Profit Margins by Trade From IRS and Census Data, Not Vendor Guesses

Quick answer: The only public, population-wide profit data for the trades comes from tax returns, and it says the average contractor business earns a single-digit net margin. In the IRS Statistics of Income corporate tables for tax year 2022 (all active corporations, C and S, by industry), electrical contractors netted 5.0 percent of total receipts, plumbing, heating and air-conditioning contractors 4.7 percent, and the other specialty trades (roofing, painting, carpentry, concrete) 5.5 percent, after deducting officer pay of about 3 percent of receipts; add it back and the owner-inclusive margin is about 8 percent. Only the profitable companies, taken alone, reached 7.3 percent, 6.8 percent and 8.3 percent. Sole proprietors on Schedule C (tax year 2023) show 15.7 percent for specialty trades, but on average receipts of $102,220 that is $16,054 a year, which is the owner's pay, not a profit on top of it. The 2022 Economic Census gives the cost structure: for plumbing-HVAC employers, payroll 27 percent of receipts, benefits another 8 percent, materials 31.5 percent, subcontracts 7 percent. The surveys with stated sample sizes land in the same range: ACCA's 1,000-contractor study puts HVAC net profit at 6 percent on average, CFMA's 1,558-firm benchmarker puts specialty trades at 7.7 percent before tax, NAHB puts remodelers at 6.3 percent. The 10 to 20 percent 'healthy' margins and the 25 percent 'typical' painting margin on software vendors' pages cite no dataset, no sample size and no year.

Definitions, from the forms themselves

Gross profit is receipts minus cost of goods sold. Schedule C, line 5: "Gross profit. Subtract line 4 from line 3," where line 4 is "Cost of goods sold." For a contractor, cost of goods sold is the direct cost of the jobs: materials, the labor on the job, subcontractors.

Net profit is gross profit minus everything else. Schedule C, line 31: "Net profit or (loss). Subtract line 30 from line 29," after "Total expenses" on line 28, which is lines 8 through 27 (advertising, truck, depreciation, insurance, interest, office, rent, repairs, supplies, taxes, utilities, wages, other).

Net margin is net profit divided by receipts. Gross margin is gross profit divided by receipts.

Markup is not margin. Markup is (price minus cost) divided by cost; margin is (price minus cost) divided by price. A 50 percent markup is a 33.3 percent gross margin. A 50 percent gross margin needs a 100 percent markup. Half the contradictions between the ranking pages come from one site quoting markup and another quoting margin. Our materials markup guide covers the arithmetic and the disclosure rules.

One more definition that decides everything below. On a corporate return (Form 1120 or 1120-S), the owner's salary is a deduction ("compensation of officers," line 12), so corporate net income is what is left after the owner is paid. On Schedule C there is no owner-salary line, so "net profit" is what the owner keeps, before self-employment tax. The two numbers are not comparable until you adjust one of them.

Corporations: IRS Statistics of Income, tax year 2022

The IRS publishes the aggregate of every active corporate return by industry (Publication 16, tables 1 and 5.1). "Active corporations" are "returns of corporations reporting any income or deduction items," and the tables include S corporations, which is most small contracting companies. Net income (less deficit) is the sum of the profits of the profitable companies minus the losses of the rest. Dollars in thousands.

The arithmetic. Electrical: net income $12,580,835 minus deficit $2,274,489 equals $10,306,346, divided by total receipts $206,068,882 equals 5.00 percent. "Profitable only" divides net income by the receipts of returns with net income ($171,385,264): 7.34 percent. Officer compensation $6,067,281 is 2.94 percent of receipts; adding it back gives 7.95 percent. Files: 22co01ccr.xlsx (Table 1) and 22co51ccr.xlsx (Table 5.1), verified 2026-10-28.

C corporations alone are thinner. Table 5.3 (Form 1120 only, no S corporations): electrical 3.3 percent on 7,924 returns, plumbing-HVAC 2.4 percent on 16,076. The implied S corporations are 5.5 and 5.7 percent. S corporations, which is to say most owner-operated contracting companies, run about two points above C corporations, partly because C corporations have more reason to pay income out as salary.

