HVAC Business Profit Margin: What the Census and IRS Data Show (2026)

What a typical HVAC business profit margin looks like in official data

Official data put the bottom line for plumbing and HVAC corporations at 6.9% of receipts in Tax Year 2023, far below the 10 to 20 percent ranges common on contractor software blogs. The number depends on which costs are subtracted, so this page shows each step.

Corporations filing under NAICS 238220 reported $254.4 billion of total receipts and $17.47 billion of net income less deficit in Tax Year 2023, a net margin of 6.9% (IRS Statistics of Income).

Adding back compensation of officers, which in a closely held company is mostly the owners' pay, lifts that figure to 10.2% of receipts.

Of the 86,269 corporate returns in the industry, 62,866 showed net income, or 72.9%. The rest reported a deficit.

Operating residual: Receipts minus materials, subcontracted work, fuel and power, payroll, fringe benefits, rent, depreciation and other operating expenses, as reported to the 2022 Economic Census. It is computed by this desk. It is before income taxes and before any cost the Census form does not itemize, such as interest or bad debts, which appear as separate deductions on IRS corporate returns.

For an owner, the useful benchmark is the IRS net figure, read alongside the officers' pay add-back: a company that pays its owner a market salary and still clears high single digits is in line with the industry's tax-return average.

Materials and labor take about two thirds of every dollar

In 2022, materials took $31.47 and payroll plus fringe benefits took $34.93 of every $100 of receipts at plumbing and HVAC establishments.

The 2022 Economic Census counted 112,088 employer firms in NAICS 238220 with $297.6 billion of receipts and 1.17 million employees (U.S. Census Bureau, EC2223BASIC).

Materials, components and supplies cost $93.67 billion, or 31.5% of receipts. Work subcontracted to other contractors added 7.1%, and fuel, power and land 2.3%.

Annual payroll was $80.35 billion, 27.0% of receipts, and fringe benefits were $23.59 billion, 7.9%. Together labor came to 34.9%.

Rent and leases (1.6%), depreciation (1.5%) and other operating expenses such as advertising, software, professional services and taxes (5.9%) leave an operating residual of 15.3%.

Between the 2017 and 2022 censuses, receipts rose 44.3% in nominal dollars while payroll rose 33.4% and other operating expenses rose 8.4%. The residual widened from 8.8% to 15.3% of receipts, a gain of 6.5 points.

That widening is a two-point comparison that ends in 2022, a year of fast price increases. It shows that prices outran wage and overhead growth in that window; it does not show a lasting trend, and the next census year is 2027.

In plain terms for an owner: a shop whose materials bill runs well above a third of revenue, or whose labor runs well above 35 cents per dollar, is spending more than the industry did in 2022.

How you file taxes changes the margin you see

Net margins in Tax Year 2023 ran from 5.9% for construction partnerships to 15.7% for specialty trade sole proprietors, but the sole proprietor figure includes the owner's own wages.

SOI publishes corporations at the 6-digit level (238220), but S corporations and sole proprietorships only at the 3-digit level (238, all specialty trade contractors) and partnerships only for all construction (23). Each row below uses the closest code available.

S corporations in specialty trades earned 8.0% of total receipts in Tax Year 2023, or 11.2% with officers' compensation added back (IRS Table 6.1).

Specialty trade sole proprietors reported net income of 15.7% of business receipts. Their average return showed receipts of $102,220 and net income of $16,054, which is the owner's pay and profit combined (IRS sole proprietorship Table 2).

Among employer firms in NAICS 238220, S corporations are the dominant form: 73,389 firms, 65.5% of the total, with average receipts of $2.55 million in 2022 (Census EC2200SIZELFO).

Bigger firms spend a little more of each dollar on payroll

Payroll rises from 24.30% of receipts at firms with fewer than 5 employees to 28.20% at firms with 500 or more, while receipts per employee rise from $211.5 thousand to $296.7 thousand.

A value-added margin by employment size class would be the cleanest way to compare small and large shops. The Census size tables mark value added and operating expenses as not applicable (flag X) for construction, so that measure cannot be built from public data. Payroll is the one cost published by size, and it is shown here instead.

Of 91,144 plumbing and HVAC firms that operated all of 2022, 49,682 had fewer than 5 employees, 54.5% of the total, and 88.8% had fewer than 20 (Census EC2200SIZEEMPFIRM).

The lower payroll share at the smallest firms does not mean they are more profitable. Owners of unincorporated firms are not on the payroll, so their labor is missing from the payroll line and sits inside what is left over.

