Benjamin Franklin said it best when he coined the phrase, “a penny saved is a penny earned.” Many business owners take years to understand that taxes are one of their biggest costs, and it doesn’t take much effort to ensure you’re saving the most possible money.
Make sure you have a regular conversation with your tax preparer to discuss these items and learn what type of taxpayer you are (read more later about different types of taxpayers). Knowing this can determine specific benefits and opportunities to save. Use this list as a discussion point and ensure the right person is helping you with your taxes.
What are tax deductions?
Tax deductions, a vital component of the income tax system, are amounts subtracted from your gross income, thereby lowering your taxable income. Essentially, they decrease the amount of income on which you’re taxed, ultimately reducing your tax liability.
Different types of deductions exist, and understanding them can be crucial in lessening your tax bill and potentially increasing your tax refund.
Above-the-line vs. below-the-line deductions
A good CPA should teach their clients to think above the line — that is, the Adjusted Gross Income (AGI) line. The AGI is the number in the bottom right-hand corner on the front page of any tax return, and it’s essentially the base income on which you are taxed. By “thinking above the line,” you can deduct business expenses upfront in addition to your available below-the-line deductions.
Above-the-line deductions
These deductions happen before calculating your AGI, and they can include any personal expenses that have a business purpose. By deducting these expenses from your income, you report earning less to the government, which lessens your tax burden. Common above-the-line deductions include health insurance premiums, IRA contributions, student loan interest, health savings account contributions and educator expenses.
Below-the-line deductions
After using above-the-line deductions and calculating your adjusted gross income, you can continue to ease your tax burden with below-the-line deductions. Taxpayers have two options once they get below the line: a standard deduction or an itemized deduction.
Standard deduction
This is a blanket amount offered by the Internal Revenue Service (IRS) that most taxpayers can take advantage of. You can deduct the standard deduction total — in 2024, that’s $14,600 for single taxpayers and up to $29,900 for a married couple filing jointly — from your AGI to lower your tax burden. If your finances are relatively straightforward and limited, a standard deduction will be most beneficial.
Itemized deduction
If you’re spending lots of money on things like mortgage interest, medical expenses, state taxes, property taxes and charitable giving, your expenses might exceed those of a standard deduction. In that case, you can itemize your deductions to save even more money. Consult a CPA or tax professional to ensure you’re submitting truthful returns, but taking advantage of itemized deductions can save you thousands of dollars annually.
77 possible tax deductions
Consider this list of more than 70 possible tax deductions for business owners. It’s just a start, and not every one of these items is always a viable deduction. But it’s a jumping-off point to begin a discussion with your tax professional.
- Accounting fees: Expenses for services tax professionals provide, such as a Certified Public Accountant (CPA) or tax software, can be deducted. This includes preparing business tax forms, financial auditing and business advice.
- Advertising: Any costs for advertising your business and its services/products are tax-deductible. This includes traditional marketing channels and digital advertising, such as social media promotions, working with local influencers and maintaining your business website.
- Amortization: You can save money on business-related items that have depreciated in value over the past tax year, with a max deduction of $1.16 million.
- Auto expenses: If you use a vehicle for business purposes, you can deduct related expenses. This could be either actual car expenses, including gasoline, car maintenance and depreciation or the standard mileage rate set by the IRS.
- Banking fees: These could include fees for maintaining your business banking accounts, ATM fees and credit card fees.
- Board meetings: The cost of board meetings can be written off as a business expense. This includes any travel expenses related to attending board meetings and, in some cases, meals provided during meetings.
- Building repairs and maintenance: Routine maintenance — not big makeovers or renovations — can be deducted if the costs fall below $10,000 and the repairs keep your business property “in a normal efficient operating condition.”
- Business travel: You can deduct 22 cents per mile in addition to lodging and airfare.
- Business association membership dues
- Charitable deductions made for a business purpose: If your business makes charitable contributions to nonprofit organizations, these are generally deductible. However, specific rules and limits exist for deducting charitable donations, such as a ceiling based on your business’s net income.
- Children on payroll: If you run a company and hire your child to work, those payments are subject to income tax withholding and not to social security and Medicare taxes if the child is a minor.
