Business Expenses You May Be Able to Deduct Key Takeaways
Knowing which Business Expenses You May Be Able to Deduct is one of the most powerful ways to lower your tax bill and keep more of your hard-earned income.
- Business Expenses You May Be Able to Deduct fall into categories like home office, travel, marketing, and supplies — each with specific IRS rules.
- Keeping organized receipts and using the right tracking tools helps you claim every deduction you’re entitled to.
- Strategic deduction planning can legally reduce your taxable income, so you pay less without hiding anything.
What Are Business Expenses You May Be Able to Deduct?
Business expenses you may be able to deduct are the ordinary and necessary costs of running your trade or business. “Ordinary” means common and accepted in your industry; “necessary” means helpful and appropriate for your business — not necessarily indispensible. The IRS lets you subtract these expenses from your gross income, which reduces the amount of tax you owe. For 2025, the standard mileage rate is 70 cents per mile, and the home office deduction can reach thousands of dollars if you qualify. For a related guide, see 10 Quick Tax Tips for Beginners.
Whether you’re a freelance graphic designer, an e‑commerce seller, or a real estate agent, understanding these deductions can save you significant money. Below, we break down 13 common deductible expenses with practical tips for claiming them correctly.
13 Business Expenses You May Be Able to Deduct This Year
1. Home Office Expenses
If you use part of your home regularly and exclusively for business, you may deduct home office expenses. The IRS offers a simplified option: $5 per square foot of qualified space, up to 300 square feet (maximum $1,500). The regular method requires tracking actual costs like mortgage interest, utilities, insurance, and repairs — multiplied by the business-use percentage of your home.
Pro tip: Take clear photos of your workspace and measure the square footage. Keep utility bills and rent receipts to support your claim.
2. Office Supplies and Equipment
Basic office supplies like pens, paper, printer ink, and postage are fully deductible in the year you buy them. Larger equipment — computers, printers, furniture — may need to be depreciated over several years unless you use the Section 179 or bonus depreciation rules.
Pro tip: Save every receipt for supplies, no matter how small. Those $10 notepad runs add up over the year.
3. Software and Subscriptions
Software subscriptions you use for your business — like QuickBooks, Adobe Creative Cloud, Zoom, or project management tools — are deductible as ordinary and necessary expenses. The IRS treats most cloud-based subscriptions as ongoing operating costs rather than capital assets.
Pro tip: Use a dedicated business credit card for subscription payments so your records stay clean. Download annual invoices for each service.
4. Marketing and Advertising Costs
Yes, marketing and advertising costs are fully deductible. This includes website hosting, social media ads, Google Ads, print ads, promotional items, and even the cost of a professional photographer for your product shots.
Pro tip: Track ad performance alongside costs — it helps you decide which campaigns to scale and which to cut, which also improves profitability.
5. Business Travel Expenses
Travel away from your tax home overnight for business purposes is deductible. You can claim airfare, hotels, rental cars, rideshares, laundry, and 50% of business meals during the trip. Keep a log of the business purpose for each day of travel.
Pro tip: Use a dedicated travel card and save all boarding passes, hotel invoices, and meeting agendas.
6. Vehicle Expenses for Business Use
If you use your car for business — driving to client meetings, picking up supplies, or making deliveries — you can deduct either the standard mileage rate (70 cents per mile in 2025) or your actual expenses (gas, insurance, repairs). Commuting between home and your regular workplace is not deductible.
Pro tip: Maintain a mileage log in a dedicated app (like MileIQ or Stride) that records date, starting point, destination, and business purpose for each trip.
7. Meals and Entertainment
Meals and entertainment expenses are partially deductible. Business meals with clients, prospects, or employees are generally 50% deductible as long as they are not lavish. Entertainment (tickets to shows, golf outings) used to be deductible but is no longer allowed under current tax law.
Pro tip: Write the business purpose and the names of people you met on the back of each meal receipt.
8. Insurance Premiums
Health insurance premiums for yourself, your spouse, and your dependents are deductible as an adjustment to income (no need to itemize). Business insurance like liability, property, professional indemnity, and worker’s comp are also deductible.
Pro tip: Pay premiums from your business account and keep the annual statements from your insurer.