Cost of goods sold is 66.8 percent of receipts for electrical, 65.5 percent for plumbing-HVAC, 64.4 percent for other specialty. Non-officer wages outside cost of goods sold are 8.6, 8.3 and 7.6 percent. Depreciation 1.8, 1.8 and 2.7.

What this table cannot tell you. The IRS stopped publishing minor industry by asset size after tax year 2013 (the Corporation Source Book listing shows 2000 through 2013 plus a preliminary 2014 all-industry file), so there is no current public table of "electrical contractors under $500,000 in assets." Roofing, painting and carpentry are folded into "other specialty trade." Landscaping, pest control and janitorial have no row of their own in any current corporate table; the sector proxy is listed above for completeness and should not be quoted as a landscaping margin.

Sole proprietors: Schedule C, tax year 2023

The IRS also aggregates every Schedule C by industry (Sole Proprietorship Returns 2023, published March 2026, tables 1 and 2). This is the one-truck dataset: 2.52 million specialty-trade filers.

The 15.7 percent is not a profit margin in the corporate sense. It is what the average specialty-trade sole proprietor kept: $16,054 on $102,220 of receipts. A journeyman electrician at the BLS May 2025 median wage of $30.38 an hour earns about $63,000 a year as an employee. The median Schedule C contractor is earning less than a wage, not a profit on top of one. Subtract a market wage from the 15.7 percent and the "profit" is negative for the average filer. That is the single most important number on this page for anyone deciding whether to go out on their own.

The cost structure of a one-truck specialty trade business (Table 2, as a share of receipts): cost of sales and operations 31.2 percent (of which materials and supplies 12.1, purchases 9.1, cost of labor 6.1, other 3.9); contract labor 12.9; car and truck 7.7; supplies 6.5; salaries and wages 4.9; depreciation 4.3; insurance 1.8; rent 1.6; utilities 1.4; taxes 0.9; other 5.7; total deductions 84.3; net 15.7. The truck alone is 7.7 percent of receipts.

Files: 23sp01br.xls and 23sp02is.xls, verified 2026-10-28. No landscaping, pest or janitorial row exists below the 561 sector in either table.

Partnerships, tax year 2023

The partnership tables publish the construction sector only (no specialty-trade column). On 196,849 construction partnerships: business receipts $617.2 billion, cost of goods sold 78.2 percent of receipts, guaranteed payments to partners 0.6 percent, ordinary business income (net of losses) $36.2 billion, or 5.9 percent of receipts. File 23pa01.xlsx, verified 2026-10-28. It agrees with the corporate rows.

Cost structure by trade: 2022 Economic Census

The Census Bureau does not measure profit. It measures receipts and selected costs for every employer establishment, which lets you see the cost structure at the six-digit level the IRS does not publish, including roofing, painting and finish carpentry, and the receipts and payroll of landscaping, pest control and janitorial. Nonemployer firms (most Schedule C filers) are excluded. Dollars in thousands.

How to read it. For a plumbing-HVAC employer, payroll (27.0 percent) plus benefits (7.9 percent of receipts) plus materials (31.5) plus subcontracts (7.1) plus fuel (2.3) plus other operating expenses (5.9) plus rent and depreciation (3.1) is about 85 percent of receipts before interest, insurance, bad debt, owner draws of unincorporated firms, and taxes. The residual is not a margin; the Census does not collect the rest of the expense lines. But it bounds the answer: a 20 percent net margin would require everything the Census does not count to total 5 percent of receipts, and the IRS says the actual net is 4.7.

Painting is the exception in structure, not in margin. Painting is labor-heavy (payroll 30.4 percent, materials 19.0 percent), which is why "25 percent net is typical for painting businesses" circulates: the gross margin is high. The IRS row that contains painting nets 5.5 percent.

Source: EC2223BASIC and EC2256BASIC files from the Census FTP (the API now requires a key), US totals, verified 2026-10-28.

