Accounting for Plumbers: Is it Time to Incorporate?

You’ve hung up the tools, the last job of 2025 is in the books, and what a busy year it was. All across Canada, trades were in high demand. But now? Now comes the part that feels less like a clean job site and more like wrestling a tangled mess of extension cords: your taxes. It doesn’t have to be such a headache. Think of this guide as the blueprint for your 2025 tax return. Let’s frame this out so you can hold onto more of your hard-earned money when the 2026 deadlines hit.

The Labour Mobility Deduction (LMD): Get Paid to Travel

Did you have to travel for a big project this year? The government might just help you pay for it. Seriously. The Labour Mobility Deduction (LMD) is a huge deal, but it’s shocking how many tradespeople completely miss it. It’s a game-changer.

Here’s the scoop: If you’re an eligible tradesperson or an apprentice who had to travel for a temporary construction gig, you might be able to claim some serious expenses. For it to count, the job had to be at least 150 kilometres away from your main home, and you had to stay there for a minimum of 36 hours.

Of course, there’s a cap. You can claim up to $4,000 in eligible expenses. We’re not talking about pocket change here. The key to nailing the Labour Mobility Deduction for your 2026 filing is keeping records. The Canada Revenue Agency (CRA) will want to see proof. You absolutely have to keep:

  • Travel receipts: Plane tickets, train fare, or a detailed logbook of the kilometres you drove.
  • Lodging invoices: Any bills from hotels, motels, or other places you stayed.
  • Proof of employment: A simple letter or contract that shows where the temporary job was and for how long.

The Tradesperson’s Tools Deduction: That New Saw Just Paid for Itself

You already know that quality tools aren’t cheap. The CRA gets it, too. That’s why the Tradesperson’s tool deduction for Canada exists—to take some of the sting out of buying the gear you need to get the job done right.

For 2025, if you’re an employee, you can deduct the cost of eligible new tools that goes above $1,425 (that’s the 2025 threshold, adjusted for inflation). The most you can claim is $1,000. So, let’s say you spent $2,000 on qualifying tools. You’d calculate your deduction on the amount over that base threshold.

A Special Note for Apprentice Mechanics: Listen up, because your rules are different—and way better. Your deduction limit isn’t a flat number. It’s a special calculation based on your income and what you spent, which can lead to a much bigger claim. This is a massive benefit, so don’t sleep on the apprentice mechanic tool deduction.

The Golden Ticket: For any employee to claim tool expenses, you need one critical piece of paper: Form T2200, Declaration of Conditions of Employment, signed by your employer. No form, no deduction. It’s that simple.

2026 Vehicle & Mileage Updates: Your Truck is a Money-Maker

Whether you’re driving to a local site or heading across the province, your vehicle is one of your biggest expenses—and deductions. The CRA mileage rates for 2026 have been updated, so here’s what you need to know.

For 2026, the official allowance rates are:

  • 73 cents per kilometre for the first 5,000 kilometres.
  • 67 cents per kilometre for every kilometre after that.
  • (Plus an extra 4 cents per kilometre if you’re in the Northwest Territories, Nunavut, or Yukon.)

But how you claim this cash depends entirely on whether you’re an employee or self-employed. This is critical.

  • If you’re an employee: Your boss might give you a tax-free allowance using these rates. It’s easy, and you don’t have to track every single receipt.
  • If you’re self-employed (a sub): You don’t use the simple per-kilometre rate. Nope. You have to track all of your actual vehicle expenses—we’re talking gas, insurance, repairs, lease payments, everything. Then, using a logbook you’ve kept like a hawk, you figure out the percentage of your driving that was for business. You then deduct that percentage of your total vehicle costs. This is a must-know part of the small business deduction for trades.

The T5018 “Sub” Deadline: Attention Business Owners

If you run your own construction business and you hire subcontractors, this one’s for you. Pay close attention. If over 50% of your business income is from construction, you are legally required to report payments you made to subcontractors for services if the total was more than $500 for the year.

You do this using the T5018 slip, Statement of Contract Payments. Filing the T5018 for construction isn’t optional. The deadline to get these slips to the CRA for the 2025 calendar year is February 28, 2026. Since that day is a Saturday, the deadline gets pushed to the next business day: Monday, March 2, 2026.

