Are you leaving money on the table as a small business owner?

From rent payments to training and coursework, many business owners miss out on vital tax deductions that could save them money. This crucial knowledge can help you level up your business while improving your bottom line.

Ready to start saving money? Here are some often-overlooked tax deductions for small businesses.

1. Business Use of Your Home

If you have a dedicated home office, you can deduct a portion of rent/mortgage, utilities and homeowners’ insurance.

Example: Sarah works as a graphic design artist from a studio that takes up 5% of the square footage of her home. She can deduct 5% of the cost of her mortgage payment, electric bill and homeowners’ insurance.

2. Startup Costs

Expenses incurred before officially launching (legal fees, research, branding, etc.) can be deducted up to a certain limit.

Example: Josh is opening an online store selling handmade leather goods. Before launching his site, he spent $3,000 on marketing, website development and branding. He can claim this amount as a small business tax deduction.

3. Bank and Payment Processing Fees

Monthly bank fees, credit card processing charges and PayPal or Stripe fees are deductible.

Example: Jennifer is a consultant who accepts payments via PayPal and spends $45 every month on processing fees. She can deduct this as a business expense.

4. Education and Training

Courses, certifications, books and industry conferences can qualify if they relate to your business.

Example: Sterling is a business coach, and she decides to invest $1,500 on an in-person workshop for business coaches like her. She deducts the registration for the workshop as an expense for her business.

5. Marketing and Advertising

Website costs, social media ads, promotional materials and sponsoring local events are deductible.

Example: Marcus is a yoga instructor and studio owner who spends $300 on Instagram ads to generate interest in his classes. This cost is considered a business expense.

6. Professional Services

Fees paid to accountants, lawyers, consultants and even AI writing tools used for business purposes can be deducted.

Example: Connor is an event planner who pays a lawyer $500 to draft a contract for his clients to sign. This legal expense is considered tax deductible for his business.

7. Software and Subscriptions

Business-related apps, cloud storage and even industry-specific subscriptions (such as trade journals) qualify.

Example: Amira pays $10 each month for Dropbox storage for her hair salon’s HR and employee documents. She claims this cost as a tax deduction.

8. Bad Debts

If a customer never pays an invoice, you may be able to write it off as a bad debt expense.

Example: Lindsay’s client never pays their $3,000 invoice for her services as a freelance content creator. If she is using accrual accounting (a type of accounting in which revenue and expenses are recognized when they are earned or incurred) she can write off that $3,000 as bad debt.

9. Meals and Entertainment

Business meals are typically 50% deductible if they are directly related to business. Meals provided to employees at the workplace (for convenience of the employer) may be 100% deductible.

Example: Devon is a financial planner meeting a client for lunch at an Italian restaurant. Of the $30 he paid for his meal, $15 is deductible.

10. Gifts for Clients and Employees

You can deduct up to $25 per person per year for business-related gifts.

Example: Margot purchases gift baskets as a holiday present for each of her five employees at her custom monogramming business. Of the $60 she spends on each gift, $25 is tax deductible.

11. Mileage and Travel Expenses

If you drive for business, mileage, parking fees and even tolls are deductible. Business travel, including flights, hotels and meals, can also be written off.

Example: Noah is an elopement photographer and tracks the business miles he drives throughout the year to claim as a business expense.

12. Employee and Contractor Payments

Salaries, wages, bonuses and freelance or contractor payments are deductible.

Example: Jordan owns a home décor boutique and pays her part-time sales associate $10,000 over the course of one year, which is tax deductible.

13. Phone and Internet Bills

If you use your personal phone for business, a portion of your bill can be deducted. Business-only lines are fully deductible.

Example: Amanda’s internet use is 50% dedicated to managing orders for her home bakery, so she is able to deduct 50% of the cost of her internet bill.

14. Uniforms and Protective Gear

If your work requires a specific uniform or safety gear, you may be able to write it off under small business tax deductions.

Example: Karen owns a popular cleaning business which requires her to purchase heavy-duty aprons and gloves for her staff. The cost of these items is tax deductible.

15. Charitable Contributions

If your business donates to a registered nonprofit, it may be deductible, depending on the business structure.

Example: Priya is a personal assistant who registered her business as a single-member LLC. When she donates $250 to a local charity walk, she may be able to deduct it as a charitable contribution or a sponsorship.

Tax Deductions for Small Businesses: Who Makes the Rules?

The rules governing small business tax deductions come primarily from the Internal Revenue Service (IRS) in the U.S. The main sources include: 

1. IRS Publications and Forms

• Publication 535: Business Expenses – Covers general rules for deducting business expenses, including which costs qualify. 

• Publication 463: Travel, Gift, and Car Expenses – Details rules on travel, meals, entertainment and vehicle expenses.

• Form 1040, Schedule C – Used to report business income and expenses for sole proprietors. 

• Form 1120 or 1120-S – Used for corporate tax filings. 

2. IRS Code and Regulations

The U.S. Internal Revenue Code (IRC) Section 162 states that ordinary and necessary expenses incurred in running a business are deductible. 

• "Ordinary" means common in your industry. 

• "Necessary" means helpful and appropriate for running the business. 

Staying Organized

Want to take advantage of these deductions but feeling overwhelmed by the process? Use this quick checklist to keep track of everything you’ll need to claim these deductions as a small business owner.

Check with the Experts

While figuring out small business tax deductions can feel challenging, there’s good news – you don’t have to navigate it all alone. At Harvard & Associates, CPA, we provide expert accounting solutions tailored to your needs, helping you save time, reduce stress and maximize your financial potential. Our team of CPAs is experienced, knowledgeable and dedicated to providing financial guidance, strategic tax planning and reliable accounting solutions.  

With offices in Tallahassee, Florida and Thomasville, Georgia, Harvard & Associates can provide you with the bookkeeping, tax and financial services you need. Whether you're an individual, a small business or a growing enterprise, we're here to help. Call us at (850) 224-9008 or contact us online to start a long-term relationship with the local accounting expertise and service you expect.  

DISCLAIMER: This blog is for informational purposes only and does not constitute legal, financial or tax advice. Every business is different, and tax laws change frequently. Consult a licensed tax professional or accountant at Harvard and Associates to determine what deductions apply to your specific situation.