29 Small Business Tax Deductions For Your Business
Small business tax deductions are qualified business expenses you can deduct from your company’s taxable income. Maximizing your tax write-offs can help lower your business’s annual tax bill.
Many small business owners don’t know the full range of available deductions. Here are 29 common tax deductions to help improve your company’s bottom line. (If you’d like to learn how to write off business expenses, skip to the bottom of the page.)
29 small business tax deductions
Understanding which small business tax deductions you can claim is the first step in lowering your annual tax liability. While all business entities — such as sole proprietorships, partnerships, corporations or LLCs — can benefit from the following business write-offs, check with your tax advisor about how to report them.
Here are some common small business tax deductions to consider. Of course, it’s best to consult with a tax professional to decide if this is the best option for your business.
- Startup expenses
- Business and office supplies
- Software, electronics and online apps
- Domain registration and web hosting
- Home office deduction
- Business property rent
- Depreciation on equipment and machinery
- Utilities, phone and internet
- Cleaning services and supplies
- Repairs and maintenance
- Security system
- Vehicle expenses
- Employee salaries and contracted labor
- Employee fringe benefits
- Business meals and entertainment
- Professional services and fees
- Interest and bank fees
- Licenses and taxes
- Bad debt
- Business insurance
- Cost of goods sold
- Qualified business income
- Travel expenses
- Advertising and marketing
- Shipping costs and postage
- Memberships and subscriptions
- Education and training
- Moving expenses
- Charitable contributions
1. Startup expenses
The costs of getting your business up and running are treated as capital expenses since you’re investing in your business. Small business startup costs vary based on industry and overhead, typically including expenses like registering your business, hiring and training staff, purchasing inventory and equipment, advertising and leasing an office space (or revamping your home office).
Deducting capital expenses can take up to several years — a process known as amortization, which helps assess your business’s profitability on a yearly basis.
2. Business and office supplies
You can deduct expenses like office furniture, printer paper, staplers, pens, calculators, business cards and industry-specific supplies if you can prove you use them exclusively for your business.
According to the IRS, business expenses must be ordinary and necessary, meaning they are “common and accepted in your trade” and “helpful and appropriate,” though not necessarily indispensable.
However, this deduction is for items you expect to use within the year you purchased them. You’ll need to list items with a longer anticipated lifespan under “depreciation” (more on this below).
3. Software, electronics and online apps
Small business computers, software and apps you need to successfully run your business, including small business accounting software or Microsoft Word, typically count as tax write-offs. You can also claim online software subscriptions used for business purposes, such as social media scheduling apps like Hootsuite and Buffer.
4. Domain registration and web hosting
Your business’s website can help boost your brand and attract more clients. All website-related costs are typically tax-deductible, such as registering your domain name, paying for website hosting and even using a professional designer to make your site pop.
5. Home office deduction
Homeowners and renters can utilize the home office deduction if they run a business out of their home and meet the criteria. Any residence can qualify — single-family home, condominium, apartment, manufactured housing, freestanding studio or your garage.
To qualify for the home office deduction, you must meet the following:
- Regular and exclusive use. You must regularly use your home office exclusively for your business. For example, if the room has your office desk plus a guest bed for when your parents visit, it doesn’t count as “exclusive use.”
- Principal place of business. Your home office must be the primary location for your business activities. You can still conduct business outside your home, provided your home remains your primary base. For instance, if you work most hours at home but occasionally meet clients at a restaurant or cafe, you can still deduct expenses for the part of your home you use exclusively for business purposes.
There are some exceptions to these rules, including running an in-home daycare. In this case, meeting the “exclusive use” criteria would be impossible if you watch children in your living area. Refer to Publication 587 for more information on the business use of your home.
How to claim the home office deduction
When claiming the home office deduction, you have two options: the simplified or regular method. With both methods, you can’t claim home office expenses that exceed your annual income. And while you can’t switch options in the same tax year, you can change methods from year to year.
When choosing which method to use for your home office deduction, keep in mind that both have pros and cons.
|If you use the simplified method and itemize deductions, you can deduct some expenses for your home that are otherwise deductible, including mortgage interest and property taxes, as itemized deductions using Form 1040 or 1040-SR, Schedule A.
|If using the regular method, you should use IRS Form 8829 for certain business-related tax deductions when filing your taxes. But be aware that some business expenses, such as telephone expenses, don’t fall under the home office deduction. Instead, deduct such expenses on your Schedule C or F.
The regular method requires a lot more work, but you have the potential for a larger deduction if you have significant qualified expenses within a year — just remember you might end up paying a lot in capital gains tax on the depreciation deductions if you sell the house. The simplified method is much easier to file but not ideal if you want to maximize your deduction or carry over losses.
You can discuss the two work-from-home tax deduction options with your tax advisor to make the best decision for your business.
