As a small business accountant, the question I probably get more than any other is, “Can I deduct this?” And it makes sense—small business owners work hard for their money, and want to save every penny they can from getting taxed.

The good news is, a lot of the expenses that go into building and growing your business are tax deductible. The bad news is, with so many deductible expenses, it’s hard to keep track, and can be easy to forget an expense that you should be writing off.

I’m here to help, with a complete guide to small business tax deductions. We’ll talk through the most applicable expense categories in Schedule C (for sole-proprietors) and Form 1120 (for corporations), some typical small-biz costs that are umbrellaed under them, as well as any pro tips for taking advantage of these write-offs.

Deductions we’ll walk through include:

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• Advertising
• Business use of your home
• Car and truck expenses
• Charitable contributions
• Commissions and fees
• Contract labor
• Cost of goods sold
• Depreciation and amortization
• Employee benefits programs
• Insurance
• Interest

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• Legal and professional services
• Office expenses
• Rent or lease
• Repairs and maintenance
• Supplies
• Taxes and licenses
• Travel and meals
• Utilities
• Wages
• Other expenses not to forget!

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As far as tracking all of this, I strongly recommend having separate business banking and credit card accounts so you can easily look down the list and make sure you’ve deducting everything, and also using expense tracking software to keep snapshots of receipts in case you get audited (nobody has time to deal the clutter of paper receipts, but bank statements are not enough so you’ll definitely want a record of the receipts). Many of the popular accounting softwares—like Wave, Freshbooks, and Quickbooks—have integrated expense tracking with apps so you can easily keep track of things on the go.

What is a tax deduction?

A tax deduction lowers the amount of income that’s subject to tax. Unlike a tax credit (which reduces your tax dollar-for-dollar), a deduction reduces your taxable income — the amount your tax rate is applied to. The actual dollar value of any deduction depends on your marginal tax bracket: a $1,000 deduction saves $220 for someone in the 22% bracket, but $370 for someone in the 37% bracket.

There are four broad categories of deductions in the U.S. tax code, and most taxpayers can use a mix of them:

• Above-the-line deductions — subtracted from gross income to get your adjusted gross income (AGI). Available whether you take the standard deduction OR itemize.
• Standard deduction — a fixed dollar amount set annually by Congress. Most taxpayers (around 90%) take this.
• Itemized deductions — specific personal expenses listed on Schedule A. Only worthwhile if their total exceeds your standard deduction.
• Business deductions — ordinary and necessary expenses of running a business, claimed on Schedule C, 1120, 1120-S, or 1065. Available to self-employed people and business owners regardless of standard vs. itemized choice.

Standard deduction vs. itemized: how to choose

For 2026, the standard deduction amounts are:

• Single / Married Filing Separately: $15,400
• Married Filing Jointly: $30,800
• Head of Household: $23,100
• Additional for age 65+ or blind: $1,650 (single) or $1,300 (married) per qualifying condition

You take the larger of the standard deduction OR your itemized total. The math is mechanical: add up your Schedule A items and compare. If itemized is bigger, itemize. If smaller, take the standard.

The most common itemized deductions are:

• State and local taxes (SALT): property + state income (or sales) tax, capped at $10,000 ($5,000 if married filing separately)
• Home mortgage interest: on up to $750,000 of mortgage principal ($375,000 if married filing separately) for loans after Dec. 15, 2017
• Charitable contributions: cash gifts up to 60% of AGI, non-cash up to 30% of AGI
• Medical expenses: the portion exceeding 7.5% of your AGI
• Disaster losses in federally-declared disaster areas

Since the 2017 Tax Cuts and Jobs Act roughly doubled the standard deduction, most filers no longer itemize — but high-income earners in high-tax states (CA, NY, NJ, MA) with large mortgages often still come out ahead by itemizing.