9. Professional Services Fees
Fees paid to attorneys, accountants, bookkeepers, and consultants for business advice are deductible. This includes the cost of preparing your business tax return, setting up an LLC, or reviewing a contract.
Pro tip: Ask your accountant or lawyer to itemize their bills so you can clearly separate business from personal advice.
10. Bank Fees and Interest
Business bank account fees, credit card processing fees (e.g., Stripe, PayPal), and interest on business loans are deductible. Personal interest is not deductible for most taxpayers, so keep business finances separate.
Pro tip: Review your business bank statements quarterly and categorize each fee for easy deduction at tax time.
11. Education and Training
Courses, workshops, conferences, and online classes that maintain or improve skills required for your current business are deductible. For example, a freelance writer can deduct a copywriting course, but a course to become a real estate agent would be a startup cost.
Pro tip: Save certificates of completion and course invoices. If the conference includes meals, those are also 50% deductible.
12. Rent and Lease Payments
Rent for office space, storage units, coworking memberships, or equipment like copiers and vehicles is deductible. If you rent from a related party, the IRS requires the rent to be at fair market value.
Pro tip: Sign a written lease agreement and pay by check or electronic transfer so there is a clear paper trail.
13. Startup Costs
Before your business begins active operations, you can deduct up to $5,000 of startup costs (organizational and advertising costs) and amortize the rest over 180 months. Costs include market research, legal fees, and initial advertising.
Pro tip: Keep a separate folder for all pre‑opening receipts and mark them as startup costs so you don’t mix them with ongoing expenses.
Common Questions About Business Deductions
What Business Expenses May Be Tax Deductible?
Any ordinary and necessary expense directly tied to earning business income is generally business expenses tax deductible. Examples include rent, utilities, supplies, advertising, travel, insurance, and professional fees. The key is that the expense must be both common in your industry and helpful for your business.
Which Business Expenses Can Small Business Owners Deduct?
Small business owners deduct many of the same expenses as any other business: home office, equipment, vehicle costs, marketing, software, and professional services. However, certain rules differ for small businesses — for example, you may qualify for the Qualified Business Income (QBI) deduction and simplified home office deduction.
Can Freelancers Deduct Home Office Expenses?
Yes, freelancers home office expenses are deductible if the space is used regularly and exclusively for business. Under the simplified method, you can deduct $5 per square foot (max 300 sq ft). Under the regular method, you allocate a percentage of actual home costs. Freelancers working from a kitchen table should be careful — the space must be a separate area, not a shared dining table.
What Receipts Should You Keep for Business Deductions?
Receipts keep for business deductions include all documents showing date, amount, vendor, description, and business purpose. This covers paper receipts, digital invoices, bank statements, credit card records, and mileage logs. Keep them for at least three years after filing (six if you underreported income by more than 25%).
Are Marketing and Advertising Costs Deductible?
Yes, marketing advertising costs deductible include online ads, print ads, website costs, social media management, and promotional materials. These are fully deductible in the year you incur them as long as they are ordinary and necessary for your business.
Can Business Travel Expenses Be Deducted?
Business travel expenses deductible rules require travel to be away from your tax home overnight for business purposes. Deductible items include airfare, hotels, rental cars, 50% of meals, and incidental costs. You cannot deduct travel that is primarily personal.
Are Office Supplies Tax Deductible?
Yes, office supplies tax deductible items include paper, pens, ink, folders, postage, and small tools. The IRS treats them as current expenses rather than capital assets, so you can deduct the full cost in the year of purchase.
Can Software Subscriptions Be Deducted as Business Expenses?
Yes, software subscriptions deductible apply to cloud-based tools like QuickBooks Online, Adobe Creative Cloud, Zoom, Slack, Asana, and Shopify. They are considered ordinary operating expenses, not capital assets.
Are Vehicle Expenses Deductible for Business Use?
Vehicle expenses deductible business use — you can choose between the standard mileage rate (70 cents/mile in 2025) or actual expenses (gas, insurance, repairs, depreciation). A mileage log is essential to support your deduction.
Can Meals and Entertainment Expenses Be Deducted?
Meals entertainment expenses deductible — business meals are 50% deductible if you or an employee is present and the meal is not lavish. Entertainment costs (concerts, sporting events, golf) are not deductible under current law.
What Business Expenses Are Not Deductible?
