The Most Common Tax Deductions for Small Business Owners
Every dollar matters when you’re running a small business — especially at tax time. But many business owners miss out on deductions simply because they don’t know what’s allowed or how to document it.
Here are some of the most common tax deductions — and how to make sure you’re not leaving money on the table.
1. Home Office Deduction
If you work from home and use part of your space exclusively and regularly for business, you may qualify for the home office deduction.
✅ Includes a portion of rent or mortgage, utilities, insurance, and repairs
✅ Simplified method available based on square footage
📌 Just make sure it’s a dedicated workspace — the dining table doesn’t count.
📌 Important: If you already have an office outside the home, you typically can’t claim the home office deduction — unless the space at home is used for a separate and essential business function that isn’t handled elsewhere.
Example: You have a retail store but handle bookkeeping and vendor management from a dedicated office in your home. That space may qualify.
But: If your outside office handles all your business activities and you just check email from the couch at home, it wouldn’t meet IRS standards.
2. Business Mileage
If you use your personal vehicle for business purposes, you may be eligible to deduct your mileage — but documentation is key.
✅ Do:
Track every business-related trip (e.g. client meetings, bank runs, business errands)
Use a mileage log or app (like MileIQ or QuickBooks) to record date, destination, business purpose, and miles driven
Keep a record of your odometer readings at the beginning and end of each year
❌ Don’t:
Count your daily commute from home to your regular office (it’s not deductible)
Estimate your miles without written support
Include personal errands, even if they’re done while out on a business task
📌 For 2025, the standard mileage rate is 70 cents per mile. You can also choose to deduct actual vehicle expenses (gas, maintenance, insurance) — but you must choose one method and stick with it.
3. Meals & Entertainment
Business meals are still partially deductible — but entertainment expenses are not.
✅ Do Deduct (50%):
Meals with clients or prospects where business is discussed
Meals while traveling overnight for business
Meals for company retreats, seminars, or business development events
❌ Don’t Deduct:
Entertainment (sporting events, concerts, shows — even if clients attend)
Meals that are overly lavish or personal in nature
Meals where no business discussion takes place
📌 Tip: Always document:
Who you were with
The business purpose of the meeting
The date and amount
Keep receipts — physical or digital copies
Remember, if a meal is bundled with an entertainment event (like a dinner at a ballgame), you’ll need to separate the food cost from the entertainment — or none of it may be deductible.
4. Start-Up and Organizational Costs
If your business is new, you may be eligible to deduct certain start-up and organizational costs in your first year.
✅ Do Include:
Legal and accounting fees related to forming the business
Initial marketing costs, website development, branding
Travel and training related to starting the business
Business licenses and permits
❌ Don’t Include:
Equipment or assets that must be capitalized (like vehicles or computers)
Costs incurred after the business is officially operating (those are regular business expenses)
📌 You can deduct up to $5,000 in start-up and $5,000 in organizational costs if total costs are under $50,000. The rest may need to be amortized over 15 years.
5. Professional Services and Contractors
Payments to outside professionals and 1099 contractors are deductible, but make sure you handle them correctly.
✅ Do:
Deduct fees paid to accountants, attorneys, consultants, and independent contractors
Issue 1099-NECs for non-corporate service providers if payments exceed $600
Track payment methods — 1099s are not needed for payments via credit card or PayPal (they’re reported via 1099-K)
❌ Don’t:
Misclassify employees as independent contractors
Forget to get W-9 forms before issuing payment
Ignore filing deadlines for 1099s — late penalties apply
6. Retirement Contributions
Business owners can set up retirement accounts that not only help you save for the future — they also reduce your taxable income.
✅ Common Options:
SEP IRA – easy to set up; allows up to 25% of compensation (max $69,000 for 2024)
Solo 401(k) – includes both employer and employee contributions; great for maximizing savings
SIMPLE IRA – available to businesses with 100 or fewer employees
✅ Do:
Contribute before tax deadlines (deadlines vary by plan)
Coordinate contributions with your tax advisor to maximize deductions
Consider setting up a plan before year-end for flexibility
❌ Don’t:
Miss deadlines for establishment or contributions
Assume contributions don’t need documentation — keep records!
7. Software, Subscriptions, and Apps
If you use digital tools to run your business, those costs are likely deductible.
✅ Do Include:
Bookkeeping tools (QuickBooks, Xero)
Design and marketing software (Canva, Adobe, Mailchimp)
Productivity tools (Zoom, Slack, Dropbox)
❌ Don’t Include:
Personal software not used for business purposes
Non-subscription entertainment platforms unless directly tied to business
📌 Track and categorize these in your bookkeeping system for clarity at tax time.
8. Education & Training
If you invest in improving your skills or industry knowledge, those costs may be deductible.
✅ Do Deduct:
Business-related courses, certifications, and webinars
Industry conferences and events (registration fees, travel, lodging)
Books and materials directly related to your trade
❌ Don’t Deduct:
Education that qualifies you for a new trade or business
Courses unrelated to your current business activities
Travel that includes significant personal vacation or leisure time
📌 Keep receipts and document the business purpose of the training for each expense.
Don’t Miss What You Deserve
The IRS doesn’t expect you to know every rule — but missing deductions means paying more than you have to. At Dishion & Associates, we help small business owners capture every eligible write-off and stay compliant.
