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21 Small-Business Tax Deductions You Need to Know

Georgia McIntyre

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

For small-business owners, there are few sweeter phrases than “small-business tax deductions.” But in most cases, business owners just aren’t aware of all the small-business tax deductions available to them — or they simply aren’t taking the time to keep detailed records, itemize expenses or crunch the numbers necessary to take advantage of these deductions.

H&R Block

H&R Block

» MORE : NerdWallet's best small-business accounting software

21 Small-business tax deductions

All of these deductions can be claimed by sole proprietorships, as well as C-corps and S-corps, partnerships and LLCs (although there might be different rules for each).

1. Startup and organizational costs

Our first small-business tax deduction comes with a caveat — it’s not actually a tax deduction. Business startup costs are seen as a capital expense by the IRS, since they are an investment in your business (the money hasn’t actually left the business, it was just transformed into an asset). Deductions for capital expenses typically occur over several years. This is known as amortization, and helps businesses accurately assess profitability year over year. You can check out chapters seven and eight of IRS Publication 535 , which covers business expenses for more information.

2. Inventory

Some inventory-based businesses will manufacture products or purchase them for resale. If this is your business model, you can deduct the cost of your inventory, or the cost of the goods you sell. You generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold.

The following are types of expenses that go into figuring the cost of goods sold:

The cost of products or raw materials, including freight.

Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products.

Factory overhead.

» MORE: How to look up your Employer Identification Number (EIN)

3. Utilities

Any utilities that you use for your business are fully deductible. This includes things like water, electricity, trash and telephone bills. However, if you have a home office and use a landline, the cost of the first landline is not deductible, but subsequent landlines are.

4. Insurance

Most businesses will take out some form of business insurance . The cost of the business owner’s health insurance, business continuation insurance and the business owner’s policy are all 100% deductible. Other types of deductible insurance policies include property insurance, liability coverage, malpractice insurance, workers’ compensation costs , auto insurance, business provided employee life insurance and business interruption insurance.

Note that with health insurance, a small business may also qualify for up to a 50% tax credit under the qualified small employer health reimbursement arrangement, known as QSEHRA.

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5. Business property rent

If you rent your business property, you can deduct your lease or rental payments from taxes. Alternatively, if you run your business from home, you can also run an eligibility test with the IRS to see if you are entitled to any deductions. Types of deductible home business expenses include mortgage interest, insurance, utilities, repairs and depreciation. You can learn more through IRS Publication 587 .

6. Auto expenses

If you have a car for business purposes, you can usually deduct anything considered a car expense. However, you have to have records that prove business usage, as well as keep track of your miles. Conversely, you can rely on the IRS standard mileage rate: For the first half of 2022, this rate was 58.5 cents per mile; from July 1 through December 31, 2022, the rate was increased to 62.5 cents per mile. This rate goes up to 65.5 cents per mile in 2023. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463 on travel, entertainment, gift and car expenses for more information.

7. Rent and depreciation on equipment and machinery

If you lease equipment or machinery for your business you can fully deduct these costs. This can be anything from printers and copiers, to vans and trucks. You can also claim depreciation on equipment and machinery. However, these costs must be deducted over several years with a Section 179 deduction.

8. Office supplies

Paper, boxes, pens, staples — they may be small, but they all cost money (which you can deduct from your taxes).

9. Office furniture

Office furniture is also considered a type of office supplies, and can, therefore, be deducted just as you would deduct printer paper or cleaning products.

10. Software subscription

If you’ve bought or downloaded software for your business, this can be deducted. These types of expenses can be claimed under “Other Common Business Expenses>Other Miscellaneous Expenses” on your Schedule C tax form.

» MORE: NerdWallet’s best business software

11. Advertising and marketing

As long as you can prove they’re related to your business, you can claim back any money spent on ordinary advertising and marketing purchases. This includes things like billboards, business cards, Yellow Pages ads, as well as hiring a freelancer to design a business logo or sending thank you cards to clients.

12. Business entertainment

Entertaining clients with meals and events? This, too, can be deducted if necessary to your business. Note that most meal costs are only deductible up to 50% (this was raised to 100% for 2022). But certain types of meals, such as a meal provided at an office party, are 100% deductible. Be sure to save your receipts and note the business purpose of the meal in order to maximize this deduction.

13. Travel expenses

If you’re frequently on the go, you should definitely look into deducting your travel expenses. For a business expense to qualify as travel, it must be away from the city or area in which you conduct business. You must also be away from your tax home for longer than a full workday. Types of deductible travel expenses include airfare, tolls, taxis and lodging.

14. Interest

If you have a small-business loan, you’ll make interest payments on what you’re borrowing from the lender. Those interest payments are usually fully tax deductible as long as the loan is used to cover business expenses. To claim this deduction , the business owner must be legally liable for the debt, and the business owner and the lender must have a “debtor/creditor” relationship. In other words, the loan must be through a traditional lender, and not a friend or family member.

15. Bad debt

If you’ve ever lent money to an employee or vendor without receiving it back, you can claim that back as ‘bad debt.’ You just need to be able to prove that it was business debt, rather than personal debt. The IRS defines bad debt as “a loss from the worthlessness of a debt that was either created or acquired in a trade or business or closely related to your trade or business when it became partly to totally worthless.”

The following are examples of business bad debts (if previously included in income):

Loans to clients, suppliers, distributors and employees.

Credit sales to customers.

Business loan guarantees.

As strange as it sounds, the taxes you incur from just running your business are deductible. These taxes might be federal, state and local income, real estate or sales taxes. Your employer taxes, such as the employer share of FICA, FUTA and state unemployment taxes, are also fully deductible.

17. Employee salaries

In general, your employee wages are fully deductible. This includes bonuses and commissions. However, this deduction does not apply to sole proprietors, partners and LLC members, because these individuals are not considered employees.

18. Employee benefits programs

You can also deduct certain employee benefit programs, like education assistance, dependent care assistance, life insurance adoption assistance or qualified retirement plan accounts. For self-employed individuals, contributions to their own retirement plans are personal deductions claimed on Form 1040.

19. Employee gifts

Employee gifts are 100% deductible up to $25 per year, per employee, according to IRS Publication 463.

20. Contracted labor

Do you use independent contractors or freelancers as a part of your labor force? The cost of hiring contracted labor is fully tax deductible. Note that you must issue form MISC-1099 to any contract worker receiving $600 or more from you in a given tax year. If the employee is being paid via credit card or PayPal, the payment processor must issue the worker form 1099-K.

21. Legal and professional fees

If you ever need to hire a legal or accounting professional for your business, you can deduct 100% of their fees.

How to claim small-business tax deductions

To claim small-business tax deductions as a sole proprietorship, you must fill out a Schedule C tax form. The Schedule C form is used to determine the taxable profit in your business during the tax year. You then report this profit on your personal 1040 form and calculate the taxes due from there.

If you need assistance filing your taxes, many accounting services can pair you with a tax pro to assist with filing. For example, Bench users can be paired with a bookkeeper to perform financial reporting. You can also upgrade to Bench Tax for full tax filing.

» MORE: Best small-businesses apps

A version of this article was first published on Fundera, a subsidiary of NerdWallet

On a similar note...

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business plan tax write off

17 Big Tax Deductions (Write Offs) for Businesses

Janet Berry-Johnson, CPA

Reviewed by

Pat Taylor, EA, MBA

January 5, 2023

This article is Tax Professional approved

One of the simplest ways to reduce your income tax bill is to ensure you’re claiming all of the tax deductions available to your small business.

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What exactly is a tax deduction?

A tax deduction (or “tax write-off”) is an expense that you can deduct from your taxable income . You take the amount of the expense and subtract that from your taxable income. Essentially, tax write-offs allow you to pay a smaller tax bill. But the expense has to fit the IRS criteria of a tax deduction.

Below you’ll find a comprehensive list of write-offs commonly available to self employed businesses that are organized as sole proprietorships or partnerships . Some of these are directly related to running a business, and some are more personal deductions that a small business owner should be aware of.

Further reading: Tax Credit vs Tax Deduction: What’s the Difference?

Tax deduction savings

Making the most of all your available tax deductions can save you hundreds—even thousands—of dollars at tax time.

Let’s look at an example.

Joe is a self-employed writer and had $60,000 in self employment income in 2023. He has to pay 15.3% self employment (SE) tax plus income tax based on his individual tax rate. The SE tax on $60,000 is $8,478 (generally only 92.35% of SE income is subject to SE tax) and the income tax is $4,865, for a total of $13,343.

(For simplicity, we assumed Joe is single with no children and no other types of taxable income to consider.)

In early 2023, Joe joined Bench and his bookkeeper located $6,000 worth of contractor expenses that he was not aware of. These expenses count as tax deductions and reduce his net self employment income to $54,000.

Now, with $54,000 in taxable self employment income, he pays $7,630 in SE tax and $4,200 in income tax, for a total of $11,830.

Adding the additional business expenses saved Joe over $1,500 in taxes!

By locating the $6,000 in contractor expenses, Bench was able to reduce Joe’s tax liability by over $1,500 dollars. A nice saving he can use to upgrade his laptop this year.

Repeat this for all the available deductions Joe had expenses for, and he can significantly reduce the income he has to pay taxes on—saving him thousands of dollars.

Staying on top of your deductions

As a small business owner, it can be difficult to know what deductions are relevant to you.

Many people struggle to stay on top of their deductions year round and instead try to piece things together at year end and run into difficulties. Remember that restaurant expense you incurred in January last year? Most people don’t, and therefore they miss this tax write off. Add them all up and you’re missing out on a lot of tax savings.

That’s where bookkeeping comes in.

To claim these deductions, you’ll need to keep accurate records and stay on top of your monthly bookkeeping.

Ongoing bookkeeping is critical to help you tally up your deductions. If you don’t have a good DIY setup you’re happy with, check out Bench . We’ll do your bookkeeping for you.

When Bench does your bookkeeping, we catch these deductions every month so you have confidence you’ve caught everything and minimized your tax liability. Then at year end, send Bench’s books to your accountant. Or, let us take tax filing off your plate for good with Bench’s small business tax support —we’ll do your bookkeeping and tax filing for you. Consider your tax season headache free!

The top 17 small business tax deductions

Each of these expenses are tax deductible. Consider this a checklist of small business tax write-offs.

2022 Small Business Tax Deductions

And remember, some of the deductions in this list may not be available to your small business. Consult with your tax advisor or CPA before claiming a deduction on your tax return.

Click the links below to skip ahead to a specific deduction, or keep scrolling to learn about them all.

Advertising and promotion

Business meals, business insurance.

  • Business interest and bank fees

Business use of your car

Contract labour, depreciation.

  • Home office

Legal and professional fees

Moving expenses, rent expense, salaries and benefits, telephone and internet expenses, travel expenses.

  • Bonus: Personal expenses

The cost of advertising and promotion is 100 percent deductible. This can include things like:

  • Hiring someone to design a business logo
  • The cost of printing business cards or brochures
  • Purchasing ad space in print or online media
  • Sending cards to clients
  • Launching a new website
  • Running a social media marketing campaign
  • Sponsoring an event

However, you cannot deduct amounts paid to influence legislation (i.e., lobbying) or sponsor political campaigns or events.

Having separate bank accounts and credit cards for your business is always a good idea. If your bank or credit card company charges annual or monthly service charges, transfer fees, or overdraft fees, these are deductible. You can also deduct merchant or transaction fees paid to a third-party payment processor, such as PayPal or Stripe.

You cannot deduct fees related to your personal bank accounts or credit cards.

You can generally deduct 50% of qualifying food and beverage costs. To be eligible for the deduction:

  • The expense must be an ordinary and necessary part of carrying on your business
  • The meal cannot be lavish or extravagant under the circumstances
  • The business owner or an employee must be present at the meal

You can deduct 100% of the cost of providing meals to employees, such as buying pizza for dinner when your team is working late. Meals provided at office parties and picnics are also 100% deductible.

Be sure to keep documentation for the outing that includes the amount of each expense, the date and place of the meal, and the business relationship of the person you dined with. A good way to do this is to record the purpose of the meal and what you discussed on the back of the receipt.

Further reading: How to Deduct Meals and Entertainment

You can deduct the premiums you pay for business insurance .

This may include:

  • Property coverage for your furniture, equipment, and buildings
  • Liability coverage
  • Group health, dental and vision insurance for employees
  • Professional liability or malpractice insurance
  • Workers compensation coverage
  • Auto insurance for business vehicles
  • Life insurance that covers employees, as long as the business or business owner is not a beneficiary on the policy
  • Business interruption insurance that covers lost profits if your business is shut down due to fire or another cause

Do you use your vehicle for business ? If you use your vehicle solely for business purposes, then you can deduct the entire cost of operating the vehicle. If you use it for both business and personal trips, you can only deduct the costs associated with business-related usage.

There are two methods for deducting vehicle expenses, and you can choose whichever one gives you a greater tax benefit.

  • Standard mileage rate. Multiply the miles driven for business during the year by a standard mileage rate . For miles driven in 2023, it is $0.655 per mile.
  • Actual expense method. Track all of the costs of operating the vehicle for the year, including gas, oil, repairs, tires, insurance, registration fees, and lease payments. Multiply those expenses by the percentage of miles driven for business. Note that you cannot switch from the actual expense method to the standard mileage method on the same vehicle.

Both methods require that you track your business miles for the year. You can keep a detailed log of your business miles, use an app to track your trips , or reconstruct a mileage log using other documents, such as calendars or appointment books. If you keep a mileage log, clearly document the miles driven, time and place, and business purpose of your trip.

Note that you cannot count the miles driven while commuting between your home and your regular place of business. These costs are considered personal commuting expenses.

If you hire freelancers or independent contractors to help in your business, you can deduct their fees as a business expense.

Just remember, if you pay a contractor $600 or more during the tax year, you’re required to send them a Form 1099-NEC by January 31st of the following year.