The revenue size table shows the same pattern: payroll is 32.6% of receipts at firms with under $100,000 of revenue and 25.0% at firms with $25,000,000 to $99,999,999 of revenue.

For an owner weighing growth: adding employees tends to raise output per head, but the payroll bill grows at least as fast as revenue, so scale alone does not widen the labor margin.

Georgia and Oregon keep the most per dollar, North Dakota the least

Applying the same residual formula to every state, the 2022 median is 14.4% of receipts, with a range from 7.2% in North Dakota to 23.0% in Georgia.

This state ranking is an original calculation from the Census state rows. None of the 51 rows has a suppressed value in the fields the residual uses.

Among the four largest state markets by receipts, Texas posted 16.6%, Florida 16.1%, California 15.5% and New York 15.1% in 2022.

Georgia's 23.0% comes with value added minus payroll of 37.6%, well above the national 32.1%. Oregon's 20.9% comes with a materials share of 26.1%, below the national 31.5%.

State rows assign a company's work to the state where its establishment sits, and multi-state firms can book work in one state that was done in another. Treat gaps of a point or two between states as noise rather than a ranking of local markets.

Large public mechanical contractors earn 12.8% to 15.0% at the segment level

The listed contractors that report HVAC work are mostly commercial and industrial companies thousands of times larger than the average firm in the industry, so their margins show what scale can earn, not what a typical residential shop earns.

Comfort Systems USA's mechanical segment, which it describes as HVAC, plumbing, piping and controls, posted a 23.6% gross margin and a 15.0% operating margin on $6,673.7 million of revenue in fiscal 2025 (Form 10-K).

EMCOR Group's U.S. mechanical construction and facilities services segment reported a 12.8% operating margin on $7,050.5 million of revenue in fiscal 2025, while its U.S. building services segment, which includes mechanical service work, reported 6.0% (Form 10-K).

Limbach Holdings reported a 26.2% consolidated gross margin and a 7.6% operating margin in fiscal 2025. Work sold directly to building owners carried a 26.7% gross margin and work through general contractors 24.5%, after 31.2% and 21.1% in 2024 (Form 10-K).

The average employer firm in NAICS 238220 had receipts of $2.66 million in 2022. Comfort Systems' mechanical segment alone booked about 2,514 times that amount in fiscal 2025.

The closest listed residential benchmark is the Residential segment of IES Holdings, mostly electrical work for home builders with HVAC and plumbing installation in some markets. It reported a 25.8% gross margin and an 8.0% operating margin in the fiscal year ended September 30, 2025 (Form 10-K). None of these filings reports residential HVAC service or replacement margins on their own.

Why no one can publish an HVAC-only margin, and how the trade compares

Inside NAICS 238220, firms describing themselves as HVAC, mechanical or refrigeration contractors account for 61.8% of receipts and plumbing contractors 25.2%, but Census publishes no costs at that level.

The 2022 kind-of-business detail, released in December 2025, shows HVAC contractors with $121.7 billion of receipts (40.9% of the industry), plumbing contractors $75.1 billion (25.2%), mechanical contractors $54.4 billion (18.3%) and refrigeration contractors $7.9 billion (2.6%) (Census EC2223KOB).

Against other trades, the 238220 operating residual of 15.3% sits below electrical contractors at 17.0% and roofing contractors at 19.6%, and close to all construction at 15.3%.

The IRS corporate data point the same way: electrical contractor corporations netted 6.5% of receipts in Tax Year 2023, against 6.9% for plumbing and HVAC corporations.

For an owner comparing offers or peers, a margin quoted as an HVAC-only industry average is either from a private survey or a guess; the federal numbers always include plumbing. Wage detail by state for the trade is in our HVAC technician shortage report.

