If you run a small business, self-employed gig, or LLC, understanding your tax deductions can save you a lot of money. The IRS allows many legitimate business expenses to be deducted, but most entrepreneurs overlook some key write-offs that could significantly lower their tax bill.

This guide covers 17 major tax deductions every business owner should know about in 2025 — and how to claim them the right way.

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What Are Business Tax Deductions?

Tax deductions reduce your taxable income by subtracting business expenses from your gross earnings. The IRS requires that these expenses be ordinary (common in your industry) and necessary (helpful and appropriate for your business).

Claiming deductions correctly helps you lower your tax burden and keeps more money in your pocket.

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17 Tax Deductions Businesses Often Overlook

1. Home Office Deduction

Use a dedicated space in your home regularly and exclusively for business? You can deduct a portion of rent or mortgage, utilities, and other related expenses.

• Simplified method: $5 per square foot, up to 300 sq ft
• Regular method: Actual expenses prorated by business-use percentage

2. Vehicle Expenses

Deduct mileage or actual vehicle costs if you use your car for business. Maintain a mileage log or use apps for accurate records.

3. Startup Costs

First-year business expenses like legal fees, advertising, and setup costs can be deducted up to $5,000.

4. Employee Wages and Payroll Taxes

All compensation paid to employees, including payroll taxes, is deductible.

5. Contractor Payments

Payments to freelancers or contractors over $600 must be reported on Form 1099-NEC and are fully deductible.

6. Self-Employment Tax Deduction

Self-employed individuals can deduct 50% of their self-employment tax (Social Security and Medicare) from their taxable income.

7. Health Insurance Premiums

If self-employed and not covered elsewhere, deduct premiums for yourself and your family.

8. Retirement Contributions

Contributions to SEP IRAs, Solo 401(k)s, and other retirement plans lower taxable income and help build retirement savings.

9. Business Meals

50% of business meal costs with clients or during travel are deductible. Keep detailed receipts.

10. Business Travel

Costs for transportation, lodging, and meals during overnight business trips are deductible.

11. Office Supplies and Equipment

Items like computers, printers, paper, and office furniture are deductible. Use Section 179 for immediate expensing of qualifying assets.

12. Software and Subscriptions

Business-related software and online subscriptions like accounting, marketing, and productivity tools are deductible.

13. Phone and Internet

Deduct the portion of phone and internet costs used for business.

14. Insurance

Premiums for business liability, malpractice, and other insurance policies count as deductible expenses.

15. Education and Training

Courses, certifications, and seminars related to your business are deductible.

16. Marketing and Advertising

Costs for advertising campaigns, website development, branding, and social media ads are deductible.

17. Professional Services

Fees paid to accountants, lawyers, consultants, and tax preparers are deductible business expenses.

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Tips for Claiming Deductions Correctly

• Keep organized records and receipts for all expenses
• Separate business and personal finances
• Use accounting software to track expenses throughout the year
• Consult a tax professional for complex deductions

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Frequently Asked Questions

Q: Can I deduct clothing for work?
Only if it’s required and not suitable for everyday wear (like uniforms or safety gear).

Q: Can I claim the home office deduction if I work at a kitchen table?
No, the space must be exclusively used for business.

Q: How do I prove business use for vehicle deductions?
Maintain a mileage log with date, purpose, and miles traveled.

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Bottom Line

Maximizing your tax deductions can significantly reduce your tax liability. Use these write-offs wisely, maintain good records, and consider working with a tax advisor to optimize your tax strategy.

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If you want personalized advice or help tracking your deductions, book a free consultation with our tax experts or download our business tax deduction checklist to get started.

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