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As a small business owner, maximizing your tax deductions can save your business thousands of dollars each year. However, many business owners miss out on valuable deductions simply because they aren’t aware of them. To help you keep more of your hard-earned money, we’ve compiled a list of 20 commonly overlooked tax deductions. These deductions can apply to a variety of businesses, but always consult a tax professional to ensure compliance with IRS rules.
1. Home Office Deduction
If you use a portion of your home exclusively and regularly for business, you can deduct a percentage of your expenses, such as rent, mortgage interest, utilities, and maintenance. The IRS also offers a simplified method: $5 per square foot, up to 300 square feet (maximum $1,500). Learn more about the Home Office Deduction.
2. Vehicle and Mileage Expenses
Do you drive your car for business? You can deduct expenses using either the standard mileage rate—$0.67 per mile for 2024 — or actual expenses like gas, insurance, and repairs. Remember to keep a mileage log, or use an app like MileIQ!
3. Business Meals
Business meals are 50% deductible. Ensure you keep receipts and document the purpose of the meeting. This like food for company parties are 100% deductable.
4. Startup Costs
If your business is new, you can deduct up to $5,000 in startup costs in your first year. This includes legal fees, market research, and costs related to setting up your company.
5. Health Insurance Premiums
If you’re self-employed, you can deduct premiums for health insurance for yourself, your spouse, and dependents. Note: This doesn’t apply if you’re eligible for employer-subsidized health coverage.
6. Retirement Plan Contributions
Contributions to retirement plans like SEP IRAs, SIMPLE IRAs, and solo 401(k)s are deductible. For 2024:
SEP IRA: Up to $69,000 or 25% of your compensation.
Solo 401(k): $23,000 (or $30,500 if age 50+), plus employer contributions.
7. Education and Training
Costs for education that helps you improve your skills or expand your knowledge in your business field are deductible. This includes courses, certifications, seminars, webinars, and industry-specific publications.
8. Bank and Credit Card Fees
Fees from business bank accounts and credit cards, including transaction fees from payment processors like PayPal or Stripe, are deductible.
9. Professional Services
Payments to accountants, bookkeepers, attorneys, and consultants are deductible as business expenses. These services often directly support your business operations or compliance.
10. Advertising and Marketing
You can deduct the costs of promoting your business, such as:
Digital ads (Google Ads, Facebook Ads).
Website design, hosting, and domain fees.
Promotional materials like flyers and business cards.
11. Bad Debts
If a customer owes you money and you can’t collect it, you may be able to write it off as a bad debt—provided it was previously included as income in your books.
12. Depreciation on Equipment
The cost of business equipment—like computers, machinery, and furniture—can be deducted through depreciation. For 2024, the Section 179 Deduction allows you to deduct up to $1,200,000 for qualifying equipment.
13. Software and Subscriptions
Monthly or annual fees for software and online tools (e.g., QuickBooks, Adobe, or Zoom) are deductible. This also includes subscriptions to professional journals or industry-specific resources.
14. Travel Expenses
If you travel for business, you can deduct the cost of flights, hotels, rental cars, and meals. Be sure to document the purpose of your trip and only claim legitimate business-related expenses.
15. Charitable Contributions
If your business is structured as a corporation, charitable contributions made directly from the business are deductible. Partnerships, sole proprietors, and LLCs can deduct donations on individual tax returns through Schedule A.
16. Interest on Business Loans
Interest paid on business loans or lines of credit is deductible. Keep documentation of the loan agreement and how the funds were used.
17. Rent for Business Property
The cost of leasing office space, warehouses, or retail locations is deductible. Even coworking space fees can qualify if the space is used for business purposes.
18. Cell Phone and Internet Bills
If you use your phone or internet for both personal and business purposes, you can claim the percentage of the expense used for business. Keep records to justify the business-use portion.
19. Insurance Premiums
Business-related insurance is fully deductible, including:
General liability insurance.
Workers’ compensation insurance.
Cybersecurity insurance for protecting sensitive data.
20. Tax Preparation Fees
The cost of preparing and filing your business tax returns is deductible. This includes bookkeeping services directly related to tax preparation.
Final Tips
Keep Records: Proper documentation is essential to claim these deductions. Save receipts, invoices, and logs to substantiate your claims, or work with a professional (like us) who can help track that for you.
Consult a Tax Professional: Rules and limits for deductions can vary depending on your business structure and location. Working with an expert ensures you maximize deductions while staying compliant with regulations.
By taking advantage of these 20 commonly overlooked deductions, you can reduce your taxable income and keep more money in your business. For more details on deductible business expenses, visit the IRS guide: Business Expenses.
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