When you purchase furniture, equipment, and other business assets, depreciation rules require you to spread the costs of those assets over the years you’ll use them rather than deducting the full cost in a single hit.

Expensing these items upfront is more attractive because of the quicker tax benefit. Fortunately, the IRS gives business owners several ways to write off the full cost in one year.

  • De minimis safe harbor election. Small businesses can elect to expense assets that cost less than $2,500 per item in the year they are purchased. You can read more about the de minimis safe harbor election in this IRS FAQ .
  • Section 179 deduction. The Section 179 deduction allows business owners to deduct up to $1,080,000 of property placed in service during the tax year. This includes new and used business property and “off-the-shelf” software. The Section 179 deduction is limited to the business’s taxable income, so claiming it cannot create a net loss on your return. However, any unused Section 179 deduction can be carried forward and deducted on next year’s return.
  • Bonus depreciation. Businesses can take advantage of bonus depreciation to deduct 100% of the cost of machinery, equipment, computers, appliances, and furniture.

If you purchased a new vehicle during the tax year, the IRS limits write-offs for passenger vehicles. In the first year, if you don’t claim bonus depreciation, the maximum depreciation deduction is $10,100. If you do claim bonus depreciation, the maximum write off is $18,100.

Depreciation is more complicated than your average deduction, so we recommend reading our article What is Depreciation? And How Do You Calculate It? , and asking your accountant which assets you can deduct in your business.

Education costs are fully deductible when they add value to your business and increase your expertise. In order to decide if your class or workshop qualifies, the IRS will look at whether the expense maintains or improves skills that are required in your current business.

The following list contains examples of valid business education expenses:

  • Classes to improve skills in your field
  • Seminars and webinars
  • Subscriptions to trade or professional publications
  • Books tailored to your industry
  • Workshops to increase your expertise and skills
  • Transportation expenses to and from classes

Keep in mind that any education costs that would qualify you for a new career, or costs related to education outside of the realm of your business, don’t qualify as business tax deductions.

Home office expenses

If you use a home office for your business, you may be able to deduct a portion of your housing expenses against business income. There are two ways to deduct home office expenses.

  • Simplified method. You can deduct $5 per square foot of your home that is used for business, up to a maximum of 300 square feet.
  • Standard method. Track all actual expenses of maintaining your home, such as mortgage interest or rent, utilities, real estate taxes , housekeeping and landscaping service, homeowners association fees, and repairs. Multiply these expenses by the percentage of your home devoted to business use.

To qualify for the home office deduction, you need to measure up in two areas:

  • Regular and exclusive use. To pass the regular and exclusive use requirement, you must regularly use your home office exclusively for conducting business activities. A desk that doubles as your kitchen table won’t work. You don’t need to dedicate an entire room to your business, but your work area should have clearly identifiable boundaries. You may want to keep photos of your home office workspace with your tax documentation as evidence in case the IRS selects your return for audit.
  • Principal place of business. Your home office must be your principal place of business. This means you spend the most time and conduct important business activities here.

If you use the standard method for calculating your home office deduction, you’ll need to file Form 8829 along with your Schedule C. Learn more about the home office deduction .

If you take out a loan or use a credit card to cover business expenses, you can deduct the interest paid to your lender or credit card company as long as you meet the following requirements:

  • You are legally liable for the debt. For example, if your parents take out a second mortgage on their home to help you start a business, you are not legally liable for the debt. In that case, interest on the loan is not deductible, even if you make all of the payments on the mortgage.
  • Both you and the lender intend for the debt to be repaid. A loan that doesn’t have to be repaid is a gift.
  • You and the lender have a true debtor/creditor relationship. The IRS tends to scrutinize loans between related parties, such as family members. If you use the accrual method of accounting , you cannot deduct interest owed to a related person until the payment is made.

Keep in mind that if a loan is part business and part personal, you need to divide the interest between the business and personal parts of the loan.

Legal and professional fees that are necessary and directly related to running your business are deductible. These include fees charged by lawyers, accountants, bookkeepers, tax preparers, and online bookkeeping services such as Bench .

If the fees include payments for work of a personal nature (for example, making a will), you can only deduct the part of the fee that’s related to the business.

The Tax Cuts and Jobs Act of 2017 eliminated the deduction for moving expenses for all nonmilitary individuals, but businesses can still deduct the cost of moving business equipment, supplies and inventory from one business location to another.

Be sure to keep good records to substantiate all costs associated with your business move.

If you rent a business location or equipment for your business, you can deduct the rental payments as a business expense.

Keep in mind, rent paid on your home should not be deducted as a business expense, even if you have a home office. That rent can be deducted as a part of home office expenses.

Salaries, benefits and even vacation time paid to employees are generally tax-deductible, as long as they meet a few criteria:

  • The “employee” is not the sole proprietor, a partner, or an LLC member
  • The salary is reasonable, ordinary, and necessary
  • The services were actually provided

Taxes and licenses

You can deduct various taxes and licenses related to your business. This may include:

  • State income taxes
  • Payroll taxes
  • Personal property taxes
  • Real estate taxes paid on business property
  • Excise taxes
  • Business licenses

If telephone and internet services are integral to your business, they can be deductible business expenses.

Keep in mind, if you use a landline at home, you cannot deduct the cost of your first line, even if you use it solely for work. However, if you have a second landline devoted to the business, the cost of that line is deductible.

If you use your cell phone and internet connection for both personal and business reasons, you can only deduct the percentage allocable to business use. Keep an itemized bill or other detailed records to prove the amount of business use in case your return is audited.

For a trip to qualify as business travel, it has to be ordinary, necessary, and away from your tax home. Your tax home is the entire city or area in which you conduct business, regardless of where you live. You need to travel away from your tax home for longer than a normal day’s work, requiring you to sleep or rest en route.

Deductible, IRS approved business travel expenses include:

  • Travel to and from your destination by plane, train, bus, or car
  • Using your car while at a business location
  • Parking and toll fees
  • The cost of taxis and other methods of transportation used on a business trip
  • Meals and lodging
  • Laundry and dry cleaning while on a business trip
  • Business calls
  • Shipping of baggage and sample or display materials to your destination
  • Other similar ordinary and necessary expenses related to your business travel

Remember to keep records that include the amount of each expense, as well as dates of return/departure, details of the trip (whom you met with), a mileage log if you drove your own vehicle, and the business reason for the trip.

Further reading: Are Travel Expenses Tax Deductible?

Personal tax deductions for business owners

The above-mentioned deductions can be claimed on Schedule C or Form 1065’s Schedule K-1 , but there are a few other tax breaks small business owners commonly claim on their individual returns.

Charitable contributions

Sole proprietorships, LLCs, and partnerships cannot deduct charitable contributions as a business expense, but the business owner may be able to claim the deduction on their personal tax return.

To qualify, the donation must be made to a qualified organization .

Starting with 2020 returns, taxpayers can claim up to $300 of cash contributions as an “above-the-line” deduction on Form 1040. To deduct more than that, the business owner has to itemize deductions on Schedule A attached to Form 1040.

Child and dependent care expenses

If you pay someone to care for a child or another dependent while you work, you may be able to claim the Child and Dependent Care Credit. To qualify, the person receiving the card must be a child (under age 13) or a spouse or other dependent who is physically or mentally incapable of self-care.

The credit is worth between 20% and 35% of your allowable expenses, depending on your income. Allowable expenses are limited to $4,000 for the care of one dependent and $8,000 if you paid for the care of two or more dependents. IRS Publication 503 provides more information on the Child and Dependent Care Credit. You’ll need to attach Form 2441 to your Form 1040 to claim the credit.

Retirement contributions

You can deduct contributions to employee retirement accounts as a business expense. The amount you can deduct depends on the type of plan you have. Check out the IRS’s tips for calculating your own retirement plan contribution and deduction for more information.

Health care expenses

In addition to insurance premiums, you can deduct other out-of-pocket medical costs, such as office co-pays and the cost of prescriptions. These costs are normally included on itemized deductions on Schedule A.

Self-employed business owners can also deduct health insurance premiums for themselves, their spouse, and dependents on Schedule 1 attached to their Form 1040. However, if you are eligible to participate in a plan through your spouse’s employer, then the business can’t deduct those premiums.

The bottom line

Tax deductions are an essential way to minimize the amount of tax you have to pay, and good record keeping will ensure you get to keep those deductions if the IRS ever comes knocking.

Have your team of dedicated bookkeepers at Bench track all of the expenses related to running your business to ensure you’re taking advantage of every legitimate deduction. Send Bench’s books to your accountant at year end, or let us take the tax filing off your plate for good! Learn more .

More resources for small businesses

  • How Much Does It Cost To File Taxes?
  • How To Prevent An IRS Audit
  • Smart Year-End Tax Planning Moves
  • Ecommerce Tax Deductions: A Complete Guide for Online Sellers
  • IRS Receipt Requirements: What You Need To Know

Own a retail store or a startup?

Our friends at Gusto put together a handy list of store deductions and startup tax deductions .

Join over 140,000 fellow entrepreneurs who receive expert advice for their small business finances

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23 Common Tax Deductions for Small-Business Owners

13 Min Read | Jan 5, 2024

Jade Warshaw

I don’t have to convince you that taxes can be complicated—especially for small-business owners. As a responsible tax-paying citizen and a small-business owner, I know it for a fact! But not paying attention to your taxes could cost you big-time—especially if you’re not sure which  small-business tax deductions  you’re eligible for. And Uncle Sam doesn’t exactly give you a road map here. So allow me to help you out.

Here’s what you need to know: The IRS considers anything “ordinary and necessary” to run your business as a tax-deductible expense. So, paint brushes for an artist? Yes. Getting your hair done so you can look jazzy on your Zoom calls? Not so much . . . unless you’re an entertainer. Still not sure what qualifies as tax-deductible? I got you! I’ll help you understand what you can write off as a business expense on your tax return.

23 Small-Business Tax Deductions

Certain expenses are specific to the kind of business you run. But I’ve put together a list of common deductible business expenses that apply to most small-business owners. If that’s you, you can write off:

  • Qualified Business Income
  • Home Office
  • Advertising and Marketing
  • Office Supplies and Expenses
  • Software Subscriptions
  • Office Furniture
  • Inventory (Cost of Goods Sold)
  • Auto Expenses
  • Energy Efficiency Expenses
  • Business Meals
  • Salaries and Employee Benefits
  • Freelance or Contracted Labor
  • Employee Gifts
  • Legal and Professional Fees
  • Bad Business Debts
  • Debt Interest

1. Qualified Business Income

The  2018 tax reform law  changed how deductions work for most taxpayers—including small-business owners. Under the tax law, most small businesses (sole proprietorships, LLCs, S corporations and partnerships)   can deduct 20% of their income on their taxes.  Woo-hoo!

Here’s what this means: Say your small business generates $100,000 in profit. You can deduct $20,000 before ordinary income tax rates are applied.

But hold up! There are a few limits that could prevent you from claiming this deduction. The biggest obstacle is the income limit that applies to some high-income business owners. Think lawyers, doctors and consultants. Once your income exceeds that limit (in 2024, the Qualified Business Income Deduction limits are $241,950 for single filers or $483,900 for pass-through business owners who are married filing jointly) this deduction starts to phase out. 1 Dang , I guess Biggie was right: more money, more problems.

Wait—pass-through business owner? That all sounds pretty complicated, but it’s simpler than it seems. A pass-through entity is just a small business (shout out to the   LLCs and S corps) that don’t have to pay corporate income taxes. The small business my husband and I own is a pass-through entity as well (in our case an S corporation). Basically, how it goes down is the business owner pays the taxes at their personal rate. Look, just reach out to a  tax pro  to see if you’re eligible for this pass-through entity deduction.

2. Home Office

Did you rearrange the spare room in your house or apartment into a home office space? You’ll probably be able to deduct some expenses if you’re using your home for business. This includes mortgage interest, insurance, utilities, repairs and depreciation. Aye, that’s what I’m talking about. Come on and get this money back! The simplified version of this deduction also allows small-business owners to deduct $5 for every square foot of their home office—up to a max of 300 square feet. 2

But wait! The IRS allows you to  claim this deduction  only when you use your home office   exclusively  for business purposes on a regular basis .  So if your office doubles as a guest room for your mom when she’s in town, that won’t fly.

With  rent always going up , it’s nice to get a break  somewhere . The cost of renting a space for your business is fully deductible, whether it’s a downtown storefront for your cupcake shop (sweet!) or an office space in a business complex for your travel agency. Now, this is not an excuse for you to go out and rent a space you don’t truly need. Remember the whole point is to make money. Spending cash just to get a deduction is not the move.

4. Advertising and Marketing

If you’ve been doling out business cards like candy on Halloween, you’re in luck! You can deduct the cost of printing those cards on your tax return. Basically, you can deduct anything you use to promote your business and bring in new customers—including things like social media ads and billboards. So, don’t forget to claim these deductions because we both know those marketing expenses add up quick!

5. Office Supplies and Expenses

Okay, no matter what kind of business you run, you probably have to stock up on traditional office supplies—whether it’s printer ink, pens or Post-it notes. The good news is, those supplies are fully deductible.

business plan tax write off

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And if you’ve bought a new laptop, smartphone or some other gadget you use for your small business during the year, you can write off the entire cost of those expenses too.

6. Software Subscriptions

Software is a big part of running today’s businesses—even small businesses. If you need tools like  Google Workspace, point-of-sale software (like Square), or any other necessary software or subscriptions to run your business, you can claim them on your taxes.

7. Office Furniture

Creating a comfortable office environment is a great way to keep your team, clients and customers happy—so, quality office furniture is a must. You don’t have to go ham ordering fancy designer chairs, but you can find quality items on a budget. Luckily, the IRS considers office furniture as office supplies. Which means you can . . . you guessed it—deduct it!