Above-the-line deductions everyone should know

These are subtracted from gross income to arrive at AGI, BEFORE the standard-vs-itemized choice. Anyone eligible can claim them in addition to the standard deduction. The most commonly-overlooked above-the-line deductions:

• Educator expenses: up to $300 per teacher ($600 if both spouses teach) for classroom supplies
• Health Savings Account (HSA) contributions: $4,300 single / $8,550 family for 2026 (plus $1,000 catch-up if 55+)
• Self-employed retirement contributions: SEP-IRA, SIMPLE-IRA, solo 401(k) contributions reduce your taxable income
• Self-employment tax deduction: deduct half of your self-employment tax from gross income
• Self-employed health insurance: 100% of medical, dental, and qualifying long-term care premiums for you, your spouse, and dependents
• Student loan interest: up to $2,500 (phases out at MAGI $80K single / $165K joint)
• Traditional IRA contributions: up to $7,000 ($8,000 if 50+), with deductibility phasing out at certain income levels if you’re covered by a workplace retirement plan
• Alimony paid on divorces finalized before 2019

Business deductions: ordinary and necessary

The Internal Revenue Code (Section 162) allows a business to deduct any expense that is BOTH ordinary (common and accepted in your trade) AND necessary (helpful and appropriate, not requiring “indispensable”). This standard is broad — it covers most legitimate business spending — but it does have limits:

• Personal expenses with a business “spin” usually fail the test (e.g., everyday clothing isn’t deductible even if you wear it to client meetings)
• Capital expenses (equipment, vehicles, real estate) must be depreciated over multiple years, not expensed in full the year of purchase (with some exceptions like Section 179)
• Lavish or extravagant expenses can be disallowed even if related to business
• Expenses paid to family members must be reasonable and documented as if dealing with a stranger

The 21 deduction categories listed below correspond to the line items on Schedule C (Form 1040), which sole proprietors and single-member LLCs use to report business income. S-Corps use Form 1120-S and partnerships use Form 1065, but the same “ordinary and necessary” standard applies.

The QBI deduction: a 20% bonus for pass-through business owners

Section 199A of the tax code (the “Qualified Business Income” deduction, or QBI) gives most pass-through business owners — sole proprietors, partnerships, S-Corps, and some trusts — an additional deduction of up to 20% of their qualified business income. The QBI deduction sits at a unique spot: it’s claimed BELOW the line (after AGI) but is available regardless of whether you take the standard or itemized deduction.

For 2026, the QBI deduction phases out starting at:

• Single: $249,150 taxable income
• Married Filing Jointly: $498,300 taxable income

Above the threshold, “Specified Service Trade or Business” (SSTB) owners — including accountants, lawyers, doctors, consultants, and financial advisors — see their QBI deduction reduced or eliminated. Non-SSTB businesses (manufacturers, retailers, software companies, etc.) can still qualify through a separate wage-and-asset test.

Common Business Deductions on Schedule C

The following are the standard expense categories on Schedule C. Each one corresponds to a specific line on the form, with detailed rules in IRS Publication 535. Most apply to sole proprietors and single-member LLCs; the same categories apply to other business entities with minor variations.

Advertising

The money you put into getting your business out there can be deducted in full—after all, how could your business be expected to succeed without a little promotion. These expenses can add up fast, so make sure you’re accounting for everything.

Common expenses in this category for small business owners include:

• Any type of ad you can think of (social media, Google, podcast, ads in print or digital publications, billboards, commercials, subway ads, retrofitting your car with an ad—you name it)
• The costs of building and maintaining a website
• Email marketing costs (like upgrading to paid MailChimp)
• Influencer marketing costs
• Business cards, postcards, flyers, other printed materials promoting your business
• Any swag with your company name or logo on it
• Sponsored content
• Sponsoring an event
• Paying for a listing or promoted listing (like on Yelp or Etsy)
• Food and entertainment costs for promotional events

Business Use of Your Home

If you have a space in your home that’s dedicated to specifically to your work—like a room that serves as an office or even a desk in the corner of your bedroom—you can deduct a portion of your home costs as part of your business expenses.

There are two ways to calculate this. The more complex way is to figure out the percentage of your home that is used for business and then calculate your home costs—like rent or mortgage, utilities, insurance, and repairs—by that percentage. Or you could go the easy route and use the simplified deduction, multiplying the square feet of your home used for business by $5 to get your deduction amount.

Car and Truck Expenses

If you use your car at all for business expenses, make sure you’re deducting a percentage of those costs from your taxes, either by keeping track of the individual expenses incurred (like gas, maintenance, and even depreciation), or using the IRS’ standard mileage deduction — which is 58.5 cents per mile for 1/1 through 6/30/2022 and 62.5 cents per mile for 7/1 through 12/31/2022.

