Tax deductions reduce the total taxable income of your business, which in turn lowers the amount of tax you owe. The IRS allows businesses to deduct a wide range of expenses, as long as they are considered ordinary, necessary, and directly related to the operation of the business. We’ve comprised a list of 25+ deductions and credits you may be eligible for, below!
1. Home Office Deduction
What it covers: A portion of your rent or mortgage interest, utilities, insurance, and maintenance costs based on the percentage of your home used exclusively for business.
How to calculate:
Simplified Method: Deduct $5 per square foot of the business space (up to 300 square feet).
Regular Method: Calculate the actual expenses allocated to the business portion of your home. You’ll need to calculate the square footage of your workspace first and then claim that percentage of the total square footage of your home. For example, if your workspace is 100 sq ft of a 1000 sq ft home, your workspace would take 10% of your home, meaning 10% of the total costs for the year would be deductible. We've created a Home Office Deduction tracker template for your use here.
2. Business Mileage
What it covers: Expenses for business-related vehicle use.
How to claim:
Standard Mileage Rate: For 2024, the rate is 67 cents per mile, up 1.5 cents from 2023
Actual Expenses: Deduct gas, tolls, parking, maintenance, insurance, and depreciation proportional to business use. Keep a detailed log of trips, dates, and purposes.
3. Business Meals
What it covers: Meals with clients or for business purposes (e.g., during business travel).
Limitations: Generally, only 50% of the cost is deductible unless they are meals provided at the workplace such as company-sponsored meals provided to employees on-site, meals for company parties, or team-building events, then it would be 100% deductible. Social events held for your employees are 100% deductible.
4. Professional Services
What it covers: Fees paid to accountants, lawyers, consultants, or other professionals directly supporting your business.
5. Equipment and Depreciation
What it covers: Purchases of computers, cameras, office furniture, or other equipment used for business.
How to claim:
Deduct in full under Section 179 (up to $1,160,000 for 2023) if eligible.
Alternatively, deduct over time through depreciation.
6. Marketing and Advertising
What it covers: Expenses for ads, website hosting, graphic design, social media promotions, printed materials, email marketing costs, and branded swag.
7. Internet and Phone Bills
What it covers: A portion of your phone and internet expenses used for business.
How to calculate: Deduct the percentage of the bill corresponding to business use.
8. Education and Training
What it covers: Costs of professional development, including online courses, conferences, certifications, and educational subscriptions. The costs of “qualifying work-related education”. Education expenses to “maintain or improve skills needed in your present work.”
9. Retirement Contributions
What it covers: Contributions to tax-advantaged retirement accounts such as:
SEP IRA
Solo 401(k)
Traditional IRA
10. Health Insurance Premiums
What it covers: Premiums paid for yourself, your spouse, and your dependents (if you’re self-employed and not eligible for employer-sponsored plans).
11. Interest
What it covers: Interest accrued on purchases that were business expenses, on business credit cards, loans, or lines of credit.
12. Payment Processing Fees and Bank Fees
What it covers: Fees charged by platforms like PayPal, Stripe, or other credit card processors. Other fees, sometimes referred to as “Merchant Processing Fees”, like those charged by Etsy, for example, for using their platform.
13. Business Insurance
What it covers: Policies for liability, event insurance, professional indemnity, or equipment insurance.
14. Commission Fees
What it covers: Commissions paid to salespeople and affiliate payments made.
15. Contract Labor (Independent Contractors/Freelancers)
What it covers: Contractors hired to help support your business, such as virtual assistants or seasonal hires. You may be responsible for providing your contractors with a Form 1099-NEC at the end of the year, obtain a W-9 form from each of them to facilitate this process. If the contractor was paid via credit card/credit card processor like Stripe, you as the small business owner may not be responsible for providing the contractor with a Form 1099-NEC as they may receive one from the credit card processor.
16. Office Supplies & Softwares
What it covers: Everyday things you use to run your business. These could be physical items like pens, calendars, small office furniture or decor, small tools and equipment, shipping expenses, etc or software subscriptions necessary to run your business, such as bookkeeping or payroll software subscriptions.
17. Rent or Lease
What it covers: Costs paid for anything you rent for your business such as, studio, office space or co-working space, event space, equipment rental, or storage space.
18. Travel Related Expenses
What it covers: Flights, hotels, taxis or ride-sharing, on-the-go internet expenses (such as mobile hotspots or flight/hotel internet for work purposes), and food are deductible business expenses as long as they're for actual, legitimate business purposes.Generally, only 50% of the travel meal cost is deductible.
19. Licenses
What it covers: Licensing fees necessary for your business, such as fees for incorporating your business or renewal fees thereafter, professional licensing fees, trademark fees, ect.
20. Startup Costs
What it covers: Startup costs typically encompass the expenses required to launch your business before it officially opens. These may include marketing for the grand opening, salaries and wages for employees undergoing training, travel expenses to secure suppliers or customers, and consulting fees. You may be able to deduct up to $5,000 of business startup costs/organizational costs (the costs to set up a legal entity for your business, such as an LLC).
21. Supplies & Materials (Job Supplies)
What it covers: Different from office supplies, these could be things not specifically limited to the office, such as job supplies purchased for used during photography sessions.
22. Payroll
What it covers: Payroll wages paid to employees, payroll processing fees, and payroll taxes (employer portion). Employee benefits may also apply.
23. Charitable Contributions
What it covers: If you’re a C-Corp, you may be able to deduct charitable contributions made to qualifying organizations. However, if you are a sole proprietor or LLC you may only be able to deduct these on your personal taxes if you choose to itemize your deductions.
24. Repairs and Maintenance
What it covers: Costs incurred for repairs or maintenance of office equipment or space.
25. Clothing
What it covers: Work clothing specifically required for work and not suitable for ordinary wear, such as branded uniforms, costumes, or scrubs. Most clothing won’t qualify as a business expense.
26. Gifts
What it covers: $25 limit. Gifts to clients and employees are 100 percent deductible, up to $25 per person per year.
27. Child or Dependent Care
What it covers: You may be qualify for Child and Dependent Care Credit associated with child care expenses. If you paid someone to care for your child or other qualifying person so you (and your spouse if filing jointly) could work or look for work, you may be able to take the credit for child and dependent care expenses.
The information is to be used for estimation purposes only and is not a substitute for professional tax, financial, or legal advice. We recommend confirming any results by seeking the assistance of a licensed professional in your area.