8. Utilities

Uncle Sam knows you have to keep the lights on to keep your business going (and vice versa). Everything you spend on utility bills for your business—including electricity , phone, internet, water, heat and sewage—is fully deductible. Let’s go! So go ahead and get that good internet, because that bill is about to be written off.

Roofs leak, toilets break, and walls need to be repainted from time to time. If you need to repair parts of your business property or perform regular maintenance to keep things running efficiently, of course,  you can also write off those costs on your taxes.

10. Inventory (Cost of Goods Sold)

Does your small business make or purchase products for resale? The government actually lets you deduct the cost of making or purchasing those products. This includes expenses like raw materials, employee wages and storage. 3  But this deduction can get a bit technical, so you’ll want to consult a tax pro.

11. Auto Expenses

A lot of small-business owners use vehicles to get stuff done—whether it’s driving to and from meetings with clients or using a pickup truck to move heavy equipment between work sites. If you can prove you use a vehicle for business purposes, you can deduct those expenses from your income.

There are two ways you can claim this deduction:

A. Use the standard mileage rate.

Add up all the miles you drove for your business and multiply by the IRS’s standard deduction rate to figure out how much you can take off. Beginning in 2024, the standard mileage rate is 67 cents per mile. 4  So for example, if you drive 5,000 miles for business purposes in 2023, you’ll be able to deduct $3,350 off your taxes. 

B. Add up your actual car-related expenses.

This option will take a little more work. If you keep very detailed records throughout the year, you can add up how much your car depreciated and how much you spent on gas, repairs , tires, tune-ups, car insurance and registration fees. Then that’ll be your deduction instead of the mileage.

This is the option my husband Sam and I choose, but whichever option you choose basically depends on how economical your car is, how much it costs you to drive it throughout the year, and how well you documented your car-related expenses. Better save those receipts!

12. Energy Efficiency Expenses

Do you own a commercial property or building? If you’ve recently made upgrades to increase energy efficiency—like improvements to heating, cooling and interior lighting—you might qualify for a deduction of up to $1.88 per square foot. 5  Not a bad deal. But you have to show you’ve reduced energy usage by 50% to get the full deduction.

Many small-business owners and their employees spend a lot of time in airports and traveling around the country to do business. This one was a biggie for us, because all those airline tickets, hotels and meals on the road can get pricey. The good news is, you can deduct most travel expenses for you and your employees. As long as there’s a business purpose behind the trip, you’re in the clear. 6 Just make sure you hang on to all your receipts and keep detailed records from your travels.

14. Business Meals

Attention: This is not an excuse to take all your friends to a steak dinner on the business card! I tried that and my bookkeeper called me out. Whoops! But the truth is business does sometimes require wining and dining business clients, and that can get pricey. Good news is, Uncle Sam’s willing to go Dutch on the bill. You can usually deduct 50% of the costs for business lunches, but entertainment expenses (like sporting events or concerts) don’t count. 7

On the bright side, though, the cost to provide meals for your employees at a company picnic or holiday party is fully deductible. 

15. Salaries and Employee Benefits

If you have employees, anything you pay them—from salaries and wages to bonuses and commissions—counts as tax-deductible business expenses. You can also deduct contributions to their retirement plans, education assistance, and most other employee benefits and compensation . By the way, that retirement contribution part also applies to you as an employee of your small business, so be sure you have a plan set up to contribute for retirement.

16. Freelance or Contracted Labor

Freelancers and independent contractors can be an invaluable resource for your business. And—just like your normal employees—the cost of hiring them is fully deductible too.  Nice!  Just make sure you issue the right IRS form (1099-NEC or 1099-K, depending on how you pay them) to any freelancer or contracted worker who you pay $600 or more.

17. Employee Gifts

You can also deduct up to $25 per person per year for employee gifts. 8  So, if you’re feeling extra generous around the holiday season—or any time of the year—track and record your gift giving. Hey, being generous has its benefits in more ways than one!

18. Education

You can fully deduct educational costs if they add value to your business. So, if you pay for anything like classes, workshops or seminars (or even books and subscriptions) that strengthen your business know-how, you can deduct those costs. Man, it pays to learn!

But any educational costs need to  add value  to your  business . That means the couples cooking class on date night doesn’t count. Don’t play yourself.

Nothing feels better than deducting  taxes  on your taxes. While you can’t deduct federal income taxes, there are still plenty of other taxes closer to home you’ll be able to write off on your tax return. For example, you can write off up to $10,000 of state and local income taxes, sales taxes, real estate taxes and personal property taxes. 9

Here are a few other taxes you can deduct:

  • Part of your  self-employment taxes
  • Franchise taxes
  • Excise taxes
  • Occupational taxes

20. Insurance

No matter what kind of business you’re in, you want to protect it. That’s just common sense. The best way to do that is to get  the right kinds of insurance  in place. The cost for many of the insurance premiums you’ll need for your business—like liability insurance, fire and flood insurance, or theft insurance—are deductible. 10  Medical insurance for your employees is also deductible under certain circumstances.

21. Legal and Professional Fees

You have the right to an attorney—and the right to deduct any legal and  accounting  fees charged by attorneys and accountants that are related to your business operations.

22. Bad Business Debts

Okay—I know what you’re thinking:  Isn’t all debt bad?  Well, yeah . . . But that’s not what I’m talking about here. I mean bad debt in the sense of lending money to an employee or vendor and never getting it back. Credit sales to customers and business loan guarantees are also considered bad debt by the IRS (if previously included in income). 11 But here’s an idea, don’t do it in the first place.

You can claim bad debt as a tax deduction if you can prove it’s a business debt and not personal.

23. Debt Interest

Listen, I believe the best way to run your business is to run it completely debt-free . And build it at the speed of cash. Hot take: Debt is not a tool to grow your business. It creates a  lot  of unnecessary risk and will slowly suck the life out of your business. And if you’re not careful, business debt can lead to years of stress , endless payments and even bankruptcy.

If you’re thinking about taking out a business loan,  don’t do it ! That’s just dumb. But if you already   have a loan for business purposes, whether it’s a mortgage or a line of credit, you can probably deduct the interest you’re paying on the loan from your taxes. Even though it sounds like a sweet deal, it’s hard to come out on top when debt is involved. So, this is one deduction I  don’t  want you to take.

Now, go pay off that loan as soon as possible, and never borrow another cent again!

How to Claim Small-Business Tax Deductions

You can claim most small-business deductions on Schedule C and Schedule E forms (just be sure you’re filling out the right form for your business type). You can use these forms to add up all your deductions and figure out your taxable income .

Remember, the more deductions you claim, the lower your taxable income. And the lower your taxable income, the less you’ll owe Uncle Sam. That’s what I’m talking about!

But look, this stuff gets tricky—especially if you’re a small business  with  employees. The last thing you want to do is miss out on deductions that could save you hundreds or thousands of dollars on your taxes—or worse, make some mistakes that leave you in hot water with the IRS. No thanks! Talk with a tax pro to make sure you have everything sorted out.

Talk With a Tax Pro

If all this tax stuff is making your armpits sweat, I get you. Here at Ramsey we can connect you with an experienced, RamseyTrusted tax professional in your area to help you take full advantage of these small-business tax deductions.

Our RamseyTrusted pros take the stress out of tax season by helping you claim all the deductions you qualify for  and  save time in the process. Yeah, I can hear you breathing easier already.

Find your tax pro today!

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Jade Warshaw

About the author

Jade Warshaw

Jade Warshaw is a personal finance coach, bestselling author of Money’s Not a Math Problem, and regular co-host on The Ramsey Show, the second-largest talk radio show in America. Jade and her husband paid off nearly half a million dollars of debt, and now she’s a six-figure debt elimination expert who uses her journey to help others get out of debt and take control of their money. She’s appeared on CNBC, Fox News and Cheddar News and been featured in Fortune and POLITICO magazines. Through her social content, recent book, syndicated columns and speaking events, Jade is on a mission to change the typical American money mindset. Learn More.

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What Is a Tax Write-Off?

Kylie McQuarrie

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Running a small business is undeniably expensive, which is one key reason the IRS lets small business owners deduct certain business expenses from their taxable revenue. These deductions — informally known as tax write-offs — lower a business’s taxable income, which can help small businesses save money.

In this article, we’ll explain what a tax write-off is, which business expenses are tax deductible, and how to make tax deductions when filing taxes.

(Note that a tax write-off is not the same thing as an accounting write-off. While we briefly explain accounting write-offs, they aren’t our primary focus in this article.)

Tax write-offs: Table of contents

What is a tax write-off or deduction.

  • Common tax deductions for small businesses

How to write off business expenses

The takeaway.

If you're searching for accounting software that's user-friendly, full of smart features, and scales with your business, Quickbooks is a great option.

A tax write-off (an unofficial term for a tax deduction) is a business expense that the IRS allows you to deduct from your business’ profit when filing federal taxes . Writing off an expense means you lower your overall taxable income — which may mean you’ll recoup some of the cost of those expenses in your tax return. You might also see a write-off referred to as deducting or itemizing an expense. All three terms mean the same thing.

Not every business expense is tax deductible . Instead, per the IRS , a business expense must be both necessary to your business’ operations and an ordinary expense for your business, meaning it’s a common expense in your specific industry.

The IRS uses necessary as a general benchmark term: a necessary expense doesn’t have to be something you can’t do without. Instead, it can be a purchase that helps you run your business, as long as that purchase is typical for business owners in your field.

An expense the IRS terms ordinary and necessary depends on your field and industry. For instance, educators can deduct a certain amount of school supplies , and freelancers who work solely from a dedicated home office can claim a portion of their rent or mortgage as a tax deduction. However, school supplies or a home office space would not be considered an ordinary or necessary expense for an industrial supply manufacturer or commercial pilot.

Additionally, some expenses are explicitly not tax deductible even though they’re necessary to your business operations. These include expenses related to the cost of goods sold (COGS), capital expenses (expenses required to get your business off the ground, like startup costs ), and personal expenses.

Of course, since we’re talking about federal taxes, there are exceptions to every rule. For instance, if you purchase something partially for personal use and partially for business use, you could deduct part of the expense from your business income.

To learn more, we recommend reading through the IRS’s overview of small business tax deductions . Additionally, you should always consult with an accountant for professional tax-filing advice specific to your business.

Small-Business Tax-Filing Checklist

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1. Understand the self-employment tax

Traditional employees pay half of their own Medicare and Social Security taxes, with their employer matching the second half. However, if you’re self-employed, you’re both employer and employee. Along with withholding and filing your own income tax, you’ll also pay both the employee and employer halves of the FICA tax. That’s a 12.4% tax for Social Security and a 2.9% tax for Medicare, or 15.3% total .

While the Social Security tax applies only to the first $137,700 of your income, the Medicare tax applies to your entire income.

As a self-employed individual, you can claim the employer portion of your self-employment tax as a deduction. Read the IRS’s guide for a complete list of deductions.

What are the most common tax deductions?

So what can you actually deduct on your tax return? Depending on your business, you might be eligible for deductions in the categories we list below. Before we dive in, though, here are a few things to consider first.

First, while these are some of the most common deductions, this list isn’t comprehensive. Plus, different types of businesses qualify for different deductions: C corporations won’t make the same deductions as sole proprietors. For a more complete list of potential deductions, see the IRS’ deduction guidelines and consult with an accountant.

Next, remember that some of these expenses can’t be deducted if they’re related to capital costs, calculating the cost of goods sold, or personal costs. For example, accounting help related to starting your business can’t be deducted — those expenses must be claimed through depreciation and amortization (the IRS explains more in IRS Publication 535 ).

Finally, bear in mind that while you  can  deduct certain expenses, you might not want to. Why? Because while lowering your taxable income might get you a bigger tax return, it can have other financial consequences for your business — like determining which loan amounts you qualify for.

Again, we always recommend speaking with an accountant, banker, tax advisor or other financial professional to understand how tax write-offs can affect your bottom line. 

Small businesses can usually write off the monthly or annual cost of using accounting software . Similarly, if you pay a CPA to file your business’ taxes, you can deduct that expense, but only for the business-related portion of your taxes (like filing a Schedule C form ). You can't deduct the money you spend on filing your personal taxes.

business plan tax write off

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Mileage tracking

Do you travel for work? You can likely deduct the mileage for your business-related car trips. For the 2022 tax year, the mileage deduction rate is 58.5 cents per mile through June 30 and 62.5 cents for the last six months.

You’ll need to track your mileage exactly — a rough estimate won’t do. That means checking your car’s odometer before and after every trip, plus recording the dates and times of each business-related car trip. (Accounting software like QuickBooks Self-Employed can track mileage for you, including recording timestamps).

Vehicle expenses

You can usually deduct gas, maintenance, licensing, registration, and insurance costs for a car you use for work. However, you can’t deduct both mileage and car expenses — you must choose one or the other.

If you didn’t record your mileage for this year’s taxes but do have receipts for gas and insurance, you should opt to deduct vehicle expenses rather than mileage.

No matter which tax write-off method you choose, you need to be specific and accurate . Do not guess on or average your vehicle expenses. Round numbers that look like general estimates are often a red flag for the IRS and can trigger an audit.

Home offices

If you work from home, you can deduct some of the cost of your home office. You cannot write off a home office if you use the space for any other purpose . The space must be a dedicated office.

You can calculate a standard deduction based on your office’s square footage. For this tax year, you can deduct $5 per square foot (though you can’t exceed 300 square feet — which means the most you can deduct is $1,500).

Alternatively, you can determine the percentage of your home used for your home office or itemize purchases made for your home office. Typically, these methods are a little more complicated than the simple square footage calculation.

To learn more about how to calculate your home office deduction, read through the IRS' list of deduction calculation methods .

When renting office space, you can typically deduct the cost of rent from your taxes. However, if you have the title to the property or have any equity in it, you can’t make a rent deduction.