Either way, you’ll need to keep track of your miles (if you’re writing off the individual expenses, you’ll need your business mileage and total mileage of the year to figure out what percentage of costs can be written off for business). Anytime you drive somewhere for your business—be it a business trip, a delivery, a meeting with a client or investor—make sure you’re tracking the miles and keeping a log somewhere. The biggest exception to what counts as business mileage is driving back and forth to your office or place of business—that’s considered commuting and can’t be written off anywhere.

Whichever method of writing off you’re using, make sure you’re also tracking tolls and parking fees, which can be included whether you’re using the mileage deduction or individual expenses.

If you purchase a vehicle solely for business use (like a delivery truck or van), you can depreciate the cost of that purchase over its expected lifespan—that would go under the depreciation section below.

Charitable Contributions

If you’re a sole proprietor, LLC acting as a sole proprietor, or S-corp, unfortunately, this deduction doesn’t apply to you (though you can still write these off in your personal taxes if you choose to do itemized deductions). However, if you’re a C-corp and donate money, supplies, or property to a recognized charity, you can deduct it from your expenses. There are just a few things to note: donations of time aren’t included, you can’t deduct more than 10% of your income for this expense, and the charity must qualify for the deduction with the IRS.

Commissions and Fees

Anything you pay someone else to help sell your product or service can be written off. Common expenses in this category for small business owners include:

• Commissions you pay to salespeople
• Affiliate payments to third-party marketers
• Payment processing fees (like fees for processing credit cards or accepting payments through PayPal)
• Merchant processing fees (like the additional costs Etsy, Eventbrite, or Patreon take for using their platform)
• Bank fees on your business account

Contract Labor

Wages for any full-time employees you have go elsewhere (keep reading!), but if you hire contractors or consultants throughout the year to help support your work, the costs of paying them can be written off here.

Common expenses in this category for small business owners include:

• Virtual assistants
• Second shooters
• Seasonal hires for holiday production
• Freelancers to support in areas where you don’t have expertise
• Consultants and business coaches

Make sure you also file a 1099 for anyone who you pay over $600 throughout the year!

Cost of Goods Sold

Any expenses that went into creating and delivering the products or services you sold this year can be written off. This includes direct costs (like raw materials, merchandise for resale, and packaging) and indirect costs (like the labor required to create the product and costs to store the products). Learn more here on exactly what’s included in cost of goods sold (COGS).

Depreciation and Amortization

Large equipment or assets you purchase for your business can be written off over the course of their expected lifetime through the processes of depreciation (for physical assets) or amortization (intangible assets). I dig deep into this in my guides to depreciation and amortization, but the gist is this: Any equipment or asset purchases that will be useful to your business over the course of many years can be deducted in even installments over the course of their expected lifetime (and anything costing over $2,500 must be depreciated).

You can also use the section 179 expense deduction to expense the full cost of qualified business property that was purchased during the year, so long as you also started using it this year. Common expensive purchases like computers and furniture count under this, so it’s worth paying attention to for maximum write-offs.

Common expenses in this category for small business owners include:

• Computers
• Cameras and lenses
• Printers
• Production equipment
• Vehicles purchased for business use (e.g., delivery vans)
• Customer lists
• Copyrights
• Internet domain names
• Licensing agreements
• Patents
• Service contracts
• Trademarks
• Trade secrets (like a secret recipe)

Employee Benefit Programs

This is another section that’s not super commonly used in the small business world, but if you do employ others and provide benefits, you can write the costs of those off here. This can include things like:

• Health plans
• Life insurance
• Dependent care support
• Retirement plan contribution
• Awards and bonuses
• Education assistance
• Pension and profit sharing programs (reported on a separate line)

The rules of deducting these expenses are pretty nuanced, so if you’re at the point of employing folks and providing benefits (congrats!), I’d recommend chatting with an accountant.

Insurance (Other Than Health)

If you purchase business liability insurance or event insurance, you can write the cost of the premiums off here. If the business owns vehicles that are 100% used for business purposes, you can also write the cost of the car insurance off here.

If you’re self-employed and are looking to write off your health insurance, you’ll handle this on the personal part of your tax return.

Interest

Any interest you pay on credit cards, loans, or other lines of credit can be deducted here. Note that this applies only to accounts that are strictly for businesses purposes—if you use a credit card for a mix of business and personal, the write off doesn’t apply.

