Business Tax Deductions

Small business owners can deduct a wide range of ordinary and necessary business expenses. Maximizing deductions legally can save thousands in taxes each year.

Home Office Deduction

Two methods: Simplified method: $5 per square foot (up to 300 sq ft = $1,500 max). No depreciation recapture upon sale. Regular method: Actual expenses × business-use percentage of home. Includes mortgage interest, property taxes, utilities, insurance, repairs, depreciation. More paperwork but potentially larger deduction. Must be used exclusively and regularly as your principal place of business. No deduction for home office if you have a separate office space you don't use.

Vehicle Expenses

Two methods: Standard mileage rate: $0.70/mile (2026). Includes gas, maintenance, insurance, depreciation. Simple and usually best for high-mileage drivers. Actual expense method: Track all vehicle costs × business-use percentage. Better if you have an expensive or new vehicle and don't drive many business miles. Need mileage log for both methods. Commuting miles (home to office) are not deductible.

Section 179 & Bonus Depreciation

Section 179: Immediately deduct up to $1,220,000 (2026) of equipment, vehicles, computers, software, and machinery. Phases out when total asset purchases exceed $3,050,000. Bonus depreciation: 80% in 2026 (phasing down to 20% by 2027). Section 179 is limited to your taxable business income (can't create a loss); bonus depreciation can create a loss (up to certain limits).

Meals & Entertainment

Business meals: 50% deductible. Must be with a client, prospect, or business contact and have a clear business purpose. Document: who, what, when, where, why. Entertainment: No longer deductible (TCJA 2017 eliminated entertainment). Sports tickets, concerts, golf outings (unless a business meal accompanies). Employee meals: 100% deductible if provided for the convenience of the employer on premises. Office snacks/beverages: 100% deductible for employees.

Travel & Lodging

100% deductible if primarily for business. Must be away from your tax home overnight. Include: airfare, hotel, rental car, 50% of meals, Uber/taxi, baggage fees. Personal days mixed in: only deduct business days. Document business purpose for each day.

Health Insurance

Self-employed health insurance premiums are deductible on Form 1040 (above-the-line, not subject to SE tax). Must not be eligible for an employer-subsidized plan (including spouse's). Includes medical, dental, LTC insurance. Deduct on Schedule 1, line 17.

Other Common Deductions

Recordkeeping Best Practices