Employee pay and benefits

You can typically write off your employees’ wages , including bonuses and gifts. You can also write off the employer cost of contributing to employee benefits, including medical insurance and retirement accounts.

However, even if you’re self-employed , you can’t write off the cost of medical bills. Instead, individuals, including sole proprietors, must deduct medical expenses on their personal taxpayer forms.

COVID-19 and small-business tax deductions

While most tax write-offs related to the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) should have been resolved with your 2020 taxes, you may still be eligible for a tax credit based on the Infrastructure Investment and Jobs Act. This tax credit relates to employee retention and is limited to wages you paid employees in 2020 and 2021. 

For more in-depth information about COVID-19 tax relief, we recommend reading through the IRS' Employee Retention Credit info page. Then, speak to a financial advisor to determine which credits and write-offs you may qualify for. 

To claim tax deductions on your federal income taxes, you’ll file a Schedule C form . You use this form to calculate your business’s profit and loss and to report that number to the IRS in your tax return.

What documents do I need to file a Schedule C?

To fill out a Schedule C, you need a copy of your business’ profit and loss statement (aka income statement) and balance sheet . If you sell inventory, you need information on your cost of goods sold . If you bought any assets in the last tax year, you’ll need receipts or other financial documents recording the transaction.

And for itemized deductions — tax write-offs — you need whatever documents provide you with the information you need to accurately calculate your business expenses. That could include receipts for accounting software costs, payroll statements or bank statements.

You don’t need to submit all these expense-tracking documents to the IRS, but you do need to make clear, accurate expense deductions. And if you’re audited, you’ll definitely need these documents on hand to back up your deductions. Once again (we can’t stress this enough), talk to an accountant about making accurate deductions for your business.

How do I fill out a Schedule C?

A Schedule C form has several key sections that you need to fill out thoroughly. An accountant can guide you through the processes of completing each of the following sections of a Schedule C:

  • In Part I, calculate your business’ gross profit and income.
  • In Part II, list your itemized deductions, which means listing your business expenses line by line and by expense type (advertising, employee benefits, office expenses, etc).
  • In Part III, tally up your cost of goods sold.
  • In Part IV, itemize vehicle expenses. If you have additional expenses not listed in Part II, you can list them in Part V.
  • Finally, once you’ve tallied expenses, you can calculate your business’ net profit or loss.

You’ll then submit your finished Schedule C form with your other small business tax documents . Taken together, these documents help determine if you’ll receive an income tax return or if you owe money to the federal government (or, for that matter, to your state or local governments).

Tax write-offs can help you recover some of the necessary costs that come with running a small business. Before filing your tax return this year, consult with an accountant to learn more about which itemized deductions you can make — your bottom line will thank you.

Looking for more guidance on small business finances? Read our piece on small business bookkeeping basics .

Related articles

  • When Are Business Taxes Due in 2023?
  • How to File Taxes as an Independent Contractor
  • How to File Small-Business Taxes in 2023
  • What Small-Business Owners Need to Know About FICA Taxes

Tax write-off FAQ

To write something off in taxes means to claim a business expense on your end-of-year tax forms. The type of business expense you can deduct depends on the type of small business you run and what field you work in. For the IRS’s purposes, your business expense has to be ordinary and necessary to qualify as a write-off, and not every business expense is tax deductible.

A tax write-off is different from an accounting or business write-off, which refers to the process of removing an asset from your books when it loses value.

It’s not bad to write something off—quite the opposite! In fact, the IRS provides thorough instructions to help small businesses write off as many qualifying expenses as possible. In general, and with an accountant’s guidance, you can and should write off as many expenses you can.

Of course, it’s obviously bad (read: illegal) to falsify a business expense or inflate the cost of a qualifying expense. If you do this, you could be audited, and you’ll be subject to fines and other penalties from the IRS. Don’t do it!

Additionally, adjusting your business' taxable income may change which loan amounts you qualify for. Again (we really can't stress this enough), make sure to talk to a CPA, tax advisor, or small-business banker to discuss your specific situation.

What's the difference between a tax write-off and a tax deduction?

A tax write-off and a tax deduction are the same thing. A tax deduction is simply the official term for any business expense you can deduct from your business’s overall revenue on your federal taxes. It’s the term you’ll see the IRS use and that your accountant will likely use. (You might also hear the term itemized deduction as a synonym for a tax write-off or deduction. However, this term is more commonly used when talking about personal taxes rather than business taxes.)

What is an accounting write-off?

A write-off in accounting is not the same as a tax write-off . In business accounting, a write-off refers to adjusting your books for accuracy when an asset loses all value. If an asset can’t be liquidated for cash or lacks market value completely, you need to remove that amount from your asset account and potentially list it in an expense account. (Learn more about debiting and crediting your asset and liability accounts in our piece on double-entry bookkeeping .)

Writing off an asset usually happens in the following situations:

  • When you can no longer use a fixed asset — for instance, if you own a damaged piece of equipment or machinery that’s reached the end of its warranty or lifespan. If the equipment can’t be fixed or sold, only scrapped, you’ll write off that fixed asset.
  • When a client is unable to pay a bill — for instance, if a client with an outstanding invoice has declared bankruptcy and you won’t be able to collect the amount you’re owed. This is called a bad debt write-off , and it requires you to remove the bad debt amount from your accounts receivable.

If an asset doesn’t completely lose its value but decreases substantially in value, it’s referred to as a write-down, not a write-off. And if you’re fairly sure an outstanding invoice might become a bad debt (or if you let customers purchase inventory on credit), you have a doubtful debt rather than a bad debt.

Although bad debt and fixed asset write-offs aren’t the same as tax deductions, the loss of an asset or income does impact your taxes. (In particular, make sure to read through the IRS’s guidelines on bad debt expenses and deductions.) If you need to perform a write-down or write-off, reach out to your accountant for advice . You need to thoroughly document the write-off or write-down to ensure accounting accuracy, both for your business’s bottom line and the IRS.

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Small Business Tax Deductions 2024: What Can You Write Off?

By Melissa Pedigo, CPA • Jan 15, 2024

The 2022 Guide to Small Business Tax Deductions

For many small business owners, tax time may seem burdensome and overwhelming. Incomplete records, uncategorized expenses, and limited time to file tax paperwork all add to the anxiety, leaving them frazzled.

And the IRS doesn’t make it easy on you. There are hundreds of deductions available for small business owners. But how do you know what’s deductible? And what isn’t? 

According to the Internal Revenue Service (IRS), a tax-deductible business expense must be “ ordinary ” (common and accepted in your industry) and “ necessary ” (helpful and appropriate) to operate your business.

Not knowing which tax deductions you’re eligible for could cost your business a lot of money. 

That’s why we put together this guide to help you better grasp what business expenses to write off on your tax return and lower your income tax bill.

What is a tax deduction?

A tax deduction—or tax write-off —refers to any business deduction the IRS allows to lower your taxable income. Generally, these are the costs of doing business . You’re simply subtracting your qualifying expenses from your revenue to help reduce the amount of money you owe the IRS. 

Business tax deductions ‌fit into specific reporting categories, like home office expenses, advertising, business travel expenses, and more. 

Suppose your revenue is $120,000 for 2023, and you paid $3,000 for marketing services. You can claim this expense as a tax deduction, meaning the taxable income will be $117,000—not $120,000.

Don’t confuse tax deductions and tax credits, even though both help reduce the amount you owe the IRS. 

Tax credits are more valuable because they provide a dollar-for-dollar reduction in your tax bill, while tax deductions only reduce your taxable income. 

Governments offer tax credits generally to encourage certain good behaviors, such as investing in research and development, purchasing electric vehicles, or installing solar panels.

So, if your tax bill is $15,000, for instance, and you’re entitled to a $5,000 tax credit for buying an electric vehicle, the credit will cut your tax bill by $5,000—to $10,000. 

How tax deductions work

Tax deductions are calculated based on your expense reports . This underscores the importance of keeping accurate, up-to-date records of the actual expenses you paid for. 

It may help to create a system that categorizes your costs to match what’s on IRS forms so you won’t miss any potential deductions.

Our Tax Preparation software enables you to categorize each transaction in real-time so you can maximize your business tax deductions and reach tax season organized.

Common tax deductions for small businesses

The IRS Publication 535 offers comprehensive guidance on what to write off. However, you can research further in case you have an expense that doesn’t fit neatly into an IRS tax category.

Here’s a list of some of the common ones for small business owners.

Advertising and marketing

If you pay to advertise, publicize, or promote your small business or campaigns to acquire or retain clients, those costs are 100% tax deductible. 

The IRS allows you to deduct these expenses provided they’re ordinary, necessary, reasonable, and directly relate to your business activities.

This can include things like: 

  • Influencer marketing
  • Production costs for advertising materials (business cards, logos, etc.)
  • Media advertising costs (TV, print, radio, or online)
  • Event sponsorships (excluding lobbying or sponsoring political events/campaigns)

Automobiles

Deducting expenses for business use of a car or motor vehicle isn’t straightforward. You can remove the driving costs for business purposes as long as your records are good, accurate, and up to date.

If you’re self-employed, you can score a tax deduction if you use your personal car for business (for example, a trip to visit a client site). The amount you deduct depends on the type of vehicle, purchase price, and what you use it for in your business. 

You can use two different methods to calculate motor vehicle tax deduction: 

  • Actual expense : You must track your mileage plus all car expenses (insurance, gas, repairs) and deduct the business percentage of those costs . You may be able to deduct a depreciation amount each year. 
  • Standard mileage rate : You’ll deduct a set amount per business mile driven. The IRS sets the amount each year. And 2022 had two rates due to high inflation. The rate for the first six months of the year was 58.5 cents per mile. And the rate for the last six months of 2022 was 62.5 cents per mile. Using the standard mileage method , you don’t need to track what you spend on car expenses—just your business mileage and total annual mileage.

Debts your clients, customers, or patients owe that you can’t collect are bad debts. 

You can write off bad debts from your business income at the end of a year as an expense of doing business. That implies you must use the accrual accounting method , where you report income in the tax year you earned it, regardless of when you are paid.

With the cash accounting method, you don’t record income until you’re paid, so you can’t deduct bad debts, and there’s no tax benefit.

Review all your accounts receivable at the end of the year to identify which ones are likely to become bad debts, then deduct the total expense on your business tax return.

Whether you’re operating a sole proprietorship, limited liability company (LLC), or partnership, it’s always good to have a separate bank account and credit cards for your business.

If you incur monthly or annual bank fees, service charges, transfer fees, merchant or third-party payment processor fees, you can deduct them on your tax return. 

Books and professional journals

You can deduct your business reference books, professional journals, and subscriptions to technical, medical, or trade journals and magazines. But they must be related to your business to be claimed as a deduction. 

Business equipment and office supplies

This category includes any tangible property you use in your business to make a profit. That includes things like machinery, fixtures, furniture, office machines, electronic devices, computers, and more—not buildings or land owned by the business.

You must depreciate equipment over its useful life since you’ll continue using it for multiple years. The IRS lets you claim a portion of its cost on your taxes over a period of years, eventually decreasing its remaining value.

But sometimes, you can skip depreciation and write off the entire cost in the first year. Section 179 depreciation allows business owners to deduct the cost of tangible property they bought in one lump sum. 

Office supplies like postage stamps, paper, staples, sticky notes, tape, printer ink and toner, pens, paper plates, and more—which you use for your business during the year are also 100% tax-deductible.

Business insurance

The business insurance expense cost is 100% deductible if it’s ordinary and necessary to run your business. State laws, contracts, and industry regulations require most modern businesses to carry a form of business insurance, such as:

  • Accident and health insurance
  • Casualty and theft insurance
  • Workers’ compensation insurance
  • Professional liability or malpractice insurance
  • Motor vehicle insurance (for business vehicles)

Business loan interest

Paying interest on loans isn’t fun. But if it’s for your business, it’s generally tax deductible. Make sure the business loan is in the company’s name and you make payments. 

Business meals

Following law changes in the Tax Cuts and Jobs Act (TCJA), the IRS issued guidance on business expense deduction for meals . 

You can deduct business-related meals at a 50% rate and temporarily deduct 100% through December 31, 2022 , for qualifying business meals. 

To be eligible for the deduction, the IRS requires that:

  • An employee or taxpayer must be present at the meal.
  • The meal must not be “lavish or extravagant.” 
  • The expense must be ordinary and necessary for running your business.
  • The meals may be provided to potential or current business clients, customers, consultants, or similar business contacts.

There are specific guidelines on the 50% limit . For instance, you can’t claim the miles you drove to and from the restaurant, but you can deduct tax and tip. 

And if entertainment is involved, like taking a potential client to a baseball game, the cost of the food must be separate from the cost of the ticket to the game. That’s because entertainment expenses are not a business tax deduction.

For easier calculation, record and document the following information for each outing: 

  • Date and place of the meal
  • Business relationship with the person you dined with
  • Purpose of the meal
  • What you discussed

Employee expenses

Salaries, wages, recruitment and hiring costs, awards, bonuses, employee benefits (dependent-care assistance, retirement plans, educational assistance, flights, meals, and lodging), and even vacation time paid to your workers are tax-deductible if:

  • The salary is ordinary, necessary, and reasonable
  • The services were actually provided

Workers’ compensation insurance is also tax deductible, if applicable in your state, as are costs of outsourcing to freelancers, independent contractors, copywriters, or agencies. This can also include professional fees from business advisers, lawyers, and more.

If you rent office equipment or property for business (warehouse/storage or other office space), you can deduct the rental payments as a business expense in the year they’re paid. 

You may claim certain home office deductions, like repairs, mortgage interest, property taxes, maintenance, and some utilities, as long as the house meets the “ exclusive and regular use ” requirements.

