I tell clients that a free inspections marketing downturn strategy only works if the tax math supports it. When work slows down, the instinct is to say yes to every request for a free estimate. From the IRS's perspective, those hours are not a deductible donation. Under IRC §162, you can write off the hard costs—fuel, mileage, materials, wages you pay employees—but you cannot deduct the value of your own labor. Every hour you spend on a non-paying site visit is an hour of profit you never earn, and that lost profit shrinks your qualified business income under §199A. I have seen contractors chase so many free leads in a slowdown that they wipe out their QBI deduction without realizing it. In a downturn, you are already fighting for revenue. You cannot afford to give away the tax deductions that come with it.

Should you give away free estimates when work slows down?

No. Not unless the prospect passes a strict qualification filter, because uncompensated labor is invisible to the tax code. I have watched sole proprietors running Schedule C businesses try to deduct their own time. You cannot. If you spend three hours driving and inspecting for a job you never land, the IRS does not hand you a deduction for the labor you donated. You can deduct the mileage at the IRS standard mileage rate or actual vehicle expenses under §162. You can deduct wages paid to an employee who helped with the estimate. But the opportunity cost of lost billable work comes straight off your net profit and, in turn, reduces your QBI deduction.

Here is the mechanics. If your typical job nets one thousand dollars in profit and you miss one because you were chasing a free estimate, you lost one thousand dollars in net business income. At the twenty percent QBI rate under §199A, that is two hundred dollars in lost deduction. You also lost the cash. In a slowdown, your fixed overhead does not shrink to match your revenue. Rent, insurance, and truck payments stay level. Chasing unqualified leads widens the gap between your gross receipts and your break-even point, and the tax code does not soften the blow for bad marketing decisions.

What does a free estimate actually cost in after-tax dollars?

More than the gas in your truck. Start with the hard costs you can actually deduct. A forty-mile round trip is deductible business mileage under §162. If you bring an employee, his wages for those two hours are deductible as payroll. If you pay a subcontractor to measure or inspect, that cost is deductible too, and if you pay him more than two thousand dollars for the year you must issue a Form 1099-NEC per IRC §6041 as amended by OBBBA §70433.

But the real cost is the revenue you never see. Say your effective billing rate is ninety dollars an hour. A two-hour site visit plus one hour of proposal writing is three hours of lost billable time. At ninety dollars an hour, that is two hundred seventy dollars in lost revenue. If your net margin on that revenue is fifteen percent, you lost forty dollars and fifty cents in net profit. At a twenty-four percent federal marginal rate plus fifteen point three percent self-employment tax on the net, you would have kept roughly twenty-four dollars of that profit after taxes. So the after-tax cost of one free estimate is the twenty-four dollars you never earned, plus the fuel and wages you spent to produce nothing. Run five of those a week and you have given away real money the tax code will not give back.

Which estimate costs are deductible under IRC §162?

The tax code draws a bright line between out-of-pocket costs and your own sweat. Under IRC §162(a), ordinary and necessary business expenses are deductible in the year paid or incurred. For estimates, that includes:

• Fuel and vehicle expenses for travel to the prospect's site. Deductible via the standard mileage method or actual expense method. Keep a mileage log with date, destination, business purpose, and miles driven per Treasury Reg. §1.274-5T.
• Wages paid to employees for estimating time. Deductible as wages on Schedule C, line 26. Track this time separately from billable job time so you know your true labor burden.
• Subcontractor payments for estimating assistance. Deductible on Schedule C, line 11. If you pay a sub more than two thousand dollars in 2026, file Form 1099-NEC.
• Materials or supplies used exclusively for the estimate and not transferred to the job. Deductible as supplies on Schedule C, line 22.

What is not deductible? The value of your own labor. A sole proprietor cannot pay himself a wage and deduct it. Your time is capital you contribute to the business, not an expense the IRS recognizes. This is why self-employment tax is calculated on net profit, not gross receipts. You pay tax on what is left after expenses, but you get no deduction for the labor that generated the revenue in the first place. When you give that labor away for free, the tax code offers no rebate.

How do free estimates affect your QBI deduction under §199A?

They shrink it dollar for dollar. Qualified business income is your net Schedule C income after expenses. Every free estimate that replaces a paying job reduces your QBI. At the twenty percent deduction rate, a one-thousand-dollar drop in QBI costs you two hundred dollars in deduction.

I see this constantly. Contractors think lower revenue means lower taxes, which is true, but they forget that lower revenue with fixed overhead means lower net profit. That means lower QBI, which means a smaller §199A deduction. You are trading taxable income for no income, and that is a terrible exchange. The pain increases if you are in or near the phase-out range. For 2026, the §199A threshold is two hundred one thousand seven hundred fifty dollars for single filers and four hundred three thousand five hundred dollars for married filing jointly. Below those amounts, you generally get the full twenty percent of QBI. If a slowdown already has your revenue down, you might think the lower income helps. It does not. You would rather pay tax on eighty thousand dollars in profit than pay no tax on forty thousand dollars in profit because you gave away half your billable hours. If you want to understand how this deduction layers with your bracket, our guide on how much to set aside for taxes walks through the full stack.

When does a free inspection turn into a deductible marketing expense?

Never, if you do the work yourself. The tax code does not treat your own unpaid labor as an advertising deduction under §162. Advertising deductions cover money you spend to attract customers—Google Ads, yard signs, referral bonuses—not time you donate. If you pay an employee or subcontractor to conduct inspections as part of a marketing campaign, those wages or fees are deductible advertising expenses. But if you are the one driving across town, the only deduction available is your out-of-pocket cost: fuel, mileage, tolls, and possibly a small amount of supplies.

This distinction matters for your tax write-offs. Many contractors dump all estimate costs into a single bucket and wonder why their Schedule C shows high expenses but low profit. The answer is that the biggest cost—their time—never hit the books. Proper job costing separates billable labor from unbilled marketing labor so you can see