23 Small-Business Tax Deductions to Know in 2025

Small-business tax deductions, or write-offs, decrease your taxable income. This can lower your business’s tax bill.

If you plan to claim deductions, keeping detailed records throughout the year is critical to avoiding IRS audits. Accounting software can help automate this process.

Here are some small-business tax deductions that can help you save money. Most apply to sole proprietorships, corporations, LLCs and partnerships. But we also recommend finding a small-business tax advisor to double-check your deductions and eligibility.

1. Startup and organizational costs

New businesses can deduct expenses they paid prior to opening. You may be able to write-off some of these costs immediately. But you'll need to amortize (or evenly spread out) others over 180 months. It depends on how much you spent.

• If you spent less than $50,000 in startup or organizational costs, respectively. You can deduct up to $5,000 in each for your first year of operation. Then, you amortize the remaining costs over 180 months.

• If you spent more than $50,000 (but less than $55,000) in either category. Those maximums phase out dollar-for-dollar. For instance, if you spent $52,000 on startup costs, you could take an immediate $3,000 deduction (5,000 - 2,000). Then, you’d amortize the remaining $49,000 (52,000 - 3,000) over 180 months.

• If your expenses exceed $55,000 in either category. You lose that immediate deduction. Instead, you need to amortize the entire expense over 180 months.

Here are some common examples of startup costs:

• Advertising.

• Market research. 

• Consulting.

• Employee training. 

Here are some common examples of organizational costs:

• Legal services for forming a corporation or LLC.  

• Accounting services.

• Document drafting.  

Typically, organizational costs don’t apply to sole proprietorships.

2. Cost of goods sold

Businesses that resell or manufacture items may be able to fully deduct their costs of goods sold. Generally, this involves valuing inventory at the beginning and end of each tax year. See our explainer on the cost of goods sold for more tips on calculating it.

Here are some examples of what can factor into cost of goods sold:

• Raw materials.

• Items that you resell.  

• Direct labor (for manufacturing products you sell). 

• Storage. 

• Packaging. 

3. Utilities

If you run your business out of a brick-and-mortar location or rented office space, you can likely deduct 100% of your utility costs.

Here are some utility expense examples:

• Gas and electricity. 

• Trash and recycling. 

• Internet and phone. 

• Water and sewage. 

If you run your business from a home office, see the home office deduction.

4. Insurance

You can fully deduct most of your business’s insurance premiums. This can apply to a wide range of insurance policies for both your business and employees.

Here are some examples of the types of insurance you can write off:

• General liability.

• Business interruption. 

• Overhead. 

• Workers’ compensation.

• Group medical for employees.

• Fire, theft or flood.  

• Business auto. 

Not every policy is eligible, though. For instance, you can’t deduct insurance premiums for loss of earnings due to sickness or disability. The same generally goes for your life insurance policy.

5. Business property rent

If you rent your business property, you can deduct 100% of your rental payments. Business owners can’t deduct these expenses if they plan to receive equity in the property, however.

If you run your business out of a home office, see the home office deduction for more information.

6. Auto expenses or mileage

If you have a car for business purposes, you can usually deduct associated expenses. These may include the cost of the car, insurance, registration and maintenance. Just make sure to track your mileage and keep records to prove business usage.

There are two ways to deduct auto expenses:

1. Calculate actual expenses. This means you deduct the actual expenses related to operating and maintaining your business vehicle. If the business purchased the vehicle during the same tax year, you might have to depreciate its value. That means you spread the deductions out over multiple years. Let’s say you use the car for business and personal purposes, though. In this case, you need to figure out what percentage of your mileage went toward business travel. Then, you multiply that percentage by the associated vehicle expenses.

2. Use standard mileage rate. The IRS’ standard mileage rate for self-employed individuals and businesses in 2025 is 70 cents per mile. For example, if you drove 2,000 miles over the tax year for work purposes, you’d deduct $1,400 (2,000 * 0.7).  

You can’t use the standard mileage rate in certain instances. For example, if you operate five or more vehicles at the same time, you’ll need to calculate your actual expenses to deduct them.

7. Equipment and machinery

If you lease equipment or machinery for your business, you may be able to fully deduct these costs. This can include anything from printers and copiers to vans and trucks.

If you own the equipment or machinery and plan to use it for more than a year, you usually need to depreciate it. See our depreciation explainer for more information on calculating this value.

However, certain types of equipment — like an office computer — may be eligible for an immediate deduction under Section 179 of the Internal Revenue Code. In other words, you don’t need to spread the deduction out over multiple years. For more details, see our article on how Section 179 works.

8. Office supplies and furniture

You can deduct 100% of your spending on office supplies — think paper, boxes, pens and staples. The same goes for office furniture, like chairs and desks.

9. Software subscriptions

You can generally deduct 100% of software subscription costs if you use them for business purposes.

Here are some examples:

• Accounting software. 

• Payroll software. 

• POS systems. 

» MORE: NerdWallet’s best business software

10. Advertising and marketing

You can deduct 100% of advertising and marketing costs as long as you prove they’re related to your business.