The labor burden: BLS Employer Costs for Employee Compensation, June 2026

Payroll is not the cost of labor. For the construction industry in the second quarter of 2026, BLS measured total compensation at $51.96 per hour worked: wages and salaries $36.13 (69.5 percent) and benefits $15.84 (30.5 percent). The benefits break into paid leave $2.63, supplemental pay $2.49, insurance $3.90, retirement $2.39, and legally required (Social Security and Medicare $3.07, unemployment $0.26, workers' compensation $1.10) $4.42.

Benefits divided by wages: 43.8 percent. The Census benefits-to-payroll ratio for specialty trades (28.1 percent) is lower because it counts only employer-paid benefits reported on the Census form; the ECEC includes legally required costs and paid leave. Use the ECEC figure when you cost an hour: an employee at $30 an hour costs about $43 before overhead. Our service-call fee guide builds the billable rate from these inputs.

Series CMU2012300000000D and components, BLS public API, verified 2026-10-28.

Surveys that publish a sample size

These are self-selected respondents, usually larger and better-run than the IRS average, and they report before-tax income. Treat them as the ceiling, the IRS corporate rows as the floor.

The surveys and the tax data agree to within two or three points once you account for who answers surveys: ACCA 6 percent, CFMA specialty 7.7 percent before tax, NAHB remodelers 6.3 percent, IRS electrical 5.0, plumbing-HVAC 4.7, specialty 5.5 (7.3 to 8.3 for the profitable half).

Errata: the ranking pages against the data

The contradictions among the pages are the finding: HVAC "average" is stated as 2 to 3 percent, 5 percent, 5 to 10, 5 to 12 and "should be 20"; painting as 25 percent typical against a tax-return row at 5.5. None of the vendor pages names a sample size or a year.

What to do with this

1. Benchmark against the right row. If you are an S corporation paying yourself a salary, compare your net to the 5 to 6 percent corporate rows, or add your salary back and compare to the 8 percent owner-inclusive figure. If you file Schedule C, subtract a market wage for yourself from your net before you call anything profit.
2. Use the Census structure to find your outlier line. If your materials run 40 percent of receipts in a trade where the employer average is 31, that is either your mix or your markup. If your payroll plus burden is 45 percent against a 35 percent average, that is utilization. Each line in section 5 is a diagnostic.
3. Target the profitable half, not the vendor's number. The profitable half of electrical corporations earned 7.3 percent; of plumbing-HVAC, 6.8; of other specialty, 8.3; CFMA's best-in-class, 12.0 before tax. Those are achieved numbers with a population behind them. A 20 percent net margin is not a benchmark; it is a top-decile outcome, and the data cannot tell you how rare.
4. Price from cost, not from a target margin. The ACCA survey's two measured effects, flat-rate pricing (7 versus 4 percent) and marketing spend above 12 percent of revenue (9 versus 5 percent), are both about knowing your cost per hour and keeping the trucks full, not about choosing a bigger number.

What Krib does here. Quotes and invoices are built line by line from a price book, so materials, labor and subcontracts are separate lines you can total against receipts at year end; timesheets record paid hours per technician so the labor line is measured, not estimated. Scheduling, quotes, invoices and payments are free for contractors.

Method and limits

We downloaded the IRS and Census files, read the rows named above, and computed each ratio as shown. The IRS corporate figures are for all active corporations in the industry, so they average one-truck S corporations with national firms; the IRS no longer publishes the size breakdown below the sector level. The Schedule C figures are for all filers with that industry code, including part-time and side businesses, which pulls average receipts down. The Economic Census covers employer establishments only and does not collect every expense line, so no margin can be derived from it. Survey figures are quoted from the publishing organization's own release or executive summary; none publishes a response rate. Landscaping, pest control and cleaning have no public margin at the industry level, and we have not supplied one. BLS pages block automated readers; the ECEC figures were pulled from the BLS public API.

Last verified: 2026-10-28. Not tax or financial advice.