Small Business Tax Deductions:

Being a small business owner comes with a lot of responsibility. You are in charge of your own hours, managing and tracking your business costs, finding clients and sometimes even manufacturing and delivering your own products. On top of all that, you also have to pay your own taxes. So, we’re here to ease some of that burden with the best deductions for small business that you can easily claim every tax season.

Table of contents

Key takeaways:...Read more

Small business tax deductions vs. tax write-offs: is there a difference?...Read more

What is a tax write-off?...Read more

Tax deductions for small businesses...Read more

Is there a list of tax deductions for small businesses?...Read more

What is small business tax?...Read more

What are tax deductible expenses?...Read more

How to take the home office tax deduction?...Read more

What are some creative tax deductions for small business?...Read more

Does the IRS have a tax deductions list?...Read more

Key takeaways:

Small business tax deductions are expenses that are ordinary and necessary to your business.
Business deductions can reduce self-employment taxes.
You can write off tax deductible expenses on Schedule C.

Small business tax deductions vs. tax write-offs: is there a difference?

Small business tax deductions are usually reserved for sole proprietors who are the sole owner of their business and are responsible for paying their own taxes using Form 1040 and Schedule C. These individuals can also work as independent contractors, in which case, they will receive a 1099-NEC form showing their income, which they can use to fill out the above forms. Before we go any further, it's important to highlight that tax deductions and tax write-offs are the same thing. There is no real difference between the two, so we will be using both terms interchangeably. All self-employed individuals have to pay taxes if their earnings meet the threshold set by the IRS. To make things easier, you can always use our free self-employment tax calculator to figure out how much you owe.

What is a tax write-off?

A tax write-off is a business-related or personal expense that can be used to reduce your taxable income. So if you run a mobile hair salon, you can potentially write off, or deduct the cost of gas you purchased to drive to client appointments. Tax write-offs are especially useful for small businesses in helping lower the amount of their income that is subject to self-employment tax and income tax. So keeping track of these tax deductible expenses for small business can have a significant impact on your taxes if you work for yourself. Luckily, with an app like FlyFin, tracking tax deductions for small businesses has never been easier to do. Simply link your expenses to let AI scan your expenses and find every possible deduction. Those deductions can then funnel into your tax filing, which our CPA team will prepare and file for you. You can also reach out to a team of tax experts who provide unlimited tax support on the app, including helping you understand small business tax and how to keep your tax bill as low as possible.

Tax deductions for small businesses

What are tax deductible expenses? As a small business owner, you are allowed to claim certain expenses as tax deductions (or tax write-offs) provided they are directly related to running your business or are personal expenses that affect your business. These are things like business insurance or health insurance. This doesn’t mean you should be looking for more ways to spend money on your business just to try and get more deductions. If you deduct an expense that the IRS doesn’t classify as a legal tax write-off, you might get questions when you file your tax return. The standard deduction and itemized deductions are the two ways to claim small business tax deductions, and the benefits of standard vs. itemized is a crucial question to answer when filing your taxes.

This deduction is for personal expenses and you can claim this if you think your personal expenses for the year do not exceed your allotted amount. These personal expenses can refer to any charitable donations, property taxes, or and/or medical expenses. If you choose to itemize, you will be required to fill out Schedule A. The IRS also allows for individuals to deduct their business expenses on top of this standard deduction, but you will need to itemize your business deductions to claim this. Itemizing your business expenses involves classifying specific expenses as integral to your business because they helped you earn income. This requires meticulous record keeping and is often subject to IRS guidelines in terms of how much you are allowed to deduct per category of expense. So if you want to write off your business expenses, you should fill out Schedule C. Let’s use our previous example again. Your mobile hair salon brought $30,000 in income. You are filing as a single individual and decide to take the standard deduction offered by the IRS so your taxable income comes down to $15,400. You must pay 15.3% self-employment tax on your taxable income, but you can also deduct the tax-deductible items for small business (by itemizing them and filling out Schedule C) that you incurred throughout the year and bring your taxable income down further. This also applies to businesses that are an S corp, sole proprietor, partnership or LLC, which are considered "pass through" entities, where the individuals or business partners are responsible for paying the small business tax associated with their business.

Is there a list of tax deductions for small businesses?

