Owning a small business is incredibly rewarding; but, when tax season rolls around, it can sometimes be a little painful if you don’t know how to properly deduct your expenses. But, that’s why we’re here. 

Here, we’ve come up with an extensive small business tax deductions checklist for you to follow to help you save as much money as possible. From common deductions to rare ones, we’ve got you covered. 

Key Takeaways: 

• Home Office Deduction & Business Vehicle Expense: Deduct your home office space if it’s your primary business location, and track vehicle-related expenses for either actual costs or mileage.
• Office Supplies, Equipment & Employee Salaries: Supplies are fully deductible when purchased, while equipment can be depreciated. Wages, bonuses, and benefits like health insurance for employees or contractors are also deductible.
• Meals, Entertainment & Travel Expenses: Qualifying business meals are 50% deductible, while entertainment is largely no longer deductible. Business-related travel, including lodging and transportation, is deductible with proper documentation.
• Professional Services & Business Loans: Legal, accounting, and consulting fees, as well as interest paid on business loans, are fully deductible as long as the services and loans are directly related to business operations.
• Education, Training & Bad Debt Deduction: Deduct expenses for professional development related to your current business. Also, uncollectible debts from sales or services can be written off as bad debt deductions.

Small Business Tax Deductions Checklist [7 Common Expenses]

There are a handful of common small business tax deductions you should be aware of before you file. We’ve explained all of them in detail below. 

1. Home Office Deductions 

To claim a home office deduction, your home workspace must serve as your primary place of business or be regularly and exclusively used for conducting business. The space doesn’t need to be a separate room, but it should meet these criteria. 

There are two methods for calculating the deduction: the simplified method, which allows $5 per square foot (up to 300 square feet), and the actual expenses method, where you deduct a portion of your home-related expenses like mortgage interest or rent, utilities, and maintenance. 

For more information, you can explore our blog on Maximizing Home Office Tax Deductions to ensure you get the most out of this benefit.

2. Business Vehicle Expense 

Business vehicle expenses can be deducted either by tracking actual vehicle-related expenses or by using the standard mileage rate. 

The actual expenses method allows you to deduct costs such as gas, maintenance, insurance, and depreciation. 

On the other hand, the standard mileage rate, set annually by the IRS, lets you deduct a flat rate per business mile driven. 

Accurate documentation is crucial for either method, so be sure to keep a detailed log of business-related mileage and receipts for all vehicle-related expenses throughout the year.

3. Office Supplies and Equipment 

Office supplies, like stationery, software, and printer ink, qualify as business expenses and can be fully deducted in the year they are purchased. 

Larger office equipment, such as computers or furniture, often fall under depreciation rules. 

You may deduct these costs over several years, or, under Section 179, you can deduct the entire cost of the equipment in the year of purchase, depending on the value and type of equipment. 

Keeping track of all purchase receipts ensures that you can easily claim these deductions.

4. Employee Salaries and Benefits 

When it comes to your small business tax deductions, you can also deduct the full cost of employee wages, bonuses, and benefits such as health insurance premiums. 

This deduction applies whether you pay employees hourly or with a salary. If you hire independent contractors, you can also deduct payments made under 1099-MISC forms. 

It’s essential to properly classify workers as employees or contractors to avoid potential issues with the IRS. Providing competitive benefits can not only reduce tax liability but also enhance employee retention and satisfaction.

5. Business Meals and Entertainment 

The IRS allows a 50% deduction on qualifying business meals. To claim this deduction, the meal must be business-related, and you must either be present or provide the meal for employees or clients. 

Recent tax reforms have eliminated the deduction for most forms of entertainment, but meals that occur during entertainment events, such as client dinners at sports events, remain deductible at the 50% rate. Again, always document the purpose of the meal and keep receipts for proof to make this much smoother.

6. Travel Expenses 

Travel expenses, such as lodging, airfare, car rentals, and meals, qualify for deductions if they are necessary for conducting business. The IRS requires that travel be “ordinary and necessary” for your business to claim it. 

Business-related travel expenses, including transportation to and from meetings, lodging, and meals (subject to a 50% limit), are deductible as long as they are well documented. 

Keeping detailed itineraries and receipts ensures you meet the IRS requirements and prevent any issues during tax filing.

7. Professional Services 

Finally, you can deduct fees paid for professional services, including legal, accounting, and IT consulting services, as ordinary business expenses. 

These services provide the necessary expertise for keeping your business running smoothly and staying compliant with regulations. 

Whether you hire an attorney for contracts or a CPA for tax preparation, any costs associated with these professional services are fully deductible. 

Less Common Small Business Tax Deductions 

Many small business owners overlook valuable deductions that fall outside the more common categories. We understand that there are a lot of categories to remember, but even these less common deductions are key to saving you money come tax season. 

Let’s take a look at the less common small business tax deductions on our checklist. 

Interest on Business Loans 

If you’ve taken out a loan to fund business operations, you can deduct the interest paid on that loan as a business expense. 

This deduction applies whether the loan was used for startup costs, inventory purchases, or ongoing operational expenses. The key is ensuring the loan is solely for business purposes. 

Of course, make sure to keep detailed records of the loan agreement and payments made to show how the funds were used and to accurately report the interest on your taxes.

Education and Training Costs 

Continuing education for yourself and your employees can also be deductible! Even expenses for attending workshops, conferences, and seminars that directly benefit the business are eligible. The same applies to online courses or certifications that help improve professional skills. 

Keep in mind that the training must relate to maintaining or improving skills required in your current business — not for a completely new trade. Proper documentation, including receipts and course outlines, ensures you can take full advantage of this deduction.

Bad Debt Deduction 

Finally, if your business provides goods or services on credit and you’re unable to collect the money owed, you may be eligible for a bad debt deduction. 

This applies only to amounts that were included in your gross income or transactions where you sold items on credit. 

To claim this deduction, you must demonstrate that you made a reasonable effort to collect the debt, but it remains uncollectible. 

Maximizing Your Small Business Tax Deductions 

At the end of the day, understanding and utilizing the wide range of tax deductions available to small business owners like you can significantly reduce your tax liability and improve your bottom line. 

Taking the time to review your expenses and maintain accurate records throughout the year ensures that you don’t leave any money on the table when tax season arrives.

For tailored advice on maximizing your small business tax deductions and staying compliant with the latest tax regulations, contact us today. It’s time to ensure your small business has financial clarity and takes full advantage of the money it can save during tax season.