Small business tax deductions. What you can write off, what you cannot.
A deductible business expense reduces taxable income. For an LLC owner in the 24% federal + 5% state bracket, every $1,000 in legitimate deductions saves about $290 in tax. This guide covers the 50+ most common deductions, the documentation required, and the most common audit triggers. The rule from Section 162 of the IRC: expenses must be "ordinary" (common in your industry) and "necessary" (helpful to your business).
Start here.
The legal standard. Not "essential," not "exclusively business" - just common in your industry and helpful to operations.
Every deduction needs documentation: receipt, date, vendor, amount, business purpose. Without it, the deduction can be disallowed in audit.
Mixed-use items (vehicle, home office, phone) require allocation between business and personal. Only the business portion is deductible.
Items lasting longer than one year are typically capitalized and depreciated (Section 167) or expensed under Section 179 or bonus depreciation. Limits and rules apply.
Self-employed owners can deduct health insurance premiums above the line on Schedule 1. Special rules for S-Corp owner-employees.
The full explanation.
Home office
Two methods: (1) Simplified method: $5/sq ft up to 300 sq ft = $1,500 max. (2) Actual expense method: percentage of home expenses (mortgage interest or rent, utilities, insurance, repairs, depreciation) based on business-use square footage. Home office must be exclusive and regular use for business.
Vehicle
Two methods: (1) Standard mileage rate: 67¢ per business mile in 2024 (rate updates annually). (2) Actual expenses: percentage of total vehicle costs (gas, maintenance, insurance, depreciation, lease payments) based on business-use percentage. Mileage log required either way.
Equipment and software
Computers, monitors, cameras, software subscriptions, office furniture. Generally deductible under Section 179 (immediate expense up to limits) or bonus depreciation. Limits per year apply.
Meals
50% deductible when discussing business with clients or during travel. Restaurant meals are 50% deductible (briefly 100% during COVID; back to 50%). Documentation: receipt + names of attendees + business purpose.
Travel
Business travel away from home is fully deductible: airfare, hotel, ground transportation, 50% of meals. Personal-business mixed trips: prorate based on business days vs personal days.
Professional services
Accountant fees, attorney fees, consultant fees, bookkeeper fees, contractor 1099 payments. All deductible if related to the business.
Insurance
Business liability, professional liability (E&O), workers compensation, commercial auto, cyber liability. Self-employed health insurance has special rules (Schedule 1).
Marketing and advertising
Website hosting, paid ads (Google, Meta, LinkedIn), print materials, branded merchandise, business cards, conference sponsorships.
Software and subscriptions
Adobe, Microsoft 365, Google Workspace, Notion, CRM tools, project management. All business software is deductible.
Education and training
Conferences, courses, books, certifications related to maintaining or improving skills used in the current business. Education for a new line of work is generally not deductible.
Retirement contributions
Solo 401(k): up to $69,000/year (2024, including employee + employer). SEP-IRA: up to 25% of compensation, $69,000 max. Reduce current-year tax and build retirement savings.
Health insurance
Self-employed health insurance deduction: 100% of premiums for owner + spouse + dependents, above the line on Schedule 1. S-Corp owners with >2% ownership: premiums included in W-2 wages, then deducted on Schedule 1.
Bank and merchant fees
Stripe fees, PayPal fees, Square fees, bank account monthly fees, wire transfer fees, ACH fees. All ordinary business expenses.
Phone and internet
Business portion of cell phone and home internet. Allocation required if mixed use. A dedicated business line is fully deductible.
Startup costs
Up to $5,000 in startup costs (incurred before opening) deductible in first year; remainder amortized over 15 years. Section 195.
Common questions.
What is the home office deduction?
Can I deduct my whole car?
Are meals 100% deductible?
Can I deduct clothing?
What about gifts to clients?
Can I deduct entertainment?
What about my home office if I am also W-2 employed?
Can I deduct meals with my spouse if we are co-owners?
Documentation needed?
Tax setup, done right.
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This guide is educational. Specific situations require professional advice from a licensed CPA or tax attorney.
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