- Cleaning/janitorial services
- Cameras
- Collection expenses
- Commissions to affiliates
- Computers and tech supplies
- Consulting fees
- Continuing education for yourself to maintain licensing and improve skills: As a business owner, you can deduct education expenses to maintain or improve skills necessary for your business. Similarly, if you pay for your employees’ training and education related to their job, these costs are deductible.
- Conventions and trade shows
- Costs of goods sold
- Credit card convenience fees
- Depreciation: If your business purchases property like buildings, equipment or vehicles, you can’t deduct the cost in the year you bought them, but you can depreciate them over their useful life, with a max deduction of $1.16 million.
- Dining and office food
- Drones: You can deduct equipment costs when drones are used for business-related tasks, such as aerial photos or recording videos for marketing materials.
- Education and training for employees
- Equipment
- Exhibits for publicity
- Franchise fees
- Freight or shipping costs: You can deduct shipping expenses when sending some materials between work locations.
- Furniture or fixtures
- Gifts for customers: You can deduct up to $25 for each business-related gift.
- Group insurance
- Health insurance: If you’re self-employed and pay for your own health insurance, you may be able to deduct your insurance premiums. This also extends to your family members’ premiums. Additionally, if you offer health insurance to your employees, these costs are deductible.
- Equipment repairs
- Health reimbursement arrangement
- Health savings account
- Home office: If you use part of your home exclusively for your business, you may qualify for a home office deduction. This includes a portion of your rent or mortgage, utilities and home insurance. The standard deduction is $5 per square foot of your home office, with a maximum of 300 square feet.
- Interest: Some interest — including home mortgage and investment interest — can be claimed as a deduction on your annual taxes. To claim a home mortgage interest deduction, it must be your first or second home, and the debt must total less than $1 million or $750,000 (for joint filers), depending on when you purchased the home.
- Internet hosting and services
- Investment advice and fees
- Legal fees: In the normal course of doing business, you may incur legal fees. These costs are usually deductible, but specific cases like acquiring business assets or defending business claims require special treatment under the tax law.
- Leased vehicle or equipment: If you lease a vehicle, equipment or even software for your business use, you can typically deduct the lease payments. Certain tax rules might apply if your lease includes an option to purchase.
- License fees: Any costs for business licenses, permits or regulatory fees are tax-deductible.
- Losses due to theft: Theft losses from income-producing property are tax-deductible. However, the timing and amount of the deduction are governed by specific IRS rules, so consult a tax professional or tax law guide.
- Materials: The cost of raw materials and supplies necessary for running your business are tax-deductible. This includes things like office supplies, fuel and other non-inventory property.
- Maintenance and janitorial: Expenses related to maintaining and cleaning your business premises are deductible. This can include both in-house staff costs and external janitorial services.
- Mortgage interest on business property: If your business owns real estate and carries a mortgage, the mortgage interest is a deductible business expense.
- Moving: If you relocate your business, moving costs are typically deductible. These could range from moving equipment and furniture to costs associated with establishing your new business location.
- Newspapers and magazines: Subscriptions to trade or professional publications that inform you about your industry are deductible.
- Office supplies and expenses
- Outside services
- Payroll taxes for employees, including Social Security, Medicare taxes and unemployment taxes: If you have employees, you’re required to withhold certain taxes from their wages and pay them to the government. These taxes, including Social Security (12.4% tax rate, split between employer and employee), Medicare taxes (2.9% split) and unemployment taxes, are deductible business expenses. Social Security has a wage base limit of $168,600 for filing in 2025.
- Parking and tolls: Any parking fees and tolls related to business travel can be deducted. These expenses should be separated and documented if they are lumped in with general auto expenses.
- Pass-through 199A deduction: This is a tax break for small business owners, allowing them to deduct up to 20% of their qualified business income, with a threshold of $383,900 of taxable income for joint filers. It applies to “pass-through” entities like S corporations, LLCs, partnerships and sole proprietorships.
- Pension plans: Your business’ contributions to employees’ pension plans are usually deductible. Remember that retirement plans, such as a 401(k) or a Simplified Employee Pension (SEP) IRA, are also included in this category.
- Postage: Basic as it may seem, postage is often an overlooked deduction. Any costs related to mailing items for your business are deductible.