Equipment leasing also qualifies as a tax deduction under rental or lease payments as long as you have the actual lease—not a conditional sales contract.

Software subscriptions

Internet services, domain registration, web hosting, online tools, and apps you use daily in running your business are deducted as office or utility expenses.

If you run your business out of your home, factor in the exact square footage you use for business to calculate the amount you can claim. 

Expensing these costs also comes with benefits if you use them solely to run your business. For instance, if you pay subscriptions for tools like Skype, Hootsuite, or Evernote, you can deduct 100% of the cost on your tax return.

Start-up expenses

The costs you incur to get your business up and running are tax deductible. Registration fees, legal costs, office supplies, and marketing expenses related to starting up your business can help reduce your tax bill. Just remember that they need to be ordinary and necessary for your company.

Tax and licenses

You can also deduct various taxes (payroll, personal property, state income, excise, sales, fuel, and more) on your tax return. 

Annual fees paid to obtain or renew required business licenses that are ordinary and necessary are also tax deductible.

Nondeductible small business expenses

There are a few exceptions to the expenses you may associate with your business that are non-deductible, such as: 

  • Lobbying expenses
  • Political contributions
  • Fines and penalties for breaking the law
  • Federal income tax payments
  • Tax penalties or interest you incur
  • Charitable contributions
  • Certain interest costs that must be capitalized 
  • Entertainment
  • Business clothing (except uniforms worn only to work)
  • Personal care expenses (gym memberships, haircuts, manicures, etc.)
  • Personal travel expenses

Remember, tax-deductible expenses must be “ordinary and necessary” to qualify for a deduction on your business tax return. That’s why it’s important to research the rules and check with a certified public accountant (CPA) or other tax professional to be sure.

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Taxes are business as usual, but there are dozens of tax deductions that can help you lower your tax bill. To use these deductions, you must prove the associated costs and fees, which means keeping proper, organized records and receipts.

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Our Tax Prep software makes tax season simpler by enabling you to instantly categorize business expense and income transactions, automatically set aside a percentage of your income to cover your tax payment, and generate prefilled tax forms, whether Schedule C , Form 1065 , or Form 1120-S . 

Open a Lili account today and maximize your business tax deductions!

Melissa Pedigo, CPA and writer on the Lili Blog

Melissa Pedigo has been a CPA for over 20 years. Now a full-time writer with a vast knowledge of U.S. tax and accounting, she’s able to write about tax and finance topics from a unique perspective…as an industry expert.

When she’s not writing or being an accounting nerd, you’ll find her watching and playing tennis, reading, tending to her half-grown garden, and studying foreign languages. You can find her on Twitter , Linkedin or at acpawrites.com .

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Maximizing LLC Tax Benefits and Tax Write Offs: Essential Guide to Tax Deductions and Loopholes for Small Businesses

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Guide on Utilizing LLC Tax Advantages: A Must-Have Companion for Small Business Owners to Navigate Tax Write Offs and Strategies

Antonio Del Cueto, CPA

April 9, 2024

When it comes to LLC tax write-offs , maximizing your deductions can make a significant difference in your tax return. Understanding what qualifies as business income and knowing the ins and outs of business tax deductions are essential for optimizing your tax strategy. From expenses directly related to business purposes to deductions for qualified business income, navigating through the realm of business taxes can be straightforward with the right knowledge. Let's delve into how you can leverage business deductions to minimize your income tax while ensuring you're claiming all the deductions applicable for your business use.

Want an easier way to file your taxes? Download our FREE tax guide for individual filers.

business plan tax write off

Understanding LLC Tax Benefits and Tax Write Offs

Navigating the tax advantages of operating as a Limited Liability Company (LLC) can significantly impact your business's financial health. This section is designed to demystify LLC taxation, highlight key deductions, and explore strategies for maximizing your tax write-offs . Whether you're a sole proprietor transitioning to an LLC or already running an LLC, understanding these benefits is crucial, especially when tax time rolls around. It's all about ensuring you're not paying more in taxes than necessary, all while staying compliant with tax laws.

Overview of LLC Taxation

LLCs offer flexibility in how they are taxed, which can be a significant advantage for many small business owners. By default, an LLC is treated as a pass-through entity for tax purposes, meaning the business itself doesn't pay taxes. Instead, the income passes through to the members, who report it on their personal tax returns. This setup helps avoid the double taxation that corporations can face. Additionally, an LLC can choose to be taxed as a corporation if that's more beneficial, depending on your business situation and tax liability for the tax year.

LLC Tax Deductions Explained

For LLCs, a wide range of expenses related to running your business can qualify as tax deductions, effectively reducing your taxable income. Common deductions include business insurance premiums, vehicle expenses for business use, travel expenses for business trips, and even business meals under certain conditions. The expense must be ordinary (common in your business) and necessary (helpful and appropriate for your business) to qualify. From business cards to equipment used for business, ensuring you track these expenses accurately throughout the tax year is crucial for maximizing your deductions.

Maximizing Tax Write-Offs for Small Businesses

To make the most of tax write-offs, small businesses, especially LLCs, should adopt a proactive approach to record-keeping and financial management. Detailed records of every business expense, including receipts for travel, business meals, and vehicle usage for business purposes, are vital. Consider the full spectrum of small business tax deductions available, including home office expenses if you run your business from home. Strategic planning around these deductions can significantly lower your overall tax liability, allowing you to reinvest those savings back into your business. Regular consultations with a tax professional can also uncover additional opportunities for savings and ensure compliance with evolving tax laws.

Further Reading: Maximize Your 2024 Tax Deductions with Tax Write-Offs: Big Savings for Small Business with Key Business Tax Strategies

What tax forms do llcs need to file.

Many small business owners who operate as LLCs are often unsure what tax forms they must file. As a business entity, LLCs are required to file an annual business tax return, typically using IRS Form 1065. However, LLCs do not need to file a separate federal tax return for the business, as the income and expenses are reported on the owner's personal tax return. It is important for LLC owners to keep detailed records of business income and expenses, including home expenses if they work from home, in order to report the financial information on their personal tax returns accurately.

What's Different About LLC Taxes for the 2024 Tax Season?

In the 2024 tax season, LLC taxes will differ in several ways from previous years. One notable difference is that LLC owners can choose whether to be taxed as a business or a personal entity. This means they can decide whether to file taxes through their business or personal tax returns, offering more flexibility and potentially different tax benefits. Additionally, many small business owners operating as LLCs will now have the option to deduct home expenses, such as mortgage interest and utilities, as business expenses. This opens up new opportunities for tax savings that LLCs did not have access to before.

Utilizing Business Expenses for Tax Benefits

For LLC owners, understanding how to effectively leverage business expenses for tax benefits can result in significant savings come tax season. This section is designed to guide you through identifying which expenses qualify for deductions, strategies for maximizing these deductions, and the importance of meticulous expense tracking. Whether you're a new business navigating your first tax year or an established entity looking to optimize your tax rate, grasping these concepts can help reduce your federal income tax liability and enhance your business's financial efficiency.

Identifying Qualifying Business Expenses

To take full advantage of tax write-offs for LLCs , it's crucial to identify which expenses qualify as tax deductible. Generally, any expense considered both ordinary and necessary for the operation of your business can be deducted. This includes home office expenses, if a part of your home is used regularly and exclusively for business, and the use of your vehicle for business purposes. Other common deductions include LLC formation costs, supplies and materials used for business purposes, and business asset purchases. Understanding these qualifications can help you build a comprehensive tax deduction cheat sheet for your small business.

Strategies for Claiming Business Expense Deductions

Once you've identified your qualifying business expenses, employing effective strategies for claiming these deductions can further reduce your tax liability. This involves differentiating between business and personal expenses, especially for assets used for both purposes. Allocating expenses accurately and adopting a systematic approach to categorize each expense can streamline the deduction process. Business owners can deduct a portion of mixed-use expenses, such as a vehicle or a home office, based on the percentage used for business. Keeping abreast of changes in tax laws and corporate tax rates can also influence how and when certain expenses are deducted.

Benefits of Business Expense Tracking for Tax Purposes

Diligent tracking of business expenses throughout the year offers multiple benefits, not just during tax season but also in understanding the financial health of your LLC. Utilizing software or apps designed for business expense tracking can simplify this process, ensuring that no deductible expense is overlooked. Moreover, accurate record-keeping supports your deductions in the event of an IRS audit and can provide insights into areas where costs might be reduced or managed more effectively. For LLCs, distinguishing between individual tax responsibilities and the company's tax status becomes simpler with organized records, contributing to more strategic financial planning and potentially lower tax rates.

Small Business Tax Deductions: A Cheat Sheet

Tax write-offs for LLCs are calculated based on the expenses that are tax deductible. This includes deductions for any other expenses directly related to your business operations. For example, if you use your vehicle for business purposes, you may be able to deduct a portion of the vehicle expenses from your taxes. However, it's important to remember that the expense must be necessary and ordinary for your business. Additionally, it's crucial to separate expenses related to your business from those personal. When filing business taxes, it's essential to accurately calculate and document all eligible deductions in order to maximize your tax write-offs and minimize your overall tax liability as an LLC.

Write-Offs: How to Write Off Business Expenses

LLCs can benefit from a wide range of tax deductions for business expenses. Common deductions include costs related to operating the business, such as rent, utilities, employee salaries, and marketing expenses. Taking advantage of these deductions can significantly lower the taxable business income.

Furthermore, LLCs can benefit from tax write-offs by claiming deductions for eligible business expenses, which can include office supplies, travel expenses, and business-related meals. These write-offs are valuable tools for reducing tax liability and maximizing the business income.

Moreover, LLCs enjoy specific tax advantages, such as flexibility in profit allocation among the members, allowing for strategic tax planning to minimize the overall tax burden. Business cards are an effective way to take these expenses and many small businesses find them helpful.

Here are some common tax deductions and write-offs that may apply to LLCs if incurred during the current tax year:

Navigating Tax Regulations for Small Businesses

For small business owners, especially those operating as LLCs, understanding and navigating tax regulations is crucial for both compliance and maximizing financial efficiency. This section aims to shed light on recent tax legislation impacts, clarify self-employment tax obligations, and highlight strategies for leveraging LLC-specific tax advantages. Whether you're using your car for business, running your own business from home, or managing real estate as part of your operations, getting to grips with these aspects can significantly affect your tax liabilities and benefits.

Impact of Tax Cuts and Jobs Act on Small Businesses

The Tax Cuts and Jobs Act has introduced several changes that affect small businesses, offering new opportunities for deductions and altering tax obligations. One of the most significant adjustments is the creation of a 20% deduction for certain business income, which many small business owners can benefit from. Additionally, the act has modified limits on deductions include expenses such as real estate tax and interest. LLCs, in particular, may find that their tax situation has shifted, potentially reducing the amount they need to pay in corporate income tax. It's essential to check with your tax advisor to understand how these changes specifically impact your business and tax strategy.

Understanding Self-Employment Tax Obligations

For those running their own business as an LLC, understanding self-employment tax obligations is paramount. This tax covers Social Security and Medicare for individuals who work for themselves. While LLCs do not need to pay corporate income tax thanks to pass-through taxation, earnings from the operation of a business by LLC members are subject to self-employment taxes. It's important to accurately report income and expenses related to your current business activities, as this will influence your self-employment tax liability. Properly calculating and paying self-employment tax is a critical component of filing business taxes responsibly.

Maximizing Tax Advantages for LLCs

LLCs offer a unique structure that can provide significant tax advantages when leveraged correctly. Deductions for LLCs can range widely, from the ability to write off business expenses used exclusively for your business to utilizing your car for business purposes. To maximize these advantages, ensure that expenses are clearly documented and justifiably deductible as a business expense. This includes distinguishing between personal and business use for assets like vehicles or property used as your place of business. Additionally, expenses that are directly related to your business or perform services for your business, such as home office expenses or equipment purchases, should be meticulously recorded. Utilizing a comprehensive guide to business tax deductions can help ensure that no eligible deduction is overlooked, enhancing your business's financial health and minimizing tax liabilities.

Further Reading: 20 Tax Tips to Maximize Your 2023 Year-End Tax Planning: A Tax Planning Guide to Tax Deductions and Financial Tips

Tips for efficient tax preparation and planning.

Now, know the efficient tips for your tax preparation and planning!

Essential Steps in Tax Preparation for Small Businesses

Small business owners can deduct a variety of expenses as business tax deductions to help get their business up and running. This includes small business startup costs as well as ongoing expenses related to running the business. Keeping track of these expenses is crucial for tax preparation. Additionally, if you use your vehicle for business purposes, you may be able to claim a tax deduction for mileage or other expenses related to its business and personal use. Consult with a tax professional to ensure you are maximizing all available tax deductions and write-offs .

For llcs, there are specific tax deductions that can be utilized. An llc does not need to have gone out of business in order to take advantage of these deductions. Expenses as business tax deductions can be claimed as long as they are used exclusively for business purposes. This includes costs related to the principal place of business and any other expenses directly related to running the business.

How to Optimize Tax Savings through Strategic Planning

Deductions for your small business can greatly reduce your taxable income, resulting in lower taxes owed. By strategically planning your expenses and investments throughout the year, you can maximize the tax deductions you can claim on your business tax return. As a limited liability company (LLC), there are specific tax deductions for LLCs that can be fully tax deductible, such as employee salaries, business travel expenses, and office supplies. Consulting with a tax professional or using tax software can help you identify and take advantage of all available deductions, ultimately optimizing your tax savings.

Common Tax Deductions Every Small Business Owner Should Know

As a small business owner, it's important to be aware of the common tax deductions that can help reduce your tax liability. By taking advantage of these deductions, you can save money and improve your bottom line. Some of the most common tax deductions for small business owners include business expenses, home office expenses, travel expenses, and health insurance premiums.

