What Business Expenses Can Small Businesses Write Off?

Small businesses can write off ordinary and necessary business expenses — costs that are common in your industry and directly tied to running your business. That covers a wide range: office space, vehicle use, professional fees, insurance, retirement contributions, and more. Most owners miss several categories simply because they haven't tracked them.

A deductible business expense has to be both ordinary — common and accepted in your industry — and necessary, meaning it's helpful and appropriate for your business. The IRS uses this two-part test for every category. If an expense passes both, it reduces your taxable income dollar for dollar.

Personal expenses don't qualify, and mixed-use expenses — things like a phone you use for both work and personal calls — can only be deducted for the business-use portion. The category that trips up most owners isn't knowing what qualifies; it's not keeping records that prove it.

Rent paid for a dedicated office, coworking membership, or commercial space is fully deductible as an ordinary operating expense under IRC Section 162. Utilities tied to that space — electricity, gas, internet — are deductible too.

Home office deductions work differently. The space must be used regularly and exclusively for business — a dedicated room qualifies, a kitchen table you occasionally work at does not. The IRS scrutinizes home office claims, so photograph your workspace and keep a log of your average hours worked there. You can calculate the deduction using either the simplified method ($5 per square foot, up to 300 square feet) or the regular method based on the actual percentage of your home used for business.

Everyday supplies — paper, pens, printer ink, postage, and broadband service — are deductible in the year you buy them. Small equipment purchases under $2,500 per item or invoice can also be deducted immediately under the IRS safe harbor de minimis rule, rather than depreciated over time.

Software subscriptions, cloud storage, and business-use apps fall here too. If you use a tool for both personal and business purposes, deduct only the business-use percentage.

If you use a vehicle for business — delivering products, visiting clients, or traveling between job sites — you can deduct those costs. You have 2 methods to choose from, and you need to pick one at the start of the tax year.

• Standard mileage rate: deduct 70 cents per business mile driven in 2025. Keep a mileage log with dates, destinations, and business purpose.
• Actual expense method: deduct the real costs of gas, oil, repairs, insurance, registration fees, and depreciation — prorated for business use.

Commuting from home to your regular office doesn't count as a business trip. But driving from your office to a client site does. A mileage-tracking app makes this easy to document throughout the year.

Business meals are 50% deductible when they're ordinary and necessary, not lavish, and directly related to your business. You or an employee must be present at the meal — client lunches, team working dinners, and meals during business travel all qualify at the 50% rate.

Keep the receipt and note the business purpose, the people present, and what was discussed. The IRS can disallow the deduction without that documentation. Entertainment expenses — sporting events, concerts, golf — are generally not deductible even if a client is present.

Fees paid to accountants, bookkeepers, attorneys, and tax professionals for business-related work are fully deductible. That includes fees for contract review, tax planning, incorporation, and regulatory compliance — as long as the work relates to your business, not personal matters.

Bank fees are deductible too: monthly account maintenance fees, wire transfer fees, and overdraft fees on your business account all qualify. For credit cards, only interest on business-specific charges is deductible — which is one more reason to keep a dedicated business credit card separate from your personal one.

Business insurance premiums are generally deductible as ordinary operating expenses. That includes general liability insurance, professional liability (errors and omissions), commercial property insurance, and workers' compensation coverage.

Health insurance is handled differently depending on your business structure. S Corporation shareholders who own more than 2% of the business can deduct health insurance premiums as an above-the-line deduction — but only if the premiums are reported on their W-2. A tax professional can help you figure out the right treatment for your situation.

Reasonable wages paid to employees for services performed are fully deductible, including salaries subject to federal income tax withholding, Social Security, and Medicare. Employer-provided fringe benefits — health insurance, life insurance up to $50,000 in coverage, and dependent care assistance up to $5,000 — are also deductible when they're excludable from employee income.

Employer contributions to qualified retirement plans — things like a SEP-IRA, SIMPLE IRA, or 401(k) — are deductible up to annual IRS limits. This is one of the most underused deductions for small business owners, and it reduces your taxable income while building long-term savings at the same time.

Advertising and marketing costs are fully deductible when they're directly tied to promoting your business. That includes paid search ads, social media advertising, website hosting and design, email marketing platforms, business cards, and branded materials.

Sponsorships and promotional events can qualify too, as long as the primary purpose is business promotion. Keep records that connect each expense to a specific campaign or business purpose — vague descriptions like "marketing" on a receipt won't hold up if the IRS takes a closer look.

Education expenses are deductible when they maintain or improve skills required in your current business — courses, workshops, trade magazine subscriptions, and professional books all qualify. The key word is "current": education that prepares you for a new career or business doesn't qualify.

Conference registration fees and related travel expenses are deductible when the event is directly related to your business. If you extend a business trip for personal travel, only the business portion of the costs is deductible.

If you're in your first year of business, you can deduct up to $5,000 in startup costs and up to $5,000 in organizational costs — provided your total startup costs don't exceed $50,000. Startup costs include market research, advertising before you opened, and training employees. Organizational costs cover the expenses of forming your LLC or corporation.

If your total startup costs exceed $50,000, the $5,000 deduction phases out dollar for dollar above that threshold. Any remaining costs that aren't deducted in year one must be amortized over 180 months starting from the month your business begins. A tax professional can help you figure out the right election for your situation.

When you buy a major asset — equipment, machinery, furniture, or a vehicle used for business — you generally can't deduct the full cost in year one. Instead, depreciation lets you spread the deduction across the asset's useful life using the Modified Accelerated Cost Recovery System (MACRS) for most tangible property.

Section 179 is the exception. It lets you deduct the full cost of qualifying property in the year you place it in service, up to $1,250,000 for tax year 2025 — reduced if your total qualifying property exceeds $3,130,000. Bonus depreciation is a separate option that lets you immediately deduct a percentage of eligible asset costs in the year placed in service. Use Form 4562 to claim depreciation and Section 179 deductions.