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Top Tax Deductions Every Small Business Owner Should Know

For small business owners, one of the best ways to reduce your tax liability and keep more money in your pockets is by taking advantage of tax deductions. Whether you’re just starting out or have been in business for years, understanding what you can deduct is crucial to maximizing your savings. Below are some of the most important tax deductions every small business owner should know:

 

1. Home Office Deduction

If you run your business from home, you may be eligible for home office deductions. The IRS allows you to deduct a portion of your home expenses if part of your home is regularly and exclusively used for business purposes.

What can you deduct?

  • Rent or mortgage interest
  • Property taxes
  • Utilities
  • Home insurance
  • Home repairs related to your business space

 

Key Tip: You don’t need a separate building. As long as there is a designated business space, you can qualify. Be sure to track square footage and ensure your space meets IRS requirements.

 

2. Business Mileage, Vehicle, and Travel Expenses

If you use your car for business purposes, you can deduct either your actual vehicle expenses or use the standard mileage rate. The IRS updates the mileage rate regularly, and for 2025, it is currently set at 70 cents per mile.

What can you deduct? (if you choose actual expenses)

  • Gas, maintenance, and repairs
  • Parking fees and tolls
  • Depreciation on your vehicle

 

Key Tip: Be meticulous about logging your business mileage either through a tracking app or a detailed logbook. Mixing business and personal use can complicate things during tax season.

For business travel, you can also deduct expenses such as transportation, lodging, meals, and more.

What can you deduct?

  • Airfare, train, or bus tickets
  • Hotel stays
  • Business meals (50% deductible)
  • Car rentals and other transportation costs
  • Taxis, rideshare services, and other public transportation costs

 

Key Tip: Keep a detailed record of your trip, including its purpose, dates, and receipts. Mixing personal travel expenses with business expenses can disqualify deductions.

 

3. Office Supplies and Equipment

The IRS allows small business owners to deduct the cost of office supplies, equipment, and technology necessary for daily operations.

What can you deduct?

  • Office supplies
  • Computer equipment
  • Phones and internet costs
  • Furniture, such as desks and chairs

 

Key Tip: Items like computers and basic office supplies are typically deductible in full the year they are purchased, but some items may need to be depreciated over time.

4. Employee Wages, Contractor Payments, and Professional Services

Paying employees and independent contractors is a necessary business expense, and these wages are fully deductible. Similarly, fees paid to professionals like accountants or consultants are also deductible.

What can you deduct?

  • Salaries and wages
  • Bonuses and commissions
  • Employee benefits (e.g., health insurance, retirement contributions)
  • Payments to independent contractors

 

Key Tip: File the correct tax forms for employees (W-2) and contractors (1099) to avoid penalties. Keep detailed records of all payments made.

 

5. Marketing and Advertising Costs

Promoting your business is essential, and the IRS allows deductions for many marketing and advertising expenses.

What can you deduct?

  • Digital ads (e.g., Google, Meta)
  • Website development and hosting fees
  • Physical marketing materials (e.g., business cards, brochures)
  • Sponsorship fees for events

 

Key Tip: If the expense is directly related to promoting your business, it’s likely deductible. Keep receipts and contracts for proof.

 

6. Insurance Premiums

Running a business often requires purchasing multiple types of insurance, from general liability to workers’ compensation. Fortunately, these premiums are deductible as business expenses.

What can you deduct?

  • Business liability insurance
  • Professional liability insurance
  • Workers’ compensation insurance
  • Health insurance premiums

 

Key Tip: If you are self-employed and pay health insurance premiums for yourself and your family, you may be able to deduct those premiums even if you don’t itemize deductions.

 

How Hylen Can Help

Navigating tax deductions can be complicated, but understanding what you can and can’t deduct is essential for your business’s financial health. By keeping detailed records and consulting with a tax professional, you can save money and reduce your taxable income.

At Hylen CPA, we specialize in helping small business owners optimize their tax strategies. Contact us today for a consultation and let us help you put more money back into your pockets.

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