As a small business owner, it's important to be aware of the common tax deductions that can help lower your tax bill. Business expenses such as rent, utilities, and office supplies can usually be deducted. Vehicle expenses for business use, travel expenses for business trips, and health insurance premiums for employees are also deductible. Keep detailed records and work with a tax professional to ensure you are taking advantage of all available deductions.

Key Takeaways:

  • Business Expenses: Costs that are necessary and ordinary for running your LLC, like rent, utilities, and supplies. These can reduce your taxable income.
  • Deductible: A spending or cost that can be subtracted from your company's income before it is taxed. Think of it as a discount on your tax bill for certain expenses.
  • Home Office Deduction: If you work from home, part of your home expenses, such as mortgage interest or rent, can lower your taxes. It must be a dedicated workspace.
  • Vehicle Expenses: Costs related to using a car for business, including mileage, repairs, and insurance. These can be written off if documented properly.
  • Depreciation: The process of deducting the cost of big purchases, like equipment or a building, over several years. It acknowledges that these items lose value over time.

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Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

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25 creative tax deductions for small business.

Creative Tax Deductions for Small Businesses

Small business owners in the US can take advantage of tax-deductible expenses to reduce tax bills at the end of each year. These are legal ways to reduce the amount of taxes you have to pay, as per the IRS.

The following article will cover how to maximize your tax write-offs by using creative tax deductions for small business purposes.

Key Takeaways

  • There are many legal tax write-offs small businesses can use to reduce the amount of tax owed each year.
  • The IRS allows a variety of legitimate, creative business tax deductions, including advertising, loan interest, and even moving expenses.
  • Even if you use your vehicle or home office for work only part-time, you can still claim a percentage of the home office expenses, travel expenses, and other costs incurred as a deduction on your taxes.
  • All write-offs must be ordinary and necessary expenses for your business, like a camera for a photographer, or a gym membership for a professional bodybuilder.
  • Using tax preparation software can ensure you’re organized and do not miss out on any legal tax deductions while remaining tax compliant.

Table of Contents

25 Creative Tax Deductions

Freshbooks simplifies tax preparation.

  • Frequently Asked Questions

The following are some of the creative tax deductions for small businesses, as per the IRS:

1. Advertising, Marketing, and Websites

You can usually deduct the costs of ads, marketing fees, website creation and administration, and more, as long as your expenses are reasonable and ordinary. You may not be able to write off sky plane ads or celebrity appearance fees, for example, but you may be able to use flyers, social media marketing, or branded pens as a tax write-off.

2. Software

Your small business requires computer software to run smoothly. From project management software to tax preparation software to Microsoft Office or Adobe Photoshop, you likely cannot run your company without subscribing to or purchasing these important computer programs.

Fortunately, you can deduct some of the amount you spend on software. The amount will depend on how much of the time you are using the program for work vs. how much you are using it for recreational purposes or personal projects.

3. Cell Phone

If you use a dedicated cell phone exclusively for your business, you may be able to write off all of the costs incurred. Claims for cell phone use are often scrutinized by the IRS, as most people use their phones for much more than work-related functions. 

That’s why if you have one phone for both work and personal use, you can claim a percentage of cell phone use as business-related. For example, if you use your phone for business 20% of the time, you can claim 20% of your phone bill on your taxes as legitimate expenses. 

4. Home Office Utilities  

If you work from home in a home office that is a room or space used exclusively for your trade, business, and work, you may be able to deduct some of your utilities bill from your end-of-year taxes. Qualifying taxpayers can use a prescribed rate of $5 per square foot of the home office or a dedicated portion of the home used for business, up to a maximum of 300 square feet. You may also deduct a percentage of the space used for business and deduct the same percentage of your home utilities.

These benefits are available to homeowners and renters, so everybody working from home can deduct home office expenses for tax savings in the upcoming tax season.

5. Internet

A small business owner, regardless of filing taxes as a sole proprietor or a corporation, can claim payments for their internet services as tax deductions if internet use is mandatory for the business to function. For example, if your clients can book online appointments or you have an online store, the internet can be claimed the same way as other utilities are.

If it is used for support services for the business but is not mandatory, the internet can be claimed as an office expense. For example, using Zoom for meetings, when you could communicate just as well in person or over the phone.

6. Commissions and Fees

Although you can no longer deduct fees paid to buy, sell, or hold an asset or to collect interest (brokerage fees, transaction fees, etc.), if you itemize deductions, it might still be possible to deduct the interest you paid on money borrowed to purchase taxable investments.

If you provide commissions for referrals or as part of a payment to employees, these may be deductible. Fees to pay an investment broker who invests as a business may also be deductible in certain circumstances.

7. Insurance 

Insurance premiums can be deducted from small business taxes because the IRS considers business insurance a necessary cost to running a company. Filling out the proper forms will allow you to reduce your overall taxable income. Some examples of deductible insurance are general liability, property insurance, and even errors and omissions insurance . If you have employees and provide health insurance, that cost is also tax deductible.

A sole proprietor also has the option to deduct their own insurance premiums from their individual tax return. In addition, you can also hire your spouse and pay them by covering their health insurance instead of paying them wages.

8. Loan Interest

If you have taken out a business loan that qualifies as such under tax law, you can use the business loan interest tax deduction to deduct the amount of interest paid from your tax liability, which will reduce the amount of money owed on your tax return.

The lender must be a legitimate business lender like a bank or professional lender, not a family member or personal acquaintance, you must be legally liable for the debt incurred, and both you and the lender intend on the loan being repaid.

Also, if you use a credit card for business purposes, you may deduct the credit card interest payments from your tax liability.

9. Retirement Contributions

If you set up simplified employee pension (SEP) plans or other qualified retirement plans like the solo 401(k) plan, you can deduct the contributions you make to the plan for yourself up to the amount specified by the individual retirement plans.

Small business owners may also sponsor an employee retirement plan and deduct the amounts they pay to match their employee’s retirement contributions.

10. Clothing

You may be able to deduct the cost of clothing that is necessary for work but cannot be used for other reasons. For example, work boots with steel toes could be deducted from your tax return if you are a contractor, but not if you are a hairstylist.

Make sure to save all receipts, including dry cleaning or repair costs, so you can prove that the expenses were reasonable and necessary for your business.

11. Contract Labor

If you need to hire independent contractors to help in your business, you may be able to deduct their fees as a business expense. Their work must be necessary for your business to qualify. Some examples include hiring a freelance writer to write the copy for your company’s website or hiring an independent delivery company to get a rush order to a client quickly. Make sure to send them Form 1099 at the end of the year if you pay them more than $600.

12. Education and Conference Expenses  

If you attend conferences or educational programs to improve or upgrade your work skills, you may be able to deduct the registration fees, workshop costs, and more. Some qualifying expenses include books or internet courses related to your industry, trade publications, seminars, and classes or courses related to your field of work. 

13. Home Office Equipment and Supplies

Necessary business equipment like printers, office furniture (desks and chairs), computers, storage solutions, and other work-specific equipment can be deducted if they were purchased and used for work. Make sure to keep all receipts and track your business expenses closely in case of an audit.

14. Legal Accounting and Services

The IRS allows ordinary and necessary legal and professional expenses, including the cost of hiring a tax professional, that are directly related to running your business to be deductible as business expenses. This does not include any fees of a personal nature, like personal accounting or the drafting of one’s will.

15. Meals and Entertainment

In general, a business owner can deduct up to 50% of all reimbursements given to employees for expenses incurred for meals purchased during business travel and business meetings. The 50% limit also applies to meals eaten during business meetings and meals provided to employees during meetings. This percentage also includes tips and taxes.

Meals provided to the benefit of all employees, for example, during an office party, are fully deductible. Entertainment expenses, such as taking your client to a sporting event, are no longer deductible.

16. Repairs and Maintenance

Regular repairs and routine maintenance, like changing oil in business vehicles, or repairing broken windows, can be written off, as these must be done to keep things running normally and safely.

If a business pays to improve an asset, like adding parts to extend the life of a machine or installing energy-efficient windows, these are considered capital improvements and cannot be deducted as repairs and maintenance.

Do you need help with your tax preparation ? FreshBooks can help. Please check out the following video to learn more about how FreshBooks can make it easier for you to prepare for the upcoming tax season with confidence.

17. Car or Truck Expenses

If you are using a car or truck for your business, you can deduct car expenses, and if using your personal vehicle for business reasons, simply divide the actual expenses based on actual mileage or use the standard mileage rate. Commuting to and from work is not deductible, but if you have a home office, you may deduct the cost of travel to business meetings and other business-related events.

According to the IRS, the most commonly deducted car expenses include depreciation , lease payments, gas, oil, tune-ups, insurance, and registration fees.

Business travel deductions can be used when employees have to travel away from home or work for business reasons for longer than a regular workday. These expenses must be ordinary and necessary, and may not be lavish or extravagant. Business travel expenses for temporary work assignments up to 1 year in length can also be deducted. Make sure to log business miles, accommodation, and other travel expenses accurately and keep the receipts as proof.

Normal travel deductions include travel by plane, train, bus, or car from home to the business destination, some taxi fares, shipping of baggage and business items, lodging, meals, dry cleaning/laundry expenses, business communication, tips on necessary services, and other ordinary expenses.

19. Moving Expenses

Moving expense tax deduction rules changed in the 2017 tax year due to the Tax Cuts and Jobs Act, and until at least 2025, moving expense tax deductions are no longer allowed on a federal return for most individual taxpayers.

If you moved before 2018 but did not claim your moving expenses, you may be able to file an amended return. Military personnel who meet certain qualifications may still be able to claim this deduction.

If you are moving machinery for your business from one city to another, shipping costs are deductible, as is the installation of the machinery. Also, if you are moving your main office from one location to another, those expenses are deductible as well.

20. Charitable Causes

Some charitable donations may be considered deductible if you itemize your tax return. The donation must be made to a tax-exempt and qualified charitable organization. You may be able to deduct 20% to 60%.

If you are a real estate professional, and your donation is related to your business and expect to receive a financial return, your charitable donation can be 100% deducted, as any regular business expense.

21. Free Beer

One of the most creative tax deductions on this list is alcohol. In some cases, you can deduct beer as a business expense. Giving high-end gifts like craft beer, a bottle of wine, a box of chocolates, or a gift basket to a client is a deductible expense. The cost can be deducted as a Gift Expense of up to $25 per person per year.

22. Genetic Testing Kits

The IRS has included specific circumstances within which genetic testing can be deducted. They must be authorized by the FDA to be marketed as medical devices, and they must be used for health assessment purposes.

It is considered a medical expense in tax deductions when used for the prevention, diagnosis, or cure of disease but cannot be deducted when used to determine ancestry.

23. Gym Memberships  

If you are diagnosed with certain medical conditions by a doctor and are using the gym to stay healthy as part of a plan created by your physician, you may be able to join a new gym (you cannot have already belonged to the gym to qualify) and then itemize the membership fees as a deductible medical expense. Gym memberships and other health-related reimbursements may also be deductible under an accountable plan sponsored by a corporation.

24. Interview Expenses 

Transportation arrangements and other non-wage costs incurred that are related to interviews and are not wages can be deducted as a business expense on your tax return. The 50% limit applies to food and beverages, meaning if you hold your interview at a restaurant, for example, you can only claim half of the total bill.

25. Pets  

While you cannot claim your pet as a dependent, if you use your animal friends in your business (in advertising, as security, etc.), expenses, like food, training, and grooming that are related to the animal’s ability to work may be allowed as legitimate business tax deductions. All costs and expenses must be thoroughly recorded and must pertain to the animal’s time at work.

These types of claims are not usual, though, and may bring some scrutiny to your business, so be sure you are making a legitimate claim before adding your pet to your tax paperwork.

Save 40 Hours During Tax Season

As you can see, there are likely many legitimate ways for a small business owner to reduce the amount of tax you have to pay each year simply by knowing the ins and outs of the tax system. By staying organized and recording all business costs, you will be able to take advantage of all of the benefits the IRS offers small business owners.

FreshBooks cloud-based accounting software can help you to track and catalog your expenses throughout the year so that you never lose a paper receipt or miss a deduction again. 

Try FreshBooks for free , and find out just how easy it is to streamline your workflow, stay organized, and get to know your business better. If you want to know more about creative tax deductions available to you, you can explore more in our Small Business Tax Deductions article.

Less Taxin'. More Relaxin'

FAQs About Creative Tax Deductions for Small Business

The following are some of the most frequently asked questions about all the tax deductions for small business owners and how to get creative to minimize your tax payments at the end of the year.

Do you need receipts for tax write-offs? 

Yes, it is always a good idea for a business owner to keep all of your receipts and proof of purchase. There is always the chance that your small business will face an audit, and you will want all of your purchases to be able to stand up to close scrutiny.

FreshBooks receipt & expense tracking makes it simple to upload and organize receipts by date or category, making tax time easier. The IRS requires a business to keep all receipts for purchases over $75 (unless it’s for travel—then all receipts are required), however, it is smart to keep all receipts.

Can you write off haircuts as a business expense? 

No, haircuts, along with other personal care, are not considered business expenses that can be used as deductions by the IRS. Your business tax return must only contain costs incurred from regular, necessary business expenses.

Can you write off vitamins on your taxes? 

No, vitamins are a general health product and cannot be written off unless a doctor specifically prescribes them in relation to a specific health condition.

The only tax-deductible medical expenses are those related directly to the treatment or prevention of a specific health issue.

Can you write off auto insurance on your taxes?

It depends—if you are using your vehicle solely for business purposes, you may be able to write off the auto insurance premium, along with other important car expenses like fuel, oil changes, and depreciation. Keeping track of all of your vehicle expenses with FreshBooks will ensure that your receipts and proofs of purchase are recorded properly and easy to find when you need them.

Can you write off home gym equipment? 

Not usually, but if you are a fitness trainer who is working from home, you may be able to claim expenses like fitness equipment, weights, mats, educational courses, and even the music subscription services that you use to motivate your clients as tax deductions for your small business.

