Small business owners, when tax season rolls around, it’s common to wonder: Is this deductible or not? The answer depends on how the expense is used and whether it truly supports your business. Understanding common tax deductions (and the limits around them) can help you reduce your tax bill while staying compliant. Here’s a practical breakdown of deductions small business owners frequently ask about.
What Makes an Expense Deductible?
In general, the IRS allows deductions for expenses that are ordinary and necessary for your business. Ordinary means that it is common and accepted in your industry. Necessary means that it is helpful and appropriate for running your business. If an expense is partly personal and partly business, only the business portion is deductible.
Common Deductible Expenses for Small Business Owners
Home Office: Often Deductible
If you use part of your home regularly and exclusively for business, you may be able to deduct a portion of: Rent or mortgage interest, utilities and internet, home insurance, and/or repairs related to the office space. This deduction is commonly missed due to uncertainty, but it can be valuable when used correctly.
Internet and Phone: Partially Deductible
Business-only phone or internet lines are typically fully deductible. Personal plans used for business can be deducted based on the business-use percentage. Keeping a reasonable estimate or usage log can help support this deduction.
Office Supplies, Equipment, and Software: Deductible
Everyday items needed to operate your business are generally deductible, including office supplies; computers, printers, and equipment; accounting, payroll, and project management software; and subscriptions and cloud-based tools. Don’t overlook small recurring expenses. They add up over the year.
Professional Services: Deductible
Fees paid to professionals who support your business are deductible, such as bookkeepers and accountants, attorneys, and consultants or business coaches. These expenses often provide both operational value and tax savings.
Education and Training: Usually Deductible
Education expenses may be deductible if they help you maintain or improve skills related to your existing business. Examples include industry courses or certifications, workshops and webinars, and professional memberships. Education that prepares you for a new line of work is generally not deductible.
Marketing and Advertising: Deductible
Promoting your business is a normal cost of doing business. Common deductible expenses include website design, hosting, and maintenance; branding and graphic design; online and social media advertising; and printed marketing materials and signage.
Business Meals: Sometimes Deductible
Business meals may be partially deductible when they involve a client, customer, or business discussion and if they are not lavish or excessive. Meals with family or friends, even if business is casually discussed, are generally not deductible.
Travel Expenses: Depends
Business-related travel may be deductible, including transportation, lodging, and meals while traveling.
If personal travel is mixed with business, expenses must be carefully allocated and documented.
Common Non-Deductible or Limited Expenses
Clothing: Usually Not Deductible
Everyday clothing, even if purchased specifically for work, is typically not deductible unless it Is required for your job and is not suitable for everyday wear (such as uniforms or protective gear).
Personal Expenses: Not Deductible
Personal expenses are not deductible, including groceries and household items, childcare, and personal fitness, wellness, or grooming expenses. Keeping business and personal finances separate is essential.
Commuting Costs: Not Deductible
Travel from home to a regular place of business is considered commuting and is not deductible. However, travel between business locations during the workday may qualify.
Why Clean Bookkeeping Matters
Knowing what’s deductible is only part of the equation; accurate bookkeeping is what supports those deductions. Proper categorization, saved receipts, and regular financial reviews help ensure you’re maximizing deductions while staying audit-ready.
Final Thoughts
Small business owners often either miss deductions they’re entitled to or worry about claiming too much. The goal is to strike the right balance: claim legitimate deductions with confidence and clarity. If you’re unsure whether an expense is deductible or want to make sure your books are organized and accurate, a bookkeeping review can provide peace of mind before you file taxes. Clear books lead to smarter tax decisions and fewer surprises.
