What business expenses are tax deductible for small businesses?

Small businesses can deduct many “ordinary and necessary” expenses that are incurred in the course of running the business. According to IRS guidelines, common deductible expenses include:

• Advertising and Marketing: Money spent on advertising campaigns, marketing materials, or online ads. These costs are ordinary for promoting your business.
• Office and Business Supplies: This covers office supplies (paper, printer ink), and also expenses like computer software or subscriptions used for business. Keep receipts for any items used exclusively for the business.
• Rent or Home Office Expenses: If you rent office space, the rent is deductible. Home-based businesses can take a home office deduction (proportional to the space used exclusively for business) if they meet IRS requirements.
• Utilities and Internet/Phone: The cost of business telephone lines, internet service, and utilities for your office are deductible. For a home office, you’d deduct the business-use portion.
• Business Travel and Meals: Travel expenses for business (flights, hotels, rental cars) are deductible, as well as 50% of qualifying business meal costs (meals must be with a client or for business purposes – everyday lunches don’t count).
• Insurance Premiums: Premiums for business insurance (e.g., general liability, professional liability, property insurance) are deductible. Health insurance premiums for yourself (if you’re self-employed) may also be deductible.
• Professional Services and Fees: Fees paid to lawyers, accountants, bookkeepers, or consultants for business services can be written off.
• Depreciation of Assets: Big purchases (equipment, vehicles, machinery) that have a useful life beyond a year can be deducted over time through depreciation. This spreads the cost across the asset’s lifespan.
• Employee Wages and Benefits: Salaries, wages, and some benefits (like retirement plan contributions) are deductible business expenses.

It’s important to maintain good records and receipts for all these expenses. The IRS requires that expenses be ordinary (common in your industry) and necessary (helpful and appropriate for your business). Always consult with a tax professional or accountant to maximize your deductions and ensure compliance with the latest tax laws. By taking advantage of these deductions, small business owners can significantly reduce their taxable income and retain more capital for growth.