The numbers in one list

1. U.S. corporations in NAICS 238220 reported net income less deficit of $17.47 billion on $254.4 billion of total receipts in Tax Year 2023, a 6.9% net margin.^[7]
2. Adding compensation of officers to net income raises the Tax Year 2023 corporate figure for NAICS 238220 to 10.2% of receipts.^[7]
3. 72.9% of NAICS 238220 corporate returns (62,866 of 86,269) reported net income in Tax Year 2023.^[7][8]
4. Cost of goods sold equaled 63.7% of business receipts for NAICS 238220 corporations in Tax Year 2023, implying a 36.3% gross margin.^[7]
5. Materials, components and supplies were 31.5% of receipts for U.S. plumbing and HVAC establishments in 2022.^[1]
6. Payroll (27.0%) and fringe benefits (7.9%) together took 34.9% of 2022 receipts in NAICS 238220.^[1]
7. Value added minus payroll, a gross-margin proxy, was 32.1% of 2022 receipts nationally, up from 28.5% in 2017.^[1][2]
8. The 2022 operating residual for NAICS 238220 was 15.3% of receipts, against 8.8% in 2017.^[1][2]
9. Nominal receipts in NAICS 238220 grew 44.3% from 2017 to 2022 while payroll grew 33.4%.^[1][2]
10. Georgia (23.0%) and Oregon (20.9%) had the highest 2022 operating residuals; North Dakota (7.2%) and Rhode Island (9.5%) the lowest.^[1]
11. 54.5% of full-year plumbing and HVAC employer firms had fewer than 5 employees in 2022.^[4]
12. Specialty trade S corporations netted 8.0% of receipts in Tax Year 2023, and construction partnerships 5.9%.^[9][11]
13. HVAC, mechanical and refrigeration contractors made up 61.8% of NAICS 238220 receipts in 2022; plumbing contractors 25.2%.^[3]
14. Comfort Systems USA's mechanical segment earned a 15.0% operating margin in fiscal 2025; EMCOR's U.S. mechanical segment 12.8%.^[12][13]

Calculations

Download the calculations (CSV)

Summary

• Plumbing and HVAC corporations (NAICS 238220) netted 6.9% of total receipts in Tax Year 2023, or 10.2% with officers' pay added back.
• In 2022, materials took 31.5% of receipts and payroll plus benefits 34.9% at plumbing and HVAC establishments nationwide.
• The Census operating residual, computed by this desk, was 15.3% of receipts in 2022, up from 8.8% in 2017 as receipts grew faster than payroll.
• Across states the 2022 residual ranged from 7.2% in North Dakota to 23.0% in Georgia, with a median of 14.4%.
• Payroll's share of receipts barely moves with firm size: 24.30% at firms under 5 employees and 28.20% at firms with 500 or more.
• Specialty trade sole proprietors show a 15.7% net margin, but that figure contains the owner's own wages.
• Public mechanical contractors reported fiscal 2025 segment operating margins of 12.8% (EMCOR) and 15.0% (Comfort Systems), on commercial work far larger than a typical shop.
• Every federal margin for HVAC includes plumbing, because NAICS 238220 combines the two trades.

Frequently asked questions

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Reproduce this analysis

Every figure comes from the files below. The scripts that pulled and computed them are kept with the report and can be re-run.

Data quality and exclusions

• Census EC2223BASIC holds 56 rows for NAICS 238220 (1 national, 4 regional, 51 state). The 4 regional rows were not used.
• Fuel and power (CSTEFT) and land (CSTLAND) are suppressed (flag D) in 32 state rows and subcontracts (CSTSCNT) in 2. None of these fields enter the state residual, so 0 states were dropped; the national row has no flags.
• Census size tables flag value added and operating expenses as not applicable (X) for all 238220 size classes, so the planned value-added-by-size metric was replaced by payroll share.
• Size comparisons exclude 20,944 firms that did not operate the entire year, to avoid part-year receipts.
• IRS cells marked d (suppressed) were not used: income tax before credits for 238220 and total deductions for 238210.
• One page to beat (getjobber.com) returned an access-denied response to automated requests; it was not bypassed and was replaced by the next result.

Methodology

Selection: the report uses the most recent official releases that cover plumbing and HVAC contractors: the 2022 Economic Census construction tables (summary statistics released December 2024, size and legal-form tables April 2025, kind of business December 2025), IRS Statistics of Income tables for Tax Year 2023, and fiscal 2025 Forms 10-K filed on SEC EDGAR. All files were downloaded on 2026-11-02 and are saved unmodified in the raw folder.

Inclusion and exclusion: Census figures cover employer establishments in NAICS 238220; nonemployer firms are outside the Economic Census. Size comparisons use firms that operated the entire year. State rows were used only where the fields in the residual formula carry no suppression flag; all 51 qualified. Contractor software blogs were read as pages to beat and are never used as evidence.

Conflicts: Census and IRS figures differ in concept (establishment operating data versus tax-return income), year (2022 versus Tax Year 2023) and scope (employer firms versus all returns). They are shown side by side on one ladder rather than blended.

Derived metrics: value added minus payroll and the operating residual are computed from Census fields as shown in the synthesis and in derived_metrics.csv. Census value added equals receipts minus total selected costs; the desk confirmed this identity holds exactly in the national row. IRS margins divide net income less deficit by receipts. Scripts in the scripts folder reproduce every figure from the raw files.

