In the competitive world of home improvement, understanding and correctly using the home improvement NAICS code can significantly impact your business operations. Whether you’re just starting out or expanding your services, this classification isn’t just a formality—it can influence your licensing, taxes, funding opportunities, and more.
What Is a NAICS Code?
A Quick Overview
The North American Industry Classification System (NAICS) is a standardized system used across the U.S., Canada, and Mexico to categorize businesses by industry. These codes are used by federal and state agencies for:
- Tax reporting
- Licensing
- Economic research
- Compliance audits
For the home improvement sector, NAICS codes help distinguish between different types of contractors, builders, and tradesmen, ensuring your business is categorized appropriately.
Why NAICS Codes Matter in Home Improvement
Home improvement spans various services—remodeling, repair, carpentry, plumbing, painting, etc. The NAICS code home improvement companies use determines:
- Which licenses they need
- Eligibility for federal or state assistance
- How they’re tracked for economic reports and regulations
Common NAICS Codes for Home Improvement Businesses
While “home improvement” may sound like one category, it can include several codes depending on your services. Some of the most relevant include:
- 236118 – Residential Remodelers
- 238310 – Drywall and Insulation Contractors
- 238220 – Plumbing, Heating, and Air-Conditioning Contractors
- 238350 – Finish Carpentry Contractors
- 238320 – Painting and Wall Covering Contractors
Choosing the correct NAICS code ensures you’re in compliance with local, state, and federal regulations.
How the Home Improvement NAICS Code Affects Your Business Operations
1. Licensing and Compliance
Some states require that your business license matches your NAICS classification. Using the wrong code could result in:
- Licensing delays
- Fines or penalties
- Voided insurance or bonding coverage
2. Grant and Loan Eligibility
Many business funding programs—especially SBA loans and government grants—use NAICS codes to determine eligibility. For example:
- Energy-efficiency grants may require the 238220 (HVAC) classification.
- Remodelers may qualify under 236118 for home renovation subsidies.
3. Bidding on Government Contracts
Government agencies often pre-screen vendors using NAICS codes. If you’re bidding on a home improvement contract, using the appropriate code makes you easier to find and verify.
4. Industry Benchmarking and Marketing
Want to compare your business performance with similar companies? NAICS codes allow you to access market data:
- Average revenue per contractor
- Regional wage standards
- Growth trends in specific trades
Best Practices for Choosing the Right NAICS Code
1. Focus on Your Primary Revenue Source
If your business offers multiple services, choose the code that reflects your main income stream. For example:
If 70% of your work is residential remodeling and 30% is roofing, use 236118.
2. Consult Local Regulations
Some states or municipalities have their own licensing boards that align requirements with NAICS classifications. Check with:
- Local contractor licensing departments
- State business registration portals
3. Keep Records Updated
As your business evolves, update your NAICS code if your primary services change. Outdated classification could lead to audit red flags.
Real-World Example
Case Study: A General Contractor in Ohio
“Elite Homes Remodeling” initially registered under a general construction NAICS code. However, 90% of their work involved residential kitchen and bathroom remodeling. After updating their code to 236118:
- They qualified for a state grant supporting green residential renovations.
- Their SBA loan was approved with fewer questions.
- They were pre-approved for a city-funded affordable housing initiative.
FAQs About the Home Improvement NAICS Code
What is the best NAICS code for a remodeling company?
The most common NAICS code is 236118 – Residential Remodelers. If you primarily upgrade or renovate existing homes, this is your best fit.
Can I use more than one NAICS code?
Yes, if your business spans multiple services, you can list secondary codes. However, only one should be your primary classification.
How do I change my NAICS code?
You can update your NAICS code by revising your business registration with the IRS or your state’s business entity registration office.
Does the NAICS code affect my taxes?
Not directly, but it can influence audits, eligibility for certain deductions, and how your business is grouped for reporting.
Final Thoughts
Choosing the right home improvement NAICS code is more than checking a box—it affects how you’re seen by government agencies, potential partners, and even clients. Accurate classification enhances your compliance, funding opportunities, and long-term growth strategy. If you haven’t reviewed your code recently, now’s the time.
