tax strategy](/services/business-tax)**. --- # 1. Your LLC is a legal shell, not a tax plan A lot of owners set up an LLC, get the paperwork done, and assume taxes are handled. An LLC is a legal designation. It is not automatically a tax plan. I have sat with roofing and HVAC owners doing well over a million dollars in revenue who still filed as a **sole proprietor**. Every dollar of profit was exposed to self-employment tax. None of them were doing anything wrong. They were running crews, climbing ladders, and keeping the business moving, and nobody had explained what was happening underneath. By default, a single-member LLC is taxed as a sole proprietor. That means profit is subject to **self-employment tax of 15.3%** for Social Security and Medicare, on top of income tax, up to the Social Security wage base each year (per the [IRS self-employment tax guidance](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)). The fix, when the numbers support it, is often an **S Corp** election. That does not change your legal structure. It changes how your income is classified. You pay yourself a salary, and remaining profit can come out as a distribution that is not subject to self-employment tax. For a roofing business netting around $300,000, that difference may be roughly $15,000 to $25,000 a year, depending on your facts. This is the kind of election worth modeling once net profit is sustained near $80,000. It is also worth noting that IRS examination data has historically shown Schedule C sole proprietors facing higher audit coverage than S corporations, so structure affects tax, risk, and how much you keep. If this is new to you, start with **[why your LLC may be costing more than you think](/resources/blog/why-your-llc-is-costing-you-more-than-you-think)**, then bring the numbers to your CPA. --- # 2. How you pay yourself can cost or save you thousands Getting the S Corp election right is only half of it. What you do next is where owners give the savings back. I have asked owners with a correctly formed S Corp how much they paid themselves, and heard "about ten thousand" on a business that had already netted a quarter million. The reason is almost always the same: you are busy, and running your own payroll feels like the last thing on the list. The IRS does not weigh how busy you are. Once you have an S Corp, it requires a **reasonable salary** ([IRS S corporation compensation guidance](https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues)). There is no single correct figure. You support the number with your role, your hours, your revenue, your responsibilities, and compensation data for similar work. For an owner-operator of an HVAC company doing around $1.5 million in revenue, that salary might commonly land somewhere between $70,000 and $100,000, with profit above it treated as a distribution. Your facts drive the number. Here is the mechanic, using round numbers for illustration. Say the business nets $250,000 and you take a $90,000 salary. Payroll taxes apply to the salary, while the remaining profit can come out as a distribution with no self-employment tax. Compare that with a sole proprietor, where profit is exposed to self-employment tax up to the Social Security wage base. The gap in a year can be real, often in the five figures, though the exact amount depends on the wage base, your state, and your numbers. See [how we think about tax savings](/tax-savings-methodology) for why we never quote a guaranteed figure. There is a limit on the other side. Set your salary too low relative to what the business earns and what you actually do, and the IRS can question it and reclassify distributions as wages. So do not guess. Sit down with your CPA, look at your profit and your role, and document how you arrived at the number. --- # 3. Your trucks, trailers, and equipment may be under-deducted Now to something you can actually see in the yard: your vehicles, tools, and equipment. Many owners do not realize the IRS lets them write off qualifying equipment, and even when they do, the deduction is often handled poorly. I have reviewed returns where a work vehicle used almost entirely for business was being written off slowly over several years when a larger first-year deduction may have been available, with trailers and tools sitting there doing almost nothing from a tax standpoint. Two tools matter here, both covered in [IRS Publication 946](https://www.irs.gov/publications/p946): - **Section 179** lets you deduct the full purchase price of qualifying equipment in the year it is placed in service, instead of spreading it over five to seven years, subject to limits and business-use rules. - **Bonus depreciation.** Recent federal law restored 100% bonus depreciation for many qualifying assets placed in service after January 20, 2025, so some equipment can again be written off fully in year one. Timing matters more than most owners expect. Buying equipment in December versus waiting until January can be the difference between a deduction this year and waiting twelve months for it. That is not a conversation to have in April, when the year is already closed. It belongs in October, while you can still decide. Make a list of every major vehicle, trailer, tool, and piece of equipment you bought or financed this year, then ask your CPA how each item is being depreciated and whether Section 179 or bonus depreciation applies. --- # 4. Messy books quietly cost you money Before we leave the numbers, we have to talk about your books, because messy books cost more than most owners realize. The first thing I look at with a new client is the books, and I can usually see where money went missing. On one home-services company near two million in revenue, deposits were not matched to invoices, transactions had been parked in "ask my accountant" for months, personal and business spending were mixed, and there was no clear profit and loss statement. That owner had been making hiring, equipment, and tax