- Prizes for contests
- Real-estate-related expenses: In addition to mortgage interest, other real-estate-related expenses, such as property taxes, are also deductible. However, local taxes, like those on personal property, should be separated.
- Rebates on sales
- Rent: Rent on business properties is fully deductible. If your business is home-based, a portion of your home’s rent may be deductible as a home office expense.
- Research and development: Businesses often overlook the R&D tax credit, assuming it’s only for large companies or certain industries. However, many small businesses developing new products or software may qualify for this credit.
- Rental property
- Retirement plans: Contributions to retirement accounts, such as a Simplified Employee Pension (SEP) IRA or a 401(k) plan for you and your employees, are typically deductible. If you are not covered by a retirement plan through work, you can deduct the full amount of your personal IRA contribution, depending on your filing status and income.
- Royalties: If your business pays royalties for things like franchising rights or intellectual property, these payments are typically deductible.
- Safe deposit box: The cost of a safe deposit box can be deductible as long as it’s not used to hold jewelry or other personal items.
- Safe
- Spouse on payroll
- Social media advertising: As digital marketing grows, the costs associated with social media advertising have become a significant business expense and are fully deductible. You cannot deduct costs that seek to influence legislation, such as lobbying campaigns or advertising in favor of a political candidate.
- Software and online services
- Storage rental
- Subcontractors
- Taxes (personal and real property)
- Telephone: A telephone line used exclusively for business is deductible.
- Utilities
- Video equipment for business YouTube channel
- Website design: The costs of designing and maintaining your business website are tax-deductible. These can include web hosting fees, design costs and the purchase of a domain name.
- Workers’ compensation insurance
What are the different types of taxpayers?
The U.S. tax system recognizes several types of taxpayers, each with its unique circumstances and potential tax benefits. Understanding these categories is essential for properly managing tax liability and taking advantage of available tax breaks.
Individuals
These are the most common taxpayers, often earning income from wages, salaries and tips. They might also have investment income, such as interest, dividends and capital gains. This group should even include winnings from gambling, which are considered taxable income. Any gambling losses can be itemized as deductions to offset those winnings.
Individual taxpayers can use standard or itemized deductions and may be eligible for tax credits such as the Earned Income Tax Credit or the Lifetime Learning Credit. These deductions and credits can considerably reduce their federal income tax liability.
Self-employed
Self-employed taxpayers run their businesses. They could be freelancers, contractors, small business owners, or individuals making money from a side hustle. In addition to standard or itemized deductions, they can access business deductions that lower their taxable income.
These include business travel expenses, home office deductions and equipment costs. They also pay self-employment tax, which covers Social Security and Medicare taxes, but half of this amount is deductible. Furthermore, if they pay for their own health insurance premiums, these costs can also be deducted.
Homeowners
Homeowners may be eligible for deductions that can significantly lower their taxable income. These include deductions for mortgage interest and real estate taxes.
Homeowners in states with high sales tax rates might find deducting their sales taxes more beneficial than state income tax. They may also be eligible for expense deductions for certain energy-efficient home improvements.
Retirees
Individuals who are retired have unique tax considerations. Depending on their income level, some Social Security benefits may be taxable.
Retirees can also deduct medical expenses exceeding a certain percentage of their adjusted gross income, which could include health insurance premiums. Additionally, they may be eligible for tax credits that assist with dependent care expenses.
Students
Students or their parents can be eligible for several education-related tax benefits. These may include the American Opportunity Credit or the Lifetime Learning Credit, which can significantly reduce federal income tax liability.
Student loan interest can also be tax-deductible, effectively lowering the overall expense of education.
Start saving on your taxes
Surprisingly, there isn’t some master list included in the Internal Revenue Code or provided by the Internal Revenue Service. There is simply the tax principle, set forth in Code Section 62, which states that a valid write-off is any expense incurred in producing income. Each deduction then has its own rules.
Seasoned business owners have become proficient over the years at keeping good records and realizing when expenses have a legitimate business purpose. For some, this thought process becomes so ingrained that it becomes almost impossible to buy something without first considering a tax purpose for that item or service.
In sum, try to track every single expense related to your business and comb over them with your CPA at the end of the year to ensure you only take legitimate deductions. Good record-keeping and thoughtful consideration will minimize your risk of an audit if the IRS ever comes knocking.
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