Legal and Professional Services

If you don’t have in-house legal or bookkeeping and instead pay an attorney, accountant, bookkeeper, or tax professional to help with your business, you can write off the expense here! Note that if you pay an accountant to do both your personal and business taxes, you can only write off the expense related to your business taxes—see if the Schedule C is a separate line item on your invoice, or just ask your accountant what the cost for the business filing portion was.

Office Expenses

Anything you purchase to make your workspace a more productive place to be can be written off in this section.

Common expenses in this category for small business owners include:

• Paper, notebooks, pens, pencils, and basically anything from Staples
• Office furniture that’s under $2,500, as well as office decor
• Small computer equipment like monitors, keyboards and headphones
• Shipping expenses like postage, envelopes, and packing material
• Cleaning services or supplies for your office

Rent or Lease

The cost of anything you rent for your business can be deducted here. Common expenses in this category for small business owners include:

• Office rental, including coworking space membership
• Event space rental
• Rental of special equipment you’re not ready to purchase (e.g., additional camera equipment)
• Storage rental for extra inventory

Repairs and Maintenance

Any costs you incur repairing or maintaining your equipment or office space can be written off here. Common examples of small business expenses in this category include:

• Plumbing and electric repairs to an office or business space
• Maintenance to critical creative equipment (e.g., taking a camera in to get it cleaned and calibrated)
• Repairs to equipment critical to your business (e.g., getting a laptop fixed)

Supplies

All those things you feel like you’re constantly using and replacing to keep your business running smoothly? Those can be written off as supplies. For small business owners, this can include things like:

• Art supplies or other materials needed for hand-crafted goods
• Stock photos, fonts, website themes and other digital supplies
• Disposable utensils and dinnerware for a restaurant or event

Taxes and Licenses

Any taxes or fees you need to keep your business legally up and running can be written off here. This can include things like:

• The cost of a local business license
• Professional licensing fees
• Trademark fees
• Business formation or renewal fees (such as to become an LLC)
• Employer portion of payroll taxes

Travel and Meals

This is always a fun one, but one that can cause much confusion as well. While unfortunately, you can’t deduct your dream vacation, the costs of travel and meals related to business can save you some tax cash.

For travel expenses, you must be on the trip primarily for business purposes. Then, you can write off pretty much every cost of the trip, including:

• Lodging, be it a hotel or Airbnb
• Transportation around the city, including public transportation costs or taxis, Ubers and Lyfts
• Airfare, train, or bus tickets to get where you’re going
• 50% of meal expenses (either by tracking actual costs or using the per diem rate)
• Laundry and dry cleaning while traveling
• Tips for service providers at the hotel

As for meals, you can write off 50% of the cost of food and drink as long as it’s for a true business purpose. When tracking these expenses, record the full cost of the meal, and then report 50% of the total cost on your tax return.

Meal costs that can be written off include:

• Lunch, drink, or coffee meetings where you discuss business with someone else (this can include clients, mentors, employees, etc.)
• Food purchased for your staff

This does NOT include getting yourself lunch during the day, or going to a coffee shop to get work done by yourself.

Utilities

Utilities you pay for running your business can be deducted here, including:

• Electricity, water, and the like for your office space
• The cost of internet, both in-office and any costs incurred on the go (like mobile hotspots or paying for internet on airplanes or at hotels)
• Any phone costs used for business (If you’re self-employed and use your phone both personally and professionally, deduct the percentage of the costs you used for work.)

Wages

If you have employees, you can deduct their wages here! Unfortunately, you cannot deduct the wages you pay yourself as a business owner.

Other Expenses

Other expenses include anything that doesn’t quite fit in the categories above, but that is still ordinary and necessary for your business to function.

Some common extra expenses I always make sure my small business clients include are:

• Education and conference costs – Anything that improves your skills related to your business, including e-books, physical books, online courses, and conferences. More about deducting education expenses here.
• Clothing – While most clothing is not deductible (even if you truly only wear that horrible pantsuit for work), if the clothing is specifically required by your employer and could not take the place of your regular clothing, it can be deducted (think things like scrubs).
• Software subscriptions – All you Adobe Creative Cloud subscribers and avid app users, this one’s for you—if the software you use is specifically for your business, you can write off the cost here.
• Startup expenses – If this is your first year in business, you can deduct up to $5,000 in costs incurred to get your business ready to open its doors, like advertising, paying employees for training, construction, etc. Put those expenses here, and depreciate anything over the $5,000 limit.