decisions on numbers that were not accurate. When your books are messy, two things happen. You miss deductions because nobody can find them, and if a return is ever examined, disorganized financials create risk. Inconsistency, not just fraud, is a common thread in small-business examinations: personal expenses mixed with business, missing records, and numbers that do not reconcile. S corporations may see lower audit coverage than sole proprietors, but clean books are still what let your advisor plan ahead instead of forever fixing last quarter. The action is to clean up before year-end. Reconcile your bank accounts, clear out "ask my accountant," separate personal and business spending, and make sure every loan, card, payroll account, and major purchase is recorded (the recordkeeping basics are in [IRS Publication 583](https://www.irs.gov/publications/p583)). If that cadence does not exist yet, a steady **[monthly bookkeeping](/services/monthly-accounting)** rhythm is the fix, and the **[Profit Routing Calculator](/resources/calculators/profit-routing)** helps you separate tax cash from operating cash. --- # 5. Your exit will be expensive if you do not plan it Many trades owners ignore this one until it is too late. The largest amount you lose is not always while you run the business. Sometimes it is the day you sell it. I work with an owner who has strong revenue and real growth and wants to sell in about three years. When we looked at the financials, he had only cash-basis accounting, no clean accrual books. Without clean accrual financials for at least two to three years before a sale, buyers can walk away or discount what they will pay. We caught it in time and are cleaning things up now, but six months before a sale there is only so much anyone can fix. There is also a planning opportunity most owners never hear about. Under **Section 1202** of the tax code, Qualified Small Business Stock may let certain C corporation owners exclude a significant amount of capital gain on a sale if the business meets specific requirements and the stock is held long enough (see the [IRS Schedule D instructions](https://www.irs.gov/instructions/i1040sd)). Recent law has adjusted parts of this rule, and it does not fit every business, but where it applies it can shelter a meaningful portion of a sale. It also requires structuring years in advance. You cannot decide it the week you list the company. The difference between a planned and an unplanned exit can run into the hundreds of thousands of dollars. So stop treating an exit as something you plan only when you are ready to sell. If a sale is even possible in the next three to five years, talk with your CPA now about entity structure, your books, your accounting method, and what a buyer will need to see. --- # 6. A tax preparer files; a tax strategist plans Everything above only happens when someone is paying attention to your business all year. That is the difference between a tax preparer and a tax strategist, and they are not the same job. Filing a return looks backward and documents what already happened. Tax strategy looks forward. A strategist meets with you in October and asks about projected income: should we time an equipment purchase before December, look at retirement contributions, check whether your salary-to-distribution ratio still makes sense, and confirm the books are clean enough to decide on. A preparer calls you in April and tells you what you owe. None of this is complicated when a process is in place. The S Corp election, the salary structure, the depreciation timing, the books, and the exit plan all come together because someone asked the right questions before the decisions were made, not after. That is what a **[business tax strategy](/resources/topics/business-tax-strategy)** is built to do, and it is what turns a once-a-year filing into a year-round plan. --- # Your six-point owner checklist If your business is doing over a million dollars in revenue and nobody has raised these with you, here is the plan I recommend: 1. **Confirm how your business is actually taxed today.** Do not assume an LLC means you have a strategy. 2. **Check how you pay yourself.** Is your salary reasonable for your role and profit? Is it documented? 3. **List every major vehicle, tool, trailer, and equipment purchase** this year and ask how each is being deducted. 4. **Clean up your books** so your profit and loss statement tells the truth. 5. **Start the exit conversation now** if a sale is even possible in the next few years. 6. **Decide whether your CPA is planning with you** during the year or simply filing after it. Not sure where you stand? Map deadlines and estimates with the **[Tax Playbook and Estimator](/resources/guides/tax-playbook)**, or if you want a CPA-led review of your structure, pay, depreciation, books, and exit, [Schedule a strategy session](https://www.havenstoneadvisory.com/schedule-consultation). You will leave with a plan built around your own numbers. For trade-specific planning, start with **[accounting for HVAC contractors](/resources/industries/hvac)** or **[bookkeeping and tax planning for roofing contractors](/resources/industries/roofing)**. --- ## Sources - IRS Self-Employment Tax (Social Security and Medicare Taxes): https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes - IRS About Form 2553, Election by a Small Business Corporation: https://www.irs.gov/forms-pubs/about-form-2553 - IRS S Corporation Compensation and Medical Insurance Issues: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues - IRS Publication 946, How To Depreciate Property: https://www.irs.gov/publications/p946 - IRS Publication 583, Starting a Business and Keeping Records: https://www.irs.gov/publications/p583 - IRS Data Book (examination coverage by return type): https://www.irs.gov/statistics/soi-tax-stats-irs-data-book - IRS Instructions for Schedule D, Qualified Small Business Stock (Section 1202): https://www.irs.gov/instructions/i1040sd