Professional bodybuilders may also be able to write off fitness items or gym memberships. For everyday taxpayers, home gym equipment is not a tax-deductible expense.

Can you write off professional memberships?

Yes, there are times when business owners can write off the costs of professional memberships if they are essential for maintaining your professional standing, and there is a connection between the place where you pay your membership dues and your place of employment.

For example, an accountant may wish to join the American Accounting Association to reap the benefits of career services, networking and volunteer opportunities, and more, using the fees as a tax write-off.

More Useful Resources

Explore our diverse tax deduction guides catering to various niches. From small businesses to real estate agents, find valuable insights to optimize your tax savings.

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Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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How to Write Off Small Business Expenses

Writing off small business expenses can help you lower your tax liability. Here's a look at what you can write off and how the process works.

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COGS refers to the costs involved with supplying products to customers (e.g., raw materials, storage, direct labor, factory overhead). These expenses are deducted from your gross receipts to calculate your gross profit for the year. 

As a small business owner, you typically need to spend money to make money. The upside? You can deduct qualifying business expenses on your taxes to lower your overall tax liability. But how do write-offs work? Here’s what you need to know.

How Do You Write Off Small Business Expenses?

Writing off small business expenses starts with tracking them throughout the year. You can streamline the tracking process by keeping your business and personal expenses separate. For example, most business owners open a dedicated business bank account or business credit card and use it exclusively for their business-related purchases. 

As for receipts, the IRS can audit you and request to see proof of all of your business expenses, so you need to save them as you go. “One way to organize receipts is to keep a folder for each of your vendors with all the receipts for that year. Another option is to attach electronic copies of your receipts to the transactions in your accounting software,” says Tim Yoder, CPA.

When tax filing time rolls around, you’ll report the amounts you’ve spent in various expense categories on your tax return. Any qualifying expense that doesn’t fit into a listed category can be added under the “other” section. Then, you’ll subtract all of your expenses from your gross income, effectively reducing the amount that’s subject to taxes.

What Small Business Expenses Can You Deduct?

For a business expense to be deductible, it must be ordinary, necessary and common in your industry. For example, the IRS lists the following expense categories on its Schedule C form:

  • Advertising costs.
  • Vehicle expenses.
  • Fees and commissions.
  • Contract labor.
  • Employee benefit programs.
  • Insurance (not health).
  • Interest charges.
  • Mortgage payments.
  • Legal and professional services.
  • Office expenses.
  • Pension and profit-sharing plans.
  • Rent or lease payments.
  • Repair and maintenance costs.
  • Taxes and licenses.
  • Travel and meal expenses.

What Small Business Expenses Can’t Be Deducted?

While the above expense types can commonly be written off, here’s a look at what can’t:

  • Capital expenses: Business startup costs , business assets and improvements are not deductible. Instead, you can recover them through depreciation, amortization or depletion. 
  • Personal expenses: You can’t deduct personal, living or family expenses. However, if an expense is partially used for business purposes, you can deduct a portion of it. 
  • Cost of goods sold: COGS refers to the costs involved with supplying products to customers (e.g., raw materials, storage, direct labor, factory overhead). These expenses are deducted from your gross receipts to calculate your gross profit for the year. 
  • Client entertainment: Expensing client entertainment is also off the table. “The 2017 Tax Cuts and Jobs Act made client entertainment nondeductible, even if you attend with a client and business is discussed,” says Yoder.

“When in doubt, do your research or ask a CPA.” says Moira Corcoran, CPA. "Even though an expense may be ordinary and necessary, you might not be allowed to deduct it in the year you paid it, or at all. Taking deductions you shouldn't is a potential invitation to an audit.”

How to Deduct Small Business Expenses on Your Tax Forms

When filing taxes for your business, how you report business expenses will depend on the structure of your business.

Sole Proprietorships

Sole proprietors report their business income using Schedule C ( Form 1040 ). The majority of business expenses are added under Part II on lines eight through 30. Expenses that don’t fall under any of the expense categories listed in Part II can be listed under Part V.

Partnerships

Partnerships are required to file Form 1065 . Business expenses are requested under the “Deduction” section on lines nine to 21.

Corporations

Both C and S Corporations are required to file Form 1120 . Expenses are requested under the “Deductions” section on lines 12 to 29c.

Limited Liability Companies

The form required for an LLC will depend on which business structure it elects. LLCs can be treated as corporations, partnerships or disregarded entities.

How Much of a Business Expense Can You Deduct?

You can often deduct 100% of qualifying ordinary and necessary business expenses. However, according to Lei Han, CPA, “It’s important to be aware of the limits on certain types of deductions. For example, the costs of meals provided by restaurants for business purposes can be 100% deducted in 2021 and 2022 (due to the Consolidated Appropriations Act ), but the normal limitation is 50%. Additionally, you can only deduct up to $25 in business gifts per person, per year.”

When Do You Deduct Small Business Expenses?

When using the cash accounting method, you’ll deduct expenses in the tax year that you paid for them. For example, you would report expenses that were paid in 2022 when filing your 2022 tax return.

On the other hand, if you use the accrual method of accounting, you'll deduct expenses when you become liable for them. For example, if you hired a web designer and they finished the job in December of 2022, but you didn’t pay them until January of 2023, you would deduct the expense for the 2022 tax year.

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TIME Stamped: Personal Finance Made Easy

Personal Finance

How to start an online business in 8 steps.

start an online business

Our evaluations and opinions are not influenced by our advertising relationships, but we may earn a commission from our partners’ links. This content is created independently from TIME’s editorial staff. Learn more about it.

The internet has reshaped where, when, and how people shop for goods and services. The popularity of digital shopping has opened a world of opportunities for online business owners. With a computer and a stable internet connection, you can work from anywhere, set your own schedule, and sell to customers worldwide while avoiding the hassle and costs of owning a brick-and-mortar business.

Whether you're just starting to brainstorm about the best online business ideas or already have a concept in mind, here are some tips for getting your business up and running.

8 Ways to start your online business

1. establish a business niche.

If you haven't done so already, you'll need to decide what you want to offer and who your target customers will be. Here are a few factors to consider:

Your interests

Mark Twain once said, "Find a job you enjoy doing, and you will never have to work a day in your life." While only some would agree with this work/life approach, it's a good starting point for choosing a business niche. Think about your passions, skills, and expertise, then focus on ideas where they intersect.

Target audience

Consider your target audience and whether they have a problem no one else is solving or a product no one else is providing. If so, do they have the discretionary income to afford your product or service and are they willing to pay for it? Will there be adequate demand?

Profit potential

Consider if your niche has profit potential in an online environment. For example, an overly large or heavy product may be too expensive to ship at a reasonable cost. Is the idea scalable so you can accommodate more customers and transactions in the future?

2. Choose a business model

A business model is how your company will provide products or services to customers and make money. Some options to consider include:

  • Affiliate marketing. Promote other businesses and receive a commission for each sale you make.
  • Coaching and consulting. Share your expertise and offer guidance.
  • E-commerce. Launch a website and sell products online using one of the best payment gateways .
  • Franchising. Pay a franchise fee and operate under an established brand.
  • Freelancing. Offer a service such as writing, programming, web design, or social media marketing.
  • Information products. Create and sell eBooks or online courses.
  • Subscriptions. Package software or subscription boxes and charge a recurring fee.

3. Write a business plan

A good business plan outlines the steps to start and manage your business. The important thing is to think through the key elements of your venture while focusing on your goals. According to the Small Business Administration (SBA), a traditional business plan format includes some combination of the following:

Executive summary

Explain what your company is and why it will be successful. This section should include your mission statement, product or service, basic company information, and financial details if you need financing.

Company description

Provide detailed information about your company: the problem it solves, your target audience, and your competitive advantages.

Market analysis

Explain your industry outlook, what other businesses are doing, and how you can do it better.

Organization and management

Outline who will run your company and how it will be structured. Will it be a general or limited partnership, a C or S corporation, limited liability company (LLC), or are you a sole proprietor?

Service or product line

Describe the product or service you offer, explaining how it benefits your target customers.

Marketing and sales

Explain how you will attract and retain customers and the steps for making a sale.

Funding request

Explain the level of funding you'll need over the next five years and how you'll use it. Include financial projections detailing your forecasted income, cash flow, and budgets. Research how to get a business loan , and familiarize yourself with the SBA website to learn more about its loan programs.

4. Develop your brand

Once you know what you'll sell and how you'll run the business, developing your brand is next. You'll have to choose a business name and create a logo. This process can be relatively simple if you already have ideas in mind—or challenging if you're starting from scratch. You might want to hire a graphic designer to implement your vision.

5. Create a website

Once you have developed your brand, it’s time to build a website. You’ll need to lock in a domain name and choose a hosting service. There are website builders, such as Squarespace , available to help you get started—or you can hire someone to do the work for you.

6. Cover legal bases

The next step is to make your business official. While the requirements vary by business, here are the essential action items:

Register your business

Registering with your state gives you legal grounds to use your brand's name. You can utilize a service like LegalZoom to register as a sole proprietor, LLC, corporation (C corp or S corp), nonprofit, or DBA (doing business as). Consult a tax specialist for help choosing the best business structure for your situation.

Apply for an EIN

You'll need an Employer Identification Number (EIN)—a federal tax ID—to pay federal taxes, apply for business licenses and permits, open a business bank account , and hire employees. You can apply for an EIN for free on the IRS website . The IRS says to beware of websites that charge for this free service.

Licenses and permits

Depending on your business activities and location, you may need licenses and permits from your state, county, or city. Check with your state's website (e.g., ca.gov, nc.gov) to determine your necessary licenses and permits.

Most businesses must file an annual income tax return, and the form you use depends on how your business is structured. Online services like Found, a banking and tax app designed for small business owners, have tools to make keeping track of taxes easier. It's also helpful to establish a relationship with a trusted tax specialist.

7. Market your business

Once your online business is ready for the world, it's time to market it. While marketing strategies vary depending on your business model and target audience, here are a few options to consider:

  • Include your brand in online directories.
  • Create social media profiles and share high-quality content often.
  • Launch compelling email marketing campaigns.
  • Use SEO best practices to optimize your site for search engines.
  • Collaborate with influencers to promote your brand.
  • Leverage your network—including professional contacts, friends, and family.

8. Reward customer loyalty

Keeping existing customers happy is often easier than generating new leads, so it can be worth the extra effort to reward them for their loyalty. Consider offering discounts to repeat customers or perks to patrons who refer friends and family. You might also provide spending-based rewards or incentives for sharing positive reviews on social media.

Of course, one of the best ways to reward loyalty is to connect with your customers personally, making sure they always feel welcome and appreciated. That way, they'll be more likely to become repeat customers, recommend you to friends and family, and help you grow a thriving online business.

Why should you consider starting an online business?

Consumers increasingly prefer shopping online, providing virtually unlimited opportunities for digital entrepreneurs to reach a global audience. Further, many of the traditionally time-consuming aspects of starting a business have been simplified—and made more affordable—by websites such as LegalZoom .

One outcome of the pandemic was the emergence of new and enhanced tools that make remote work not only possible, but more efficient. As a result, it's easier than ever to work anywhere in the world with a laptop and a reliable internet connection.

How to save when starting an online business

Businesses have a slew of start-up costs that can be difficult to manage before you're up and running. Here are a few ways to make balancing the budget a little easier.

Rewards credit cards

A business credit card is an excellent way to keep your business and personal expenses separate for accounting purposes, but that's not the only perk. With the best small business credit cards , you can also earn rewards on your spending, enjoy perks like free travel insurance, and score a hefty welcome bonus.

Tax prep software

A good way to save money in the early days of your business is to use upgradable tax prep and other business-related software. Start with the free version, then upgrade to the premium package once your business takes off.

Payment processing

You'll need a payment service provider to accept online payments. Not surprisingly, some payment solutions are more expensive than others. For example, Square charges 2.9% + $0.30 for online transactions, while Venmo costs 1.9% + $0.10 between Venmo accounts. Of course, fees shouldn't be the only consideration when choosing a payment service provider. Still, they're worth paying attention to; even small differences can add up over time.

TIME Stamp: Research and strategy are key to success

Starting an online business involves many of the same steps as opening a brick-and-mortar business. You’ll need to determine your niche, conduct market research, craft a well-thought-out business plan, and develop a brand and website. Implementing a successful marketing plan is also key to building and retaining a solid customer base.

Frequently asked questions (FAQs)

What is the best type of online business to start.

The best online business for you depends on your professional background, skills, interests, and goals. Think about what you're good at and enjoy doing, then brainstorm ideas for monetizing it.

Which kind of online business is most profitable?

There are a wide variety of online businesses ranging from e-commerce to private tutoring. How profitable one is over the other depends on a number of factors. The start-up and ongoing costs of some are nominal compared to others. For example, an online tutoring business would typically have much lower costs than selling collectibles online. Demand, competition, and how well an online business is managed also impact profitability.

Can I start an online business with $100?

You can start an online business on a shoestring budget. With $100, you’ll be able to buy a domain name, build a basic website (using a free template), and publish the site through a web hosting provider long enough to get you started. Of course, some ventures have higher start-up costs, so you may well need considerably more than $100, depending on your business.

The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.

Plant Based Plan

Plant Based Plan

15 Clever Ways People Write Off Their Meals To Save On Taxes

Posted: May 28, 2024 | Last updated: May 28, 2024

<p><span>Savvy entrepreneurs and professionals know the importance of smart spending. </span><span>Here is your ultimate guide to understanding how dining can be more than just an expense—it's an investment. </span><span>From networking dinners to client meetings over lunch, we'll uncover the meals that not only satisfy your appetite but also strategically benefit your bottom line.</span></p>

Savvy entrepreneurs and professionals know the importance of smart spending. Here is your ultimate guide to understanding how dining can be more than just an expense—it's an investment. From networking dinners to client meetings over lunch, we'll uncover the meals that not only satisfy your appetite but also strategically benefit your bottom line.