While I’ve done my best to cover the most common deductions for small businesses here, this list is by no means exhaustive. If there’s something that seems like you should be able to write it off because it’s critical to your business function, but you can’t find it on this list, chat with an accountant!

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Recordkeeping: what the IRS expects

Every deduction you claim must be supported by adequate documentation — the IRS isn’t going to take your word for it during an audit. The general rule: keep records for at least 3 years from the date you filed (or 2 years from when you paid the tax, whichever is later). For situations involving substantial under-reporting, the look-back period extends to 6 years; for fraud or non-filing, there’s no time limit.

Specific records you should keep for each major deduction category:

• Vehicle expenses: contemporaneous mileage log with date, business purpose, miles. Either save all gas/repair receipts (actual cost method) or just the mileage log (standard mileage rate)
• Home office: photo of the dedicated space, square footage measurement, utility bills, mortgage interest or rent statements
• Travel: hotel folios, flight itineraries, conference agendas, business purpose notes — anything establishing the trip was for business
• Meals: receipt, who attended, business topic discussed, the amount, and the date
• Equipment / depreciation: purchase receipt, date placed in service, fair market value if converted from personal use
• Charitable contributions: bank record OR written acknowledgment from the charity for gifts over $250

Digital records are fine — IRS rules accept scanned receipts and digital logs as long as they’re legible and contain the same info as paper. Apps like Expensify, MileIQ, and QuickBooks Self-Employed handle most of this automatically.

What’s NOT deductible (common mistakes)

These items are frequently claimed as deductions but get disallowed in audits:

• Commuting — driving from home to your regular workplace is personal, not business
• Business clothing that’s “street-wearable” — a suit isn’t deductible even if you only wear it for client meetings. Specialized uniforms or branded workwear may qualify
• Gym memberships for general fitness (unless prescribed by a physician for a specific medical condition)
• Personal portion of mixed-use expenses — cell phone, internet, home office must be prorated; only the business portion is deductible
• Pre-business expenses over $5,000 — must be amortized over 15 years rather than deducted in the startup year
• Fines and penalties paid to governments (parking tickets, IRS penalties, OSHA fines)
• Lobbying expenses for federal/state legislation
• Country club dues and most entertainment expenses (eliminated by the 2017 TCJA)
• Life insurance premiums when the business is the beneficiary

Frequently asked questions about tax deductions

Can I deduct expenses if I have a side hustle in addition to a W-2 job?

Yes. Self-employment income (including side hustles) is reported on Schedule C, and you can deduct all ordinary and necessary expenses against that income — even if your W-2 wages are your primary income. The deductions reduce your self-employment income (and therefore your self-employment tax), independent of your W-2 wage taxation.

Do I need an LLC or S-Corp to claim business deductions?

No. Schedule C deductions are available to any sole proprietor — no formal business entity required. Starting an LLC, S-Corp, or partnership can offer liability protection or tax-savings benefits, but it doesn’t unlock additional deduction categories. The “ordinary and necessary” expenses you can deduct as an LLC are the same ones you could deduct as an unincorporated sole proprietor.

What’s the difference between a deduction and a tax credit?

A deduction reduces your taxable income. A credit reduces your tax bill dollar-for-dollar. A $1,000 deduction saves you between $100-$370 depending on your tax bracket. A $1,000 credit saves you exactly $1,000. Credits are nearly always more valuable than deductions of the same nominal amount.

Can I claim deductions for prior years if I missed them?

Yes — file an amended return (Form 1040-X) within 3 years of the original filing date or 2 years from when you paid the tax, whichever is later. The IRS will adjust your refund or balance accordingly. Note that some elections (like the Section 179 expensing election) must have been made on the original return and cannot be added via amendment.

How do I prove a business deduction in an audit?

You need contemporaneous records — created at or near the time of the expense, not reconstructed afterward. The minimum required: a receipt showing what was bought, when, how much, and from whom; plus a record of the business purpose. For meals and travel, the IRS requires the additional details of who attended and what business was discussed.

Can a self-employed person deduct health insurance premiums?

Yes, as an above-the-line deduction on Schedule 1. You can deduct 100% of premiums paid for you, your spouse, and dependents — including medical, dental, and qualifying long-term care coverage. The deduction is limited to your net self-employment income for the year, and you can’t deduct premiums for any month you were eligible to participate in your spouse’s employer plan.