Limitations: NAICS 238220 includes plumbing; the operating residual is not profit; IRS publishes S corporations and sole proprietorships only for all specialty trades and partnerships only for all construction; public companies are commercial contractors. Owners who want a figure for their own company can use the site's valuation form; this report does not estimate company values.

Last updated 2026-11-02 by the HVAC Business Brokers Research Desk. Data and tables are licensed CC BY 4.0. Attribution: HVAC Business Brokers Research Desk, sell-my-hvac-business.com/research/hvac-business-profit-margin/.

This report presents published data with its limitations. It is not legal, financial or investment advice.

Sources, ranked by quality

Tier 1: primary and official sources (13)

• [1] U.S. Census Bureau. 2022 Economic Census, Construction: Summary Statistics for the U.S., States, and Selected Geographies (EC2223BASIC). 2022. Accessed 2026-11-02.
• [2] U.S. Census Bureau. 2017 Economic Census, Construction: Summary Statistics (EC1723BASIC). 2017. Accessed 2026-11-02.
• [3] U.S. Census Bureau. 2022 Economic Census, Construction: Value of Business Done for Kind of Business (EC2223KOB). 2022. Accessed 2026-11-02.
• [4] U.S. Census Bureau. 2022 Economic Census, Selected Sectors: Employment Size of Firms (EC2200SIZEEMPFIRM). 2022. Accessed 2026-11-02.
• [5] U.S. Census Bureau. 2022 Economic Census, Selected Sectors: Sales, Value of Shipments, or Revenue Size of Firms (EC2200SIZEREVFIRM). 2022. Accessed 2026-11-02.
• [6] U.S. Census Bureau. 2022 Economic Census, Selected Sectors: Legal Form of Organization (EC2200SIZELFO). 2022. Accessed 2026-11-02.
• [7] Internal Revenue Service, Statistics of Income. Returns of Active Corporations, Table 5.1: Balance Sheet, Income Statement, Tax, and Selected Other Items by Minor Industry. Tax Year 2023. Accessed 2026-11-02.
• [8] Internal Revenue Service, Statistics of Income. Returns of Active Corporations, Table 1 and coefficients of variation, by Minor Industry. Tax Year 2023. Accessed 2026-11-02.
• [9] Internal Revenue Service, Statistics of Income. Returns of Active Corporations, Form 1120-S, Table 6.1 by Major Industry. Tax Year 2023. Accessed 2026-11-02.
• [10] Internal Revenue Service, Statistics of Income. Nonfarm Sole Proprietorships, Table 2: Income Statements by Industrial Sectors. Tax Year 2023. Accessed 2026-11-02.
• [11] Internal Revenue Service, Statistics of Income. All Partnerships, Table 1: Total Assets, Trade or Business Income and Deductions by Industrial Group. Tax Year 2023. Accessed 2026-11-02.
• [15] U.S. Census Bureau. 2022 Economic Census Data Releases. Release schedule. Accessed 2026-11-02.
• [16] Internal Revenue Service, Statistics of Income. Nonfarm Sole Proprietorships, Table 1: Business Receipts, Selected Deductions, Payroll, and Net Income. Tax Year 2023. Accessed 2026-11-02.

Tier 2: trade bodies, market research, company data (4)

• [12] U.S. Securities and Exchange Commission, EDGAR. Comfort Systems USA, Inc., Form 10-K for fiscal year 2025 (filed 2026-02-19). Fiscal year 2025. Accessed 2026-11-02.
• [13] U.S. Securities and Exchange Commission, EDGAR. EMCOR Group, Inc., Form 10-K for fiscal year 2025 (filed 2026-02-26). Fiscal year 2025. Accessed 2026-11-02.
• [14] U.S. Securities and Exchange Commission, EDGAR. Limbach Holdings, Inc., Form 10-K for fiscal year 2025 (filed 2026-03-02). Fiscal years 2024 and 2025. Accessed 2026-11-02.
• [20] U.S. Securities and Exchange Commission, EDGAR. IES Holdings, Inc., Form 10-K for fiscal year ended September 30, 2025 (filed 2025-11-21). Fiscal year ended 2025-09-30. Accessed 2026-11-02.

Tier 3: journalism and expert commentary (3)

• [17] ServiceTitan. Understanding HVAC Profit Margins and How to Improve Them. undated. Accessed 2026-11-02.
• [18] ShareWillow. HVAC Profit Margins. undated. Accessed 2026-11-02.
• [19] Hook Agency. HVAC Profit Margin. 2024. Accessed 2026-11-02.