6. Business property rent
You can deduct rent for an office, brick-and-mortar, conference or co-working space you need to operate and run your business or host business-related events. However, you can’t deduct rent as a business expense if you have or will receive equity in or a title to said property. The IRS defines rent as “any amount you pay for the use of property you do not own.”
If using space in your home residence for business-related purposes, see above for the home office deduction.
7. Depreciation on equipment and machinery
If you purchase equipment, furniture or other assets for your business, you can depreciate the total cost over three to seven years instead of claiming the expense all at once.
However, some business owners prefer to deduct the total cost in one year for a quicker tax benefit. The IRS offers the following options for writing off the total cost.
- De minimis safe harbor election: You can opt to deduct any assets that cost less than $2,500 each under the de minimis safe harbor election. However, you must include the total cost of the asset in the year you bought it.
- Section 179 deduction: Business owners can deduct up to $1,160,000 of property placed in service during that same tax year with a Section 179 deduction. While you can’t claim this deduction if it creates a net loss on your business tax return, you can carry any unused Section 179 deductions to next year’s return.
- Bonus depreciation: If you want to deduct a significant portion of your equipment, machinery or furniture costs, you can take advantage of the bonus depreciation. While the bonus depreciation previously allowed you to deduct 100%, this category is gradually phasing out with a 20-point decrease per year — with 80% for the tax year 2023, 60% for the tax year 2024 and so on.
To depreciate business expenses, you need to fill out Form 4562.
8. Utilities, phone and internet
- Utilities: If you own or rent a brick-and-mortar business or office space, you can deduct 100% of the necessary utilities such as gas, electricity, trash and water. For those claiming the regular home office deduction, you can only subtract the portion used for business. Remember, you can’t claim utilities if using the simplified home office deduction.
- Phone: You can claim phone expenses that are essential to running your business successfully. Note that the primary landline for your home office is not deductible, although charges for business long-distance phone calls can count as deductible business expenses. Additional landlines for your home business are deductible — but only the percentage used for business purposes. If you utilize your cell phone for personal and business purposes, keep an itemized bill highlighting the percentage used for business calls. Alternatively, you can deduct 100% of the expenses of a second cell phone if used exclusively for business.
- Internet: You can claim 100% of your internet service if you run a retail store or have a dedicated office space. However, be sure to calculate the percentage used for your business when claiming internet expenses for your home business.
9. Cleaning services and supplies
You can deduct cleaning services and supplies you purchase for your business’s storefront or office space. If running your business at home, you can only deduct the percentage used for your dedicated business space (and only if claiming the regular home office deduction).
10. Repairs and maintenance
You may also be able to deduct home repairs and maintenance performed on your residence, but only for the part of your residence exclusively used for business purposes.
According to the IRS, an example could include “painting or repairs only in the area used for business,” like a new coat of paint or replacement flooring in your home office.
11. Security system
A security system that secures your business is deductible as a business expense.
This expense is only partially deductible as a home business expense, provided you use part of your home for business purposes.
12. Vehicle expenses
If you use your car or truck for business purposes, you can deduct auto-related expenses on your tax return. However, if you operate your vehicle for both personal and business use, you must divide your expenses based on the mileage you drive for personal and business purposes.
You have two choices on how to claim your business-related car expenses: standard mileage rate vs. actual costs. Once you pick a method for a specific vehicle, you can’t change it.
- Standard mileage: You track your miles driven for business-related activities, then use the applicable year’s mileage rate. The IRS maintains a table of standard mileage rates to calculate deductions — with 65.5 cents per mile for the 2023 tax year and 67 cents per mile for the 2024 tax year.
- Actual expenses: You track the actual expenses, such as car insurance, repairs, gas, registration fees and interest paid on your auto loan (if applicable), then multiply this figure by how much you used the car for business purposes.
Whichever method you use, you must keep track of each business trip and the total miles driven. You can review all of your car trips with Google Maps Timeline — just be sure to enable your phone’s Location History before getting started. However, exporting the data and figuring out which trips were for business purposes could take much time and effort.
Alternatively, you can download an app to track business miles easily, such as Mileage Tracker by MileIQ.
13. Employees’ salaries and contracted labor
You can write off all salaries, commissions, bonuses or other non-cash compensation your business pays to part- or full-time W-2 employees.
You can also deduct payments made to freelancers, contract workers or other non-employees. Be sure to file a 1099-NEC form for any non-employee who earned at least $600 for the year — the deadline to submit these forms for the 2023 tax year is Jan. 31, 2024, regardless if you do e-filing or mail in the documents.
14. Fringe benefits
You can typically deduct benefits you provide for your employees, referred to as fringe benefits.
Here are some examples:
- Small business retirement plans, such as a SEP IRA or Solo 401(k)
- Health insurance premiums
- Life insurance policies
- Educational expenses (if you participate in a qualified educational assistance program)
- Dependent care assistance
- Fitness memberships
- Employee gifts ($25 per employee per year)
15. Business meals and entertainment
Small business owners can deduct ordinary meal and entertainment expenses directly related to their business. The activity must have a clear business objective, such as promoting your business, gaining new clients, building rapport with current clients, networking, training staff or drafting a business plan.