Important 2026 Tax Dates: Circle These on Your Calendar

Don’t let these dates sneak up and bite you. Here’s a quick rundown of the deadlines you need to know for your 2025 taxes.

| Deadline | What’s Due | | —————– | ————————————————– | | March 2, 2026 | File T4, T5, and T5018 slips with the CRA. | | March 2, 2026 | Final day to contribute to your RRSP for the 2025 tax year. | | April 30, 2026| Deadline to pay any 2025 taxes you owe. | | June 15, 2026 | Deadline to file your return if you’re self-employed. |

And remember, even if you have until June to file, you still have to pay up by April 30th. The CRA loves to charge interest on late payments.

Don’t Let Your Paperwork Get Messy

At the end of a long year, your bookkeeping shouldn’t look like the floor of a job site after a demo crew tore through it. Getting your deductions right, tracking every expense, and hitting your deadlines is the final, crucial step in a profitable year. It can feel like a complex project with a lot of moving parts.

If you need a second set of eyes on your expense claims or just want to be sure you’re squeezing every dollar out of the Labour Mobility Deduction, getting professional advice is the smartest tool you can use. For a personalized blueprint of your tax situation, it’s always worth talking to an accounting team that actually understands the trades. To get clarity and build a solid financial foundation, you can contact us for professional guidance tailored to your specific needs.

Accounting for Plumbers - FAQs

If I incorporate, can I still pay myself easily or does all the money belong to the company?

Yes, you can absolutely pay yourself! While the money technically belongs to the company, you’re the owner, so you call the shots. You can pay yourself a regular salary (which makes you an employee of your own company), pay yourself dividends from the profits, or do a mix of both. Each option has different tax perks, and a good accountant can help you figure out the best strategy for you.

My spouse helps with the books and answering the phone. How does incorporation affect them and our family's finances?

Incorporation can be great for this. It opens up smart ways to do some income splitting. For instance, you could pay your spouse a reasonable salary for the work they actually do, which becomes a handy tax deduction for the business. You could also make them a shareholder, allowing them to receive dividends. The rules here are strict—the pay has to match the work—but it can be a fantastic way to improve your family’s overall tax picture.

Are there specific government grants from CanNor or territorial programs that are only available to incorporated businesses?

Yes, very often. Many of the bigger grants for business development and expansion are specifically designed for formal business structures. While some programs are open to sole proprietors, being incorporated makes you eligible for a much wider range of funding and frankly, makes your application look more solid and professional to the people handing out the money.

What's a realistic all-in cost to set up and maintain a corporation for a small business in the North for the first year?ere

It can vary a bit, but a good budget to have in mind for the first year is somewhere in the $1,500 to $3,500 range. That generally covers the legal and accounting fees to get registered and set up properly, plus the cost for your first corporate tax return. After the first year, the annual costs to keep everything filed and up-to-date are much lower.

I do a lot of work on First Nations' land. Does my business structure impact my ability to get contracts or form partnerships with Indigenous development corporations?

It certainly can. An incorporated business is often seen as more stable, permanent, and professional—a huge plus when you’re bidding for contracts with First Nations governments or looking to partner with their economic development corporations. A formal corporate structure gives you the legal foundation you need for joint ventures and other partnerships, which are incredibly common on major Northern projects.

What can I deduct as a self-employed plumber in BC?

Beyond standard tools and materials, many plumbers miss deductions like protective gear (steel-toed boots, safety glasses), specialized software for scheduling, union dues, and even a portion of your vehicle’s maintenance if it’s used for service calls. We help you track every “hidden” deduction to lower your year-end tax bill. To get a personalized list of deductions for your business, contact our Vancouver office today.

Should I incorporate my plumbing business or stay a sole proprietor?

This is a common question for growing trades. Generally, once your plumbing business is netting more than you need for personal living expenses, incorporating can offer significant tax deferral advantages and limited liability protection. We provide a full cost-benefit analysis to help you decide when to make the switch.

How do I manage GST/PST on plumbing materials and labor?

Navigating sales tax in BC can be tricky for trades. You must charge GST on your labor and materials, but you can also claim Input Tax Credits (ITCs) for the GST you pay on business purchases. We streamline your bookkeeping so your quarterly filings are accurate and painless.