Business expenses not deductible include personal living expenses, commuting costs, fines and penalties, political contributions, lobbying costs (with limited exceptions), and any expense that is not ordinary and necessary for your business. Also, entertainment and club dues are not deductible.
How Do You Track Deductible Business Expenses?
To track deductible business expenses, use accounting software like QuickBooks, Xero, or FreshBooks. Scan receipts with apps like Expensify or Hubdoc. Reconcile your bank and credit card accounts monthly. Maintain a mileage log with date, destination, and business purpose for vehicle use.
How Can Business Owners Reduce Taxable Income Legally?
To reduce taxable income legally, maximize all ordinary and necessary deductions, contribute to retirement plans (SEP IRA, Solo 401(k)), use health savings accounts (HSAs), take advantage of the QBI deduction, and defer income if possible. Work with a CPA to create a year-round tax strategy. For a related guide, see 10 Tax Tips Every Freelancer Should Know Before Filing.
Useful Resources
For official guidance on deductible business expenses, visit the IRS Deducting Business Expenses page.
For practical tips on tracking deductions and using accounting software, check NerdWallet’s guide to small business tax deductions.
Frequently Asked Questions About Business Expenses You May Be Able to Deduct
What is the difference between ordinary and necessary expenses?
An ordinary expense is common and accepted in your industry; a necessary expense is helpful and appropriate for your business. Both must be directly related to earning business income.
Do I need to itemize deductions to claim business expenses?
No. Business expenses are reported on Schedule C (for sole proprietors) or the appropriate business tax form, separate from itemizing personal deductions on Schedule A.
Can I deduct expenses before my business starts earning revenue?
Yes, startup costs up to $5,000 are deductible in the first year of active business. Additional costs are amortized over 180 months.
What if I use my personal vehicle for both business and personal trips?
You can only deduct the business portion. Keep a mileage log showing business miles, total miles, and personal miles to calculate the deductible percentage.
Can I deduct the cost of a cell phone used for business?
If you use the phone exclusively for business, the full cost is deductible. If mixed use, you can deduct the business-use percentage based on call logs or data usage.
Is a home internet bill deductible?
Yes, the business-use portion of your internet bill is deductible. If you work from home 60% of the time for business, you can deduct 60% of the internet cost.
Are gifts to clients deductible?
Yes, business gifts are deductible up to $25 per recipient per year. You cannot deduct gifts disguised as entertainment.
Can I deduct the cost of a business website?
Yes, domain registration, hosting, design, and maintenance costs for your business website are fully deductible as advertising or operating expenses.
Are bank transfer fees for business accounts deductible?
Yes, monthly account fees, wire transfer fees, and credit card processing fees are deductible as ordinary business expenses.
What is the simplified home office deduction?
It allows $5 per square foot of qualified home office space, up to 300 square feet (max $1,500). No need to track actual home expenses.
Can I deduct my health insurance premiums as a sole proprietor?
Yes, health insurance premiums for yourself, your spouse, and dependents are deductible as an adjustment to income on Form 1040, reducing your AGI.
Are parking fees for business meetings deductible?
Yes, parking fees, tolls, and other transportation costs incurred for business activities directly related to your trade are deductible.
Do I need a separate business bank account to claim deductions?
Not legally required, but highly recommended. A separate account makes tracking business expenses much easier and provides a clear paper trail for the IRS.
Can I deduct the cost of a coworking membership?
Yes, coworking fees are deductible as rent for business space. Keep monthly invoices as proof of payment.
Are trade publication subscriptions deductible?
Yes, subscriptions to industry magazines, journals, and online publications that help you stay current in your field are deductible business expenses.
What about expenses paid with personal credit cards?
You can still deduct them as long as they are legitimate business expenses. Just keep detailed records linking the charge to a business purpose.
Are continuing education credits deductible?
Yes, the cost of classes, workshops, and exams that maintain or improve skills required for your current business are deductible.
Can I deduct the cost of a business license?
Yes, fees for business licenses, permits, and registrations are fully deductible as ordinary expenses of running your business.
Are penalties for late business tax payments deductible?
No. Fines and penalties paid to government agencies for violating laws or late payments are not deductible.
How long should I keep deduction records?
Keep receipts and supporting documents for at least three years after filing your return (six years if you underreported income by more than 25%).