<p><span>Indulge in the world of culinary opulence with our list of 15 dishes that epitomize luxury and exclusivity. Reserved for the ultra-wealthy, these gastronomic delights are not just meals but symbols of affluence and refined taste. </span><span>From the rarest caviars to the most exquisite truffles, each dish represents a pinnacle of culinary craftsmanship and rarity, offering an unparalleled dining experience for those who can afford these extravagant indulgences.</span></p>

1. Client Meetings Over Lunch

Lunch meetings with clients offer a relaxed atmosphere conducive to discussions and negotiations. These meals are deductible as long as the business is discussed before, during, or after the meal, making them a smart way to build client relationships while also managing expenses.

<p><span>Participating in a community garden or joining a food co-op can provide access to fresh produce at a lower cost than traditional grocery stores.</span></p>

2. Dinner with Potential Investors

When courting potential investors, dinner can serve as a prime opportunity to present business proposals in a more intimate setting. These meals can be written off, provided they are ordinary and necessary expenses aimed at generating business income.

<p><span>This Irish pub-themed chain, known for its "Legendary Monte Cristo" sandwich and lively atmosphere, filed for </span><a href="https://en.wikipedia.org/wiki/Bennigan%27s"><b>bankruptcy in 2008</b></a><span> after years of declining sales. Factors like competition from casual dining chains, rising food costs, and economic recession were cited as contributors.</span></p>

3. Team Building Dinners

Investing in team cohesion through dinners strengthens work relationships and boosts morale. Such gatherings qualify for deductions, highlighting the importance of nurturing a positive work environment as part of business operations.

<p><span>Charm and culinary delights await near Durham. This charming country hotel's restaurant showcases the best of seasonal flavors through locally sourced ingredients. Modern British fare takes center stage, offering a delicious and stylish escape.</span></p>

4. Networking Events

Attending or hosting meals during networking events allows professionals to connect with peers and industry leaders. These occasions are deductible, emphasizing the value of expanding one's professional network.

<p><span>Meals consumed while traveling for business purposes, such as conferences or client visits, are eligible for write-offs. This underscores the necessity of sustenance during business travels as a deductible expense.</span></p>

5. Travel Meals

Meals consumed while traveling for business purposes, such as conferences or client visits, are eligible for write-offs. This underscores the necessity of sustenance during business travels as a deductible expense.

<p><span>The Greek salad, or horiatiki, is a vibrant showcase of Greece's bountiful produce. Tomatoes, cucumbers, onions, olives, and feta cheese, dressed in olive oil, come together in a dish that's as healthy as it is delicious, reflecting the Mediterranean diet's emphasis on fresh ingredients.</span></p>

6. Working Lunches

Lunches consumed at the office while working through meal times are considered a part of the operational costs. These meals can be deducted, reflecting the continuous effort and time investment in business activities.

<p><span>Planning a getaway that tantalizes your taste buds as much as it indulges your senses? Look no further than these stunning hotels renowned for their culinary artistry. </span><span>Brace yourself for delectable dishes, locally sourced ingredients, and Michelin-starred magic!</span></p>

7. Business Partner Meetings

Regular meetings with business partners to discuss strategies, review progress, or plan future endeavors are essential. The cost of meals during these meetings is deductible, underlining the ongoing investment in business development.

<p><span>Attending dinners during conferences provides a platform for learning and networking. These meals are part of the professional development expenses and are deductible.</span></p>

8. Conference Dinners

Attending dinners during conferences provides a platform for learning and networking. These meals are part of the professional development expenses and are deductible.

<p><span>Guidance from mentors or advisors over a meal can be invaluable for business growth. Such meetings are considered a business expense, making the meals deductible.</span></p>

9. Meals with Mentors or Advisors

Guidance from mentors or advisors over a meal can be invaluable for business growth. Such meetings are considered a business expense, making the meals deductible.

<p><span>Providing meals for employees during in-office meetings or extended work sessions not only boosts productivity but also qualifies as a deductible expense, showcasing the direct link between sustenance and work efficiency.</span></p>

10. Office Catering for Meetings

Providing meals for employees during in-office meetings or extended work sessions not only boosts productivity but also qualifies as a deductible expense, showcasing the direct link between sustenance and work efficiency.

<p><span>Annual holiday parties are a gesture of appreciation towards employees and can be written off, reflecting the role of such events in employee retention and satisfaction.</span></p>

11. Holiday Parties

Annual holiday parties are a gesture of appreciation towards employees and can be written off, reflecting the role of such events in employee retention and satisfaction.

<p><span>Informal meetings over coffee to discuss potential collaborations or get updates from colleagues are deductible, highlighting the informal yet essential nature of such gatherings in business operations.</span></p>

12. Coffee Meetings for Casual Business Discussions

Informal meetings over coffee to discuss potential collaborations or get updates from colleagues are deductible, highlighting the informal yet essential nature of such gatherings in business operations.

<p><span>Participating in or hosting seminars often involves meals, which are deductible as they are part of the educational or promotional business activities.</span></p>

13. Meals During Business-related Seminars

Participating in or hosting seminars often involves meals, which are deductible as they are part of the educational or promotional business activities.

<p><span>While the direct deduction of entertainment expenses has been limited, meals provided during entertainment events where business is discussed can still qualify for deductions, emphasizing the strategic planning of business entertainment.</span></p>

14. Entertainment Meals with Clients or Prospects

While the direct deduction of entertainment expenses has been limited, meals provided during entertainment events where business is discussed can still qualify for deductions, emphasizing the strategic planning of business entertainment.

<p><span>As fast food and meal delivery services become increasingly popular, the skill of preparing simple, nutritious meals at home is diminishing. Cooking is not only essential for health and self-sufficiency but also an act of creativity and cultural expression.</span></p>

15. Reward Meals for Employee Achievements

Celebrating employee milestones or achievements with a meal not only motivates the team but also counts as a deductible business expense, showcasing the investment in employee recognition as part of business culture.

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Note:  We have discontinued Publication 535, Business Expenses; the last revision was for 2022. Below is a mapping to the major resources for each topic. For a full list, go to the Publication 535 for 2022 PDF . Also, note that Worksheet 6A that was in chapter 6 is now new 2023  Form 7206 , Self-Employed Health Insurance Deduction.

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Small business owners lose out as parties argue over instant asset write-off bill

A young woman wearing spectacles looks at the camera while standing outside with ferns behind her.

Both major parties have been accused of playing "dumb" politics as a significant policy designed to benefit millions of small businesses remains stuck in the House of Representatives.

The amendment to the instant asset write-off provision for small businesses would increase the tax break amount from $1,000 to $20,000 — with the aim of boosting cashflow and reducing compliance costs.

When the ABC spoke to Tasmanian cafe and hotel owner Rachel Power earlier this month about the higher threshold, she was looking forward to being able to replace the dishwasher and fridges in her industrial kitchen.

But with the bill still yet to pass Parliament, and a June 30 deadline before the current tax break expires, Ms Power told the ABC on Wednesday that it was too late for her to benefit from last year's budget promise to lift the threshold.

"[Even] if this gets legislated within the next four weeks, it's too late," said Ms Power, who runs Waterfalls Cafe and Gallery in Tasmania's Mt Field National Park. 

Outdoor seating and tables covered in snow, surrounded by tall trees.

The instant asset write-off has been available to small businesses for years, but many owners have told the ABC the current limit of $1,000 is hardly worth the effort of claiming.

But a $20,000 limit could make a big difference.

The way it works is that a business can buy something, such as a coffee machine, and the owner can deduct the cost of that machine from the business' taxable profit.

But they need to use the asset immediately after the purchase to be eligible.

"And they need the ability to actually get the product," Ms Power explained.

"If we're talking $20,000, some of those products might have to come in from offshore and might not be available in Australia."

Bill bouncing around Parliament

The bill, known as the Treasury Laws Amendment Bill 2023, was introduced to Parliament in September last year — four months after the federal budget announcement.

It has now bounced between the Senate and the House of Representatives several times.

The sticking point? Coalition and Greens MPs in the Senate want to increase the asset price threshold to $30,000.

"Small businesses, the backbone of our communities right across Australia, are buckling under the weight [of] repeated interest rate hikes — 12 since Labor came to power," Shadow Treasurer Angus Taylor told the National Press Club in Canberra on Wednesday .

Shadow Treasurer Angus Taylor speaking during a National Press Club speech.

Labor, concerned about fuelling inflation, insists the asset threshold needs to remain at $20,000.

A spokesperson for Treasurer Jim Chalmers told the ABC "the only thing standing between small businesses and cashflow support this financial year is the grandstanding and delaying tactics of the opposition and crossbench".

"Unless they urgently pass the legislation in the upcoming sittings, businesses may miss out on this important cashflow support when they lodge tax returns from July 1," the spokesperson said.

The ABC understands the Coalition now plans to ultimately agree to the government's $20,000 asset threshold.

But the houses are not due to both sit again until the final week of June, meaning the earliest the bill could be passed would be one or two days before it expires.

That will be too late for many business owners.

"It was announced and it was adopted in the [federal budget] but it hasn't been legislated, so as a business owner I don't have time to spend looking at the ins and outs of the politics of every little decision," Ms Power said.

Small businesses 'need certainty'

Small Business Council CEO Luke Achterstraat said Ms Power spoke for many small businesses across the country.

"Quite frankly, I think small businesses are a bit over it," Mr Achterstraat said.

"They'd like to see certainty but they'd also like to see that certainty locked in."

A man in a grey suit sits at a table talking.

Angus Taylor said the Coalition would deliver a permanent instant asset write-off if elected to government.

"Our commitment in this budget reply is to make this instant asset write-off permanent," he said.

"And that's a down payment on our priority of lower, simpler, fairer taxes.

"This will simplify depreciation for 2.5 million small businesses across Australia while giving them the certainty that they can plan investments on a longer-term basis rather than year to year."

But veteran budget commentator Chris Richardson said neither side of politics was courting favour with this policy and argued that, frankly, they had stuffed up the politics.

A man in a navy suit sits inside an apartment.

"Political gridlock and political games doesn't help anybody," he said.

"In Australia, we lack bipartisanship to do things that should be done.

"This isn't the worst example but it's a dumb example. We can and should do better.

"So you want to give people a chance to respond to this policy.

"And to run it down to the wire … messes up good decision-making by small business."

This year's federal budget offers to extend the $20,000 instant asset write-off for another 12 months but, again, that would require an amended bill to pass Parliament.

Given the serious concerns about inflation, it is arguable the political stalemate has prevented an economically fraught surge in business spending.

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Can Small Business Owners Write Off Gym Memberships on Taxes? [2024‪]‬ Small Business Tax Savings Podcast

  • Entrepreneurship

Send us a Text Message.Have you ever wondered if your business can deduct the cost of an on-site gym? In this episode, Mike focuses on the tax deductibility of gym memberships and on-premises athletic facilities for small businesses. He clarifies that personal gym memberships are not deductible, with rare exceptions for fitness instructors. However, gyms or athletic facilities located on business premises can be deductible if they primarily serve rank-and-file employees, not owners or hi...

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    If your taxable income is $100,000 and you paid $60,000 in interest on your loan, you could claim a $30,000 deduction (30% of your taxable income) of that interest as a tax write-off. Percentage deductible: 100% (up to an amount equal to 30% of your taxable income) Eligibility: You are legally liable for the acquired debt.

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  10. Publication 334 (2023), Tax Guide for Small Business

    The maximum net self-employment earnings subject to the social security part of the self-employment tax is $168,600 for 2024. Standard mileage rate. For 2024, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 67 cents a mile.

  11. What Is a Tax Write-Off?

    Writing off an expense means you lower your overall taxable income — which may mean you'll recoup some of the cost of those expenses in your tax return. You might also see a write-off referred to as deducting or itemizing an expense. All three terms mean the same thing. Not every business expense is tax deductible.

  12. Here's how businesses can deduct startup costs from their federal taxes

    Generally, the business can recover costs for assets through depreciation deductions. For costs paid or incurred after September 8, 2008, the business can deduct a limited amount of start-up and organizational costs. They can recover the costs they cannot deduct currently over a 180-month period. This recovery period starts with the month the ...

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  14. The Ultimate List of 34 Tax Deductions for Self-Employed Business

    For example, if you use your cellphone 50% of the time for business, then you'll deduct 50% of your phone bill. If your monthly phone bill is $100, then the deductible portion is $50. The same goes for your home internet. You'll write off a percentage of the bill based on how much you use your home internet for business.

  15. What Are Business Tax Write Offs & How Do They Work

    The cost of the business insurance would be a tax write-off. A business tax rate will then be applied to the $9,000 to determine the amount of taxes owed. Given a 10% tax rate, the resulting tax liability would be $900. Using a business tax credit,companies may further reduce the amount of taxes owed.

  16. For National Small Business Week, plan now to take advantage of tax

    IR-2022-100, May 3, 2022. WASHINGTON — The Internal Revenue Service today urged business taxpayers to begin planning now to take advantage of the enhanced 100% deduction for business meals and other tax benefits available to them when they file their 2022 federal income tax return.

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    John L. Hillis, president of Hillis Financial Services in San Jose, California, said the best tax write-off for the self-employed is a retirement plan. A person with no employees can set up an individual 401 (k). "The individual can contribute $22,500 in 2023 as a 401 (k) deferral, plus 25 percent of net income," Hillis said.

  21. 25 Creative Tax Deductions for Small Business

    The following are some of the creative tax deductions for small businesses, as per the IRS: 1. Advertising, Marketing, and Websites. You can usually deduct the costs of ads, marketing fees, website creation and administration, and more, as long as your expenses are reasonable and ordinary.

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