Here are some examples of advertising and marketing costs:

• Billboards. 

• Business cards. 

• Yellow Pages ads. 

• Freelance design work.

• Web development.  

» MORE: Best small-businesses apps

11. Business meals

You can deduct 50% of most business-related meals. This includes meeting with clients over dinner and providing meals for your employees in the office. Be sure to save your receipts and note the business purpose of the meal to maximize this deduction.

12. Travel expenses

To qualify as travel, you or your employee must exit the city or area in which you conduct business. You must also be away from your tax home for longer than a full workday.

Here are some examples of fully deductible travel expenses:

• Airfare. 

• Tolls.

• Taxis and other ground transportation. 

• Lodging.

13. Interest

You may be able to deduct up to 100% of any interest you pay on small-business loans. The business loan interest deduction can also apply to business credit card debt and interest on business vehicle loans. To qualify, you must be legally liable for the debt and have a “debtor/creditor” relationship with your lender.

Some business owners may not qualify for a full deduction. Complete Form 8990 to calculate how much you’re eligible for.

14. Bad debt

If you’ve ever lent money to an employee or vendor without receiving it back, you might be able to fully claim that amount back as “bad debt.” You just have to prove that it was business debt, rather than personal debt. You must also have included the amount in your gross income.

Here are some examples of business debts that could turn bad:

• Loans to clients, suppliers, distributors and employees.

• Credit sales to customers.

• Business loan guarantees.

15. Taxes

As strange as it sounds, you may be able to fully deduct the taxes you incur from just running your business.

Here are some examples:

• State and local income tax or state and local sales tax (but not both). 

• Real estate tax. 

• Employment tax (e.g., your share of FICA, FUTA and state unemployment taxes). 

• Excise tax.

16. Employee pay

In general, you can fully deduct what you pay your employees. This includes hourly pay, salaries and bonuses.

To qualify, the pay must be reasonable and for services rendered. However, this deduction does not apply to sole proprietors, partners and LLC members, because the IRS does not consider these individuals “employees.”

17. Employee benefits programs

You might be able to fully deduct certain employee benefit programs. These can include education assistance, dependent care assistance, life insurance, adoption assistance or qualified retirement plan accounts.

Self-employed individuals can also usually write off their own retirement plan contributions.

18. Employee gifts

Employee gifts are 100% deductible up to $25 per year, per employee, according to IRS Publication 463.

19. Contracted labor

Do you use independent contractors or freelancers? You can fully deduct the cost of hiring contracted labor. Note that you must issue Form 1099 to any contract worker receiving $600 or more from you in a given tax year.

20. Legal and professional fees

If you ever need to hire a legal or accounting professional for your business, you can generally deduct 100% of their fees. The same goes for tax prep fees. However, you can’t typically write off legal costs associated with acquiring business assets.

21. Home office

If you run your business out of your house, you can likely take the home office deduction. To qualify, you must use the office regularly and exclusively for business purposes.

Here are some expenses that may qualify as home office costs:

• Rent or mortgage payments. 

• Mortgage interest. 

• Utilities. 

• Home insurance. 

• Repairs and maintenance. 

There are two ways to claim the home office deduction:

1. The simplified method: Deduct $5 per square foot of office space up to $1,500. 

2. The regular method: Multiply the percentage of space your home office occupies by your total qualified home expenses. For instance, let’s say your monthly home expenses add up to $3,500 per month. And your home office occupies 200 square feet of your 2,000 square foot home. Since your home office takes up 10% of your home (200 / 2,000), you’d deduct $350 (3,500 * 0.1).

22. Qualified business income

This deduction lets you deduct up to 20% of your business income. However, it’s typically not available to C corporations. See our article on the qualified business income deduction for more details on who qualifies.

23. Education

Self-employed business owners may be able to deduct work-related education expenses. To qualify, the education must improve skills required for your job or be required by law.

» MORE: Explore more popular self-employment tax deductions

Where do you claim small-business tax deductions?

The tax forms you use to claim small-business tax deductions vary depending on your business’s structure. Here’s a breakdown:

• Sole proprietorships: Schedule C (Form 1040). 

• Partnerships: Form 1065. 

• C corporations:  Form 1120. 

• S corporations: Form 1120-S. 

LLC isn’t an official tax classification. Instead, the IRS typically taxes single-member LLCs as sole proprietorships and multi-member LLCs as partnerships.

» MORE: How to file LLC taxes for the first time

What’s the difference between a tax deduction and a tax credit?

Tax deductions decrease your taxable income, whereas tax credits decrease your tax bill. Both minimize how much you pay in taxes — just in different ways.

Let’s say you’re a sole proprietor with an income of $110,000. You take $7,000 in tax deductions, which brings your taxable income to $103,000. This bumps you down to a lower tax bracket (where you owe 22% vs. 24% in federal income taxes).

Without tax credits, you’d owe $22,660 (0.22 * 103,000) in federal income taxes. But let’s say you actually qualify for $2,000 in tax credits. That would bring your tax bill down to $20,660 (22,660 - 2,000).

» MORE: Find out which small-business tax credits you qualify for