Typically, business meals are deductible up to 50%. However, certain events, such as food for an office party, are 100% deductible.
16. Professional services and fees
You can deduct fees for professional services like legal advice or consulting, business coaching, bookkeeping, accountants or tax preparation.
17. Interest and bank fees
You should be able to deduct business-related interest charges, such as with a business credit card or a small business loan.
Also, maintenance fees charged for a business bank account are fully deductible — so keeping your business and personal bank accounts separate is a good idea.
18. Licenses and Taxes
According to the IRS, you can deduct various taxes and licensing fees directly related to your trade or business. Some examples may include:
- Sales tax
- Business licenses and permits
- State income taxes
- Payroll taxes
- Personal property taxes
- Business property taxes
- Excise taxes
- Fuel taxes
19. Bad debt
To deduct a bad debt expense, you must first show the amount as income and then prove that the transaction was a business loan, not a gift.
The IRS gives the following bad debt examples:
- Loans made to clients, suppliers, distributors and employees
- Credit sales to customers
- Business loan guarantees
Refer to Topic No. 453 for more information on the bad debt deduction.
20. Business insurance
You can typically deduct the cost of business-related insurance products, provided they apply to your trade or profession.
Health insurance for yourself and your family is deductible as a business expense when you’re self-employed.
21. Cost of goods sold
If your business creates products or purchases them for resale, you can typically deduct the cost of these products or the costs involved in manufacturing them. This can include the cost of raw materials, freight, shipping, storage, direct labor and more.
22. Qualified business income
As a result of the Tax Cuts and Jobs Act of 2017, eligible businesses can deduct up to 20% of their qualified business income on your taxes. However, the qualified business income (QBI) deduction has limitations based on your trade or business, as well as how much you earn.
Specifically, individual filers with incomes below $182,100 or joint tax filers below $364,200 can file Form 8995 to claim the simplified QBI deduction in full, provided they work in a qualifying industry. If you earn above the income thresholds, you must submit Form 8995-A instead.
For the tax year 2023, joint tax filers with incomes between $364,200 and $464,200 and individuals with incomes between $182,100 and $232,100 were subject to phase-outs.
23. Travel expenses
Business-related travel expenses can count as a qualified business expense. Travel deductions typically include taking a taxi, Uber, bus or plane to meet with clients or to attend professional education or training events. Business owners can maximize their savings by paying for these expenses with a business travel credit card — and remember, you can deduct all interest charges for business expenses.
24. Advertising and marketing
Anything used to help spread the word about your business could be listed as a business expense. Examples include digital and print ads, business cards, posters and banners.
If you pay for marketing help or business development to help you expand your client base, these expenses can also be deductible from your business income.
25. Shipping costs and postage
If you ship items for business purposes, shipping costs can be deductible from your taxes. The same is true for postage when used for business purposes.
26. Memberships and subscriptions
Professional memberships and subscriptions to business-related publications can also be tax-deductible. For example, a freelance writer could claim the cost of a subscriber-only newsletter that lists potential job offerings, workshops and networking opportunities since its purpose is to help grow and strengthen their business model. A dance teacher could claim part of their Spotify subscription if they use the playlists to prepare and teach dance classes.
27. Education and training
You can deduct expenses related to furthering your education if it helps bring value to your business or allows you to gain more expertise in your business’s industry.
The following educational expenses typically qualify for this deduction:
- Courses and classes related to your industry
- Books needed for research
- Seminars and webinars
- Networking events
- Trade publication subscriptions
- Fees associated with necessary qualification or certificate programs
- Travel expenses to get to training events or workshops
28. Moving expenses
Before 2018, taxpayers were allowed to claim moving expenses as a personal tax deduction. However, only military individuals and business owners can now claim the cost of moving on their tax returns.
Deductible moving expenses may include:
- Brokerage commissions to help secure a new location
- Surveying the space
- Packing and loading
Ensure you record all costs associated with moving your business to a new location.
29. Charitable donations
If you make charitable donations throughout the year to qualifying organizations, you can claim these on your tax return. How to claim them depends on your business’s entity. For example, if you’re a sole proprietorship, LLC or partnership, you must declare these on your personal tax return. However, corporations can claim these on their corporate tax return.
How to write off business expenses
Your business entity determines how you report your earnings and business tax deductions.
- Sole proprietorships: Use a Schedule C form
- LLC partnership: Use Form 1065
- Corporation: Use Form 1120
Struggling to stay on top of expenses throughout the year? Consider using small business tax software to keep your finances organized and ready to go when tax season hits. And remember to refer to the IRS publication 535 for the most up-to-date list of business expense categories before filing your business taxes.