If you’re a U.S.-based small business owner, understanding tax deductions can significantly reduce your taxable income and help you keep more of what you earn. This article explains how business structure, estimated quarterly taxes, and common deductions work together—and highlights key expenses many sole proprietors and single-member LLCs can deduct.
📚 Tip
This article is for general education only. Always consult a qualified tax professional for advice specific to your situation.
Start with the right business structure
If you’re a sole proprietor or single-member LLC that hasn’t elected S-Corporation (S-Corp) status, you typically report business income on Schedule C, filed with your personal tax return (Form 1040). In addition to income tax, you’ll also owe self-employment tax (15.3%) on net earnings.
Consider an S-Corp election
Some LLCs choose to be taxed as an S-Corp to reduce self-employment taxes by:
Paying a reasonable salary, subject to payroll taxes
Taking additional profits as distributions, not subject to self-employment tax
This strategy can reduce taxes, but it adds complexity and compliance requirements—so it’s best reviewed with a tax professional.
Use quarterly estimated tax payments to avoid surprises
If you expect to owe $1,000 or more in taxes, the IRS generally requires quarterly estimated payments, due:
April
June
September
January
Making estimated payments throughout the year can help you:
Avoid underpayment penalties
Reduce large year-end tax bills
Smooth out cash flow
📚 Tip
Set aside 25–30% of taxable income for federal taxes, adjusting as needed with professional guidance.
Common tax deductions for U.S. small business owners
Tax deductions reduce your taxable income by subtracting eligible business expenses. To qualify, expenses must be ordinary, necessary, and directly related to your business.
Below is a consolidated table of frequently claimed deductions for U.S. small business owners.
Category | Deduction | What it covers | Key notes |
Workspace and operations | Home office | Portion of rent or mortgage interest, utilities, insurance, and maintenance | Simplified: $5/square foot (up to 300 square foot), or regular method based on business-use percentage |
Workspace and operations | Office supplies and software | Office supplies, subscriptions, bookkeeping and payroll tools | Must be ordinary and necessary for business |
Workspace and operations | Equipment and depreciation | Computers, cameras, office furniture, tools | Deduct using Section 179 or depreciation |
Workspace and operations | Repairs and maintenance | Repairs to office space or business equipment | Must relate to business use |
Transportation and travel | Business mileage | Vehicle use for business | Standard mileage rate (2025): $0.70 per mile, or deduct actual expenses |
Transportation and travel | Travel expenses | Flights, lodging, rideshares, work-related internet | Travel meals generally 50% deductible |
Marketing and client work | Marketing and advertising | Website hosting, ads, email marketing, printed materials | Includes branded materials and promotions |
Marketing and client work | Client meals and gifts | Meals and client appreciation gifts | Meals usually 50% deductible. Gifts up to $25 per person per year. |
Marketing and client work | Job-specific supplies | Supplies used directly for client work | Separate from general office supplies |
People and services | Professional services | Accounting, legal, consulting fees | Must directly support business operations |
People and services | Contract labor | Payments to freelancers or contractors | 1099 rules may apply |
People and services | Payroll expenses | Employee wages, payroll taxes, processing fees | Includes employer portion of payroll taxes |
People and services | Business insurance | Liability, professional, equipment, or event insurance | Coverage must be business-related |
Financial and admin | Payment processing and bank fees | Credit card processing, merchant and platform fees | Often labeled as “processing” or “merchant” fees |
Financial and admin | Interest | Interest on business loans or credit cards | Only interest tied to business expenses qualifies |
Financial and admin | Licenses and registrations | Business licenses, professional renewals, trademarks | Includes incorporation and renewal fees |
Owner-related benefits | Health insurance premiums | Premiums for self-employed individuals and dependents | If not eligible for employer-sponsored coverage |
Owner-related benefits | Retirement contributions | SEP IRA, Solo 401(k), Traditional IRA | Subject to IRS limits |
Owner-related benefits | Startup costs | Expenses incurred before opening | Up to $5,000 may be deductible |
Owner-related benefits | Child and dependent care credit | Care expenses that allow you to work or seek work | Credit eligibility depends on filing status |
Final tips for maximizing deductions
Keep detailed, well-documented records
Separate business and personal finances
Track expenses throughout the year—not just at tax time
Use accounting tools to simplify categorization and reporting
Staying organized and proactive makes tax season easier—and helps ensure you don’t miss deductions you’re entitled to claim.
Still have questions? Feel free to send us a message by clicking the Question Mark icon on any HoneyBook page. Our team is always happy to help!
HoneyBook Tax Hub is designed to provide information relevant for tax preparation but does not provide tax, financial, or legal advice. It is not a substitute for a licensed professional. Users are solely responsible for the accuracy and compliance of their filings. We recommend confirming any information given here by seeking the assistance of a licensed professional in your area. We do not guarantee completeness, real-time updates, or assume liability for errors, omissions, or penalties.