5 Business Tax Deductions You Might Be Missing
Every dollar counts when you're running a business. The good news? There are legitimate, IRS-approved deductions that many business owners overlook. Here are five common deductions that you may be overlooking:
1. Home Office Deduction
Deductible examples:
A dedicated room used exclusively and regularly for administrative tasks, bookkeeping, client calls.
Square footage method: a percentage of your home expenses (rent/mortgage interest, utilities, homeowners insurance, property taxes) proportional to office square footage.
Actual-expense method: portion of specific expenses like painting, repairs, or depreciation attributable to the office area.
Home-office-related internet and phone usage: the business portion of a line dedicated to the office.
2. Vehicle and Mileage Expenses
Deductible examples:
Standard mileage deduction: multiply business miles driven by the IRS standard mileage rate (track business mileage in a log).
Actual auto expenses: business share of gas, oil changes, repairs, insurance, registration, lease payments, depreciation (if using vehicle for business).
Parking and tolls incurred while conducting business.
Travel between multiple client sites or to a temporary work location (commuting to your regular place of business is generally not deductible).
3. Depreciation and Section 179 Expensing
Deductible examples:
Depreciation of business equipment (computers, furniture, machinery) over its useful life.
Section 179 election: expense the entire cost of qualifying property (subject to limits) in the year placed in service instead of depreciating over several years.
Bonus depreciation for qualified property placed in service (subject to current tax law).
Improvements to a leased business space that qualify as qualified leasehold or improvement property.
4. Qualified Business Income (QBI) Deduction
Deductible examples:
Up to 20% deduction of qualified business income for eligible pass-through entities (sole proprietors, partnerships, S corporations) subject to income thresholds and other limitations.
Includes net income from trade or business activities, reduced by reasonable wages and guaranteed payments.
Limitations and phase-outs apply based on taxable income, type of business (specified service trades/professions), and W-2 wages or property basis.
Consider planning with entity structure and wage strategies to maximize the deduction.
5. Retirement Plan Contributions and Health Benefits
Deductible examples:
Employer contributions to retirement plans (SEP IRA, SIMPLE IRA, 401(k), Solo 401(k)) are deductible and reduce taxable business income.
Contributions for employees to employer-sponsored plans are deductible; owner contributions also reduce self-employment tax exposure when structured properly.
Self-employed health insurance deduction: premiums paid for medical, dental, and long-term care insurance for you, your spouse, and dependents can be deductible above-the-line (subject to rules).
Health Savings Account (HSA) contributions (if eligible) made by the business or owner can be deductible and provide tax-advantaged savings for medical expenses.
This post is for general informational purposes and isn't tax advice. Every business is different, so consult a qualified tax professional about your specific situation. If you’d like, we can review which of these deductions might apply to your situation and what records you’ll need to support them.
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