Yes! The IRS groups tax write-offs by category to make it easier for individuals to find specific deductions. Below are a few of the most common small business tax deductions that you can take advantage of.

Being organized and keeping track of all your expenses throughout the year is a good practice if you’re looking to maximize your deductions. And if you’re worried about starting your own business because you don’t want to pay a lot of taxes or are worried about how tax write-offs work, hopefully this has convinced you to give it a go!

What is small business tax?

Small business tax is the taxes you pay on your business income, and they can be a bit overwhelming if you're just starting out. Depending on your structure, like if you're a sole proprietor, LLC, or S-corp, your small business tax obligations may vary. But one thing you can do to make this easier is to keep track of your deductions, which lower your taxable income. For example, keeping a detailed tax deductions list is helpful, especially with common write-offs like office supplies, business travel, and advertising expenses. A tax write-off is simply any expense that can reduce your total taxable income. If you're driving for business purposes, for instance, you can write off mileage or maintenance costs. The more deductions you track, the less you'll owe in taxes.

What are tax deductible expenses?

Tax-deductible expenses are those that you can subtract from your business income to reduce your tax bill. For example, if you work from home, you might qualify for a home office tax deduction, which allows you to write off a portion of your rent or mortgage, utilities, and internet expenses. Other common tax write-offs include business travel, advertising costs, and employee wages. Let’s say you have a business lunch—if the meeting is directly related to your work, you can deduct 50% of the meal’s cost. Another example could be purchasing a new computer for your business; that would count as a deductible business expense. By keeping track of these deductions, you’ll save a lot on your taxes over time.

How to take the home office tax deduction?

Taking the home office tax deduction is a great way to reduce your taxable income if you use a portion of your home exclusively for your business. To qualify, your home office must be your principal place of business, and you need to use it regularly. For example, let’s say you dedicate a room in your house to running your online business. You can deduct a percentage of your rent, mortgage interest, utilities, and even home repairs based on the size of the office relative to your home. The IRS offers two methods for claiming the home office tax deduction: the simplified method, where you deduct $5 per square foot of your office, up to 300 square feet, or the actual expense method, where you calculate actual costs. Knowing which tax deductions for small business you qualify for can help reduce your tax bill significantly.

What are some creative tax deductions for small business?

Finding creative tax deductions for small business can significantly reduce what you owe in taxes. Many small business owners are surprised to learn how much they can write off. For example, you can deduct professional development costs like workshops, classes, or certifications that improve your skills. Let’s say you run a graphic design business and enroll in an advanced design course; that cost is tax-deductible. Another often overlooked tax deduction for small business is business-related entertainment. If you take a client out to lunch or attend an event together for business purposes, a portion of those costs can be written off. Even the costs of throwing a small event for clients or partners could be partially deductible. You can also get creative with home office expenses. If you work from home and need to upgrade your workspace—like buying new furniture, lighting, or even plants—those can all qualify as business expenses. Another idea is to deduct personal items that you use for business. For example, if you drive your personal car for work, track your mileage, and deduct the business portion of your auto expenses. It’s always worth speaking to a tax professional to uncover more potential deductions and maximize the savings for your small business tax situation. Staying organized and tracking these expenses throughout the year can really pay off when it’s time to file your taxes.

Does the IRS have a tax deductions list?

The IRS provides a comprehensive tax deductions list for small businesses, outlining various tax deductible expenses for small business owners. Common deductions include rent, utilities, office supplies, business insurance and wages paid to employees. For instance, if you rent office space or a storefront, you can deduct those costs. Utilities like electricity, water, and internet services that are used for business operations are also eligible. Office supplies, such as paper, pens, computers, and software, can be written off as well. Marketing and advertising expenses are another area where you can save. Whether you invest in online ads, print marketing, or even hire a designer to create a logo, those costs can all be deducted. Let’s say you run Facebook or Google Ads to promote your business—those expenses are deductible and can reduce your taxable income. Business travel is another common deduction, including flights, hotel stays, and meals while traveling for work. Even services you use to run your business, like paying an accountant or attorney for professional advice, can be added to your tax write-offs. The key is to stay organized and keep receipts for everything. By carefully tracking and reporting these expenses, you can lower your taxable income and potentially owe less when tax season rolls around.

Tax Write-Offs

Self-employed individuals can use tax write-offs to lower taxes. These itemized deductions should be reported on Schedule C.