10 Valuable Small Business Tax Deductions to Know

Summary:
Business tax deductions help lower your taxable income and reduce how much you owe at tax time. It’s always smart to consult a professional, such as a CPA, to make sure you’re claiming the maximum deductions available to your small business.

Many small business owners miss out on money-saving tax deductions because they don’t track their expenses carefully or take time to categorize them correctly.

The more legitimate deductions your business can claim, the less you’ll owe in taxes. These deductions can even provide personal benefits—like lower home office costs or work trips that double as travel opportunities. The key is knowing what’s deductible and staying compliant with IRS guidelines.

Top 10 Small Business Tax Deductions You Should Use

These essential write-offs can make tax season easier and help you keep more of your hard-earned income.

1. Startup and Business Formation Costs

Expenses such as advertising, utilities, office supplies, and repairs are deductible once your business officially begins operations.

Startup costs are considered capital expenses. You can deduct up to $5,000 in your first year and spread the remaining amount evenly over 15 years.

If your business won’t turn a profit right away, it may be better to defer these deductions until you have taxable income to offset them.

2. Business Travel Expenses

You can deduct travel-related costs such as airfare, lodging, rental cars, meals, and tips if the trip is directly related to your business.

To qualify:

• The travel must be necessary for your business operations.

• It must take you away from your main work location.

• It must require rest or an overnight stay.

For a full list of eligible travel deductions, visit the IRS website.

3. Inventory

If your business buys or produces goods for resale, you can deduct the cost of inventory sold during the year. This includes:

• Raw materials and shipping fees

• Storage expenses

• Direct labor costs for production staff

• Manufacturing overhead

Track inventory at the start and end of the year to calculate your cost of goods sold accurately.

4. Professional and Legal Fees

Fees paid to lawyers, accountants, or consultants are deductible in the year they’re incurred. Business books and software that help you manage finances are also deductible.

If the service benefits your business over several years, spread the deduction over the time period you’ll receive the benefit.

5. Utilities

Utilities like water, electricity, and phone services used for business are fully deductible.
If you work from home, note that your first home landline isn’t deductible, but any additional business lines are.

Image source
ALT: Tax for home office utilities.

6. Rent for Business Property

If you lease office or retail space, your rent payments are deductible.
For home-based businesses, you may also be eligible for deductions on mortgage interest, insurance, utilities, and depreciation. See IRS Publication 587 for full details.

7. Home Office Expenses

Freelancers and small business owners can deduct up to $5 per square foot of workspace, up to 300 square feet, using the IRS simplified method.

To qualify, the space must be used regularly and exclusively for business. For example, working from your kitchen table doesn’t count, but a dedicated office space in your home does.

8. Vehicle Expenses

If you use your vehicle for business, you can deduct related expenses such as gas, maintenance, or depreciation.

Keep detailed mileage records, or use the IRS standard mileage rate (currently $0.67 per mile for 2025).
Split expenses between business and personal use based on actual mileage.

9. Charitable Contributions

Your business can claim deductions for donations of money, equipment, or goods to qualified organizations.

For partnerships, LLCs, and S corporations, the deduction passes through to your personal return.
C corporations can claim the deduction directly.

Donating old office equipment or technology is a great way to help your community while earning a tax break.

10. Employee Salaries

Employee wages, bonuses, and commissions are deductible business expenses.
This applies to all employees but not to sole proprietors or business partners since they aren’t classified as employees.

Save Thousands on Taxes With a Trusted Accounting Partner

Small business owners can also deduct certain state and local taxes in the year they’re paid. However, federal taxes paid in prior years aren’t deductible.

Working with a CPA or tax accountant ensures you don’t miss valuable deductions and helps you stay compliant with current tax laws.

At Today CFO, we help small businesses find every deduction possible and maximize their savings at tax time. Schedule a free consultation to get started.