20 Tax Deductions Every Small Business Owner Should Know
Unlock hidden savings and maximize profits with these 20 essential tax deductions every small business owner needs to know!
- Alyana Aguja
- 6 min read
Operating a small business is full of costs, but savvy tax deductions can save you thousands and leave more cash in your wallet. From home office deductions to travel, advertising, and even unpaid bills, understanding what you can deduct legally can make a significant impact on your bottom line. Whether you’re an independent contractor, entrepreneur, or storefront business owner, learning these 20 must-know tax breaks will help you lower taxable income and build your business smarter!
1. Home Office Deduction
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Dedicating a section of your home solely for business purposes can deduct a part of rent or mortgage, utilities, and even maintenance expenses. The IRS provides a simplified option of $5 per square foot to a maximum of 300 square feet. If you’re a consultant, freelancer, or operating an online store from home, this deduction is a lifesaver.
2. Business Mileage
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Record your mileage if your car is used for business because the IRS gives you a standard mileage rate deduction (for example, 67 cents per mile in 2024). For example, if you drove 10,000 miles on business in one year, that’s a $6,700 deduction! Make a mileage log with dates, places, and purpose to avoid IRS hassles.
3. Office Supplies & Equipment
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Printers, paper, pens, and staplers are small expenses that can add up and are all deductible. High-ticket items such as computers and desks can be depreciated or fully deducted. For example, if you invested in a MacBook Pro for your graphic design company, that’s an allowable write-off.
4. Startup Costs
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Did you invest money to start your business? The IRS allows you to deduct up to $5,000 in startup costs, such as attorney fees, market studies, and branding. You can deduct the full amount if you spent $3,000 to file an LLC and hire an attorney.
5. Advertising & Marketing
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Facebook advertising, Google advertising, business cards, website hosting—any cost that advertises your business is deductible. If you operate a bakery and invest $1,000 in Instagram ads to get local customers at your door, that’s a complete write-off. Even influencer deals and email marketing platforms qualify!
6. Business Insurance
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These are deductible costs if you carry general liability, cyber liability, or even workers’ comp. If you pay $2,500 a year for professional liability insurance as a consultant, that’s a flat deduction. Even business equipment or inventory coverage counts.
7. Meals (50% Deductible)
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When you take a client out for coffee or dinner, you can deduct 50% of the bill—just keep the receipt and note the business purpose. If you close a $10,000 deal over a $100 sushi dinner, that meal cost becomes a tax break. Lavish meals or personal dining won’t qualify, so keep it business-related!
8. Travel Expenses
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Flights, hotels, rental vehicles, and even Uber rides for business travel are 100% deductible. For instance, if you go to an industry conference in Las Vegas and spend $1,500 on travel and accommodations, that whole amount is deductible. Just make sure your trip has a definite business purpose!
9. Retirement Contributions
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Small business employers can deduct amounts contributed to SEP IRAs, SIMPLE IRAs, or individual 401(k)s. For example, if you contribute $10,000 to your personal 401(k), you will have $10,000 less income to be taxed. This helps reduce taxes while planning your financial future.
10. Professional Development & Education
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Courses, books, seminars, and certifications on your business can be written off. If you’re a photographer and spend $500 on a masterclass on lighting, you can write off that expense. Even Udemy or Coursera online courses!
11. Legal & Accounting Fees
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Hiring a tax preparer, attorney, or CPA is an outright deduction. If you’re paying $3,000 per year for tax filing and bookkeeping, that’s a flat write-off. Even lawyer fees for contract review qualify.
12. Health Insurance Premiums
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If you’re self-employed and purchase health insurance, premiums can be deducted. A business owner paying $600 monthly for health insurance can deduct $7,200 annually. This can be done even with a family plan covering your spouse and children.
13. Internet & Phone Bills
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You can deduct a percentage of the cost if you’re using the internet and phone for business. If your internet connection costs $100 per month and you use it 70% for business purposes, you can deduct $70 monthly. Even a second phone line devoted entirely to business is 100% deductible.
14. Software & Subscriptions
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Monthly fees for software like QuickBooks, Adobe Creative Cloud, or Shopify are tax-deductible. If you’re a freelance graphic designer who spends $50/month on Adobe programs, that’s $600 less on your taxable income. Even business apps and cloud storage plans are eligible.
15. Wages of Employee & Contractor
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Salaries, wages, and even payments to 1099 contractors are all deductible. If you pay a virtual assistant $20,000 annually, that’s $20,000 less of taxable income. Just be sure to provide legitimate tax forms (W-2s or 1099s).
16. Inventory Costs
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Raw materials, shipping, and storage are deductible if you’re selling tangible products. An owner of a clothing brand who pays $30,000 for fabric and production can deduct that. Keep receipts and monitor inventory costs diligently.
17. Office or Retail Space Rent
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The rent is tax-deductible each month if you lease an office, store, or coworking space. For example, a boutique owner’s $3,000 monthly rent can be deducted by $36,000 annually. Even WeWork-style coworking memberships qualify as a business expense.
18. Utilities for Business Premises
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Tax deductions include electricity, water, heat, and even business security systems for your premises. If you own a bakery and spend $500/month on utilities, that’s $6,000 less of taxable income. Like rent, utilities have to be solely for business purposes.
19. Bad Debts
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If a customer does not pay an invoice, you can claim it as a bad debt loss. A marketing agency that bills a customer $5,000 but never receives payment can claim the unpaid balance. This is true for goods sold but not paid for either.
20. Charitable Contributions
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If your company gives cash, goods, or services to an eligible charity, it’s deductible. A restaurant that gives a homeless shelter $1,000 worth of food can deduct that. Just be sure to obtain a receipt from the nonprofit!