What are the biggest tax deductions for small businesses?

The largest deductions typically include self-employed retirement contributions (Solo 401k up to $72,000 for 2026), self-employed health insurance premiums, home office deduction, vehicle expenses, and the QBI deduction (up to 20% of qualified business income). The combined impact can reduce taxable income by 40% or more.

Can I deduct business expenses without an LLC?

Yes. You do not need an LLC to deduct business expenses. Sole proprietors report income and expenses on Schedule C of their personal tax return. An LLC provides liability protection but does not change your deduction eligibility. See our guide on choosing a business structure.

What is the difference between a deduction and a write-off?

They are the same thing. A 'write-off' is informal terminology for a tax deduction — a business expense that reduces your taxable income. A $1,000 deduction does not save you $1,000 in tax; it saves you $1,000 times your marginal tax rate (e.g., $240 if you are in the 24% bracket).

business Audience: self employed 6 min read

Small Business Tax Deductions: A Comprehensive Checklist

The complete list of tax deductions available to small business owners, freelancers, and self-employed filers — from home office to retirement contributions.

Last updated on March 22, 2026

If you run a small business, freelance, or are self-employed, business deductions directly reduce both your income tax and your self-employment tax. Whether you operate as a sole proprietor, LLC, or S-Corp, this checklist covers everything you should be considering before you file. Not sure if your side gig counts as a business? Review the hobby vs. business IRS rules first.

Key Takeaways

Business deductions reduce income tax AND self-employment tax (15.3%).
You do not need an LLC to deduct business expenses — Schedule C works.
The QBI deduction can knock 20% off your qualified business income.
Retirement contributions (Solo 401k, SEP IRA) are often the single largest deduction.
Keep records and receipts — the IRS requires documentation for all business deductions.

Operating Expenses

These are the day-to-day costs of running your business:

Advertising and Marketing

Website hosting and domain names
Social media advertising
Business cards, flyers, brochures
SEO and digital marketing services
Trade show booth fees

Office Expenses and Supplies

Computers, monitors, keyboards
Printers, ink, paper
Software subscriptions (QuickBooks, Adobe, etc.)
Office furniture (desks, chairs)
Postage and shipping

Communication

Business phone line or percentage of personal phone used for business
Internet service (business portion)
Virtual meeting subscriptions (Zoom, Teams)

Professional Services

CPA and bookkeeping fees (see our guide to choosing a tax preparer)
Legal fees related to business
Consulting and independent contractor payments
Payroll service fees

Insurance

Business liability insurance
Professional malpractice / E&O insurance
Workers’ compensation (if you have employees)
Business property insurance

Home Office Deduction

If you use a dedicated space in your home regularly and exclusively for business, you can deduct a portion of housing costs. Two methods:

Simplified method: $5 per square foot, up to 300 sq ft = $1,500 maximum.
Regular method: Calculate the percentage of your home used for business and apply it to rent/mortgage interest, utilities, insurance, repairs, and depreciation.

For the full breakdown, see our home office deduction guide.

Vehicle and Transportation

Standard mileage rate: Track all business miles and deduct at the IRS rate (70 cents/mile for 2025; check for 2026 updates).
Actual expenses method: Deduct the business percentage of gas, insurance, repairs, lease payments, and depreciation.
Parking and tolls for business purposes are deductible under either method.

Deciding between buying and leasing? See our buy vs. lease business car tax guide. You cannot use the standard mileage rate if you have claimed Section 179 depreciation on the vehicle.

Retirement Contributions

Self-employed retirement contributions are often the single largest deduction available. These are above-the-line deductions that reduce both income tax and AGI:

Account	2025 Max (Under 50)	2026 Max (Under 50)
Solo 401(k)	$70,000	$72,000
SEP IRA	$70,000	$72,000
SIMPLE IRA	$16,500	$17,000 (est.)
Defined Benefit Plan	Up to $280,000+	Varies by age and income

Health Insurance Premiums

Self-employed individuals can deduct 100% of health, dental, vision, and long-term care insurance premiums for themselves, their spouse, and dependents. This is an above-the-line deduction (reduces AGI) — available even without itemizing. You may also be able to pair this with an HSA or FSA for additional savings on medical costs.

Requirement: You cannot be eligible for a subsidized employer plan (including through a spouse’s employer).

The QBI Deduction (Section 199A)

The Qualified Business Income deduction allows eligible business owners to deduct up to 20% of qualified business income. For a sole proprietor earning $100,000, this could mean a $20,000 deduction — saving $4,800+ in the 24% bracket.

Eligibility rules get complex at higher incomes. See our QBI deduction guide and the comprehensive Section 199A guide for the full breakdown. If your business suffers a loss year, those deductions may create a net operating loss carryforward you can use to offset future income.

Travel and Meals

Business travel: Airfare, hotels, car rental, and incidental expenses are 100% deductible when the primary purpose of the trip is business.
Business meals: 50% deductible when directly related to business (client meeting, business discussion). Keep records of who attended and the business purpose.
Per diem: You can use IRS per diem rates instead of tracking actual meal and lodging costs.

Education and Training

Courses, workshops, and conferences that maintain or improve skills in your existing business
Professional certifications and licenses
Industry publications and subscriptions
Trade association memberships

The education must relate to your current business — not qualify you for a new career.

Interest and Financial Expenses

Business credit card interest
Business loan interest
Equipment financing interest
Merchant processing fees (Stripe, Square, PayPal)

Depreciation and Section 179

Large purchases (equipment, vehicles, furniture) can be deducted in full in the purchase year using Section 179 or bonus depreciation, or depreciated over their useful life using MACRS. The 2025 Section 179 limit is $1,250,000.

Additional Strategies for Business Owners

Hiring your kids: Pay your children for legitimate work in the business — wages are deductible to you and may be tax-free to them.
Accountable plan: Reimburse yourself for business expenses tax-free through a formal accountable plan, especially useful for S-Corp owners.
S-Corp election: Structuring your business as an S-Corp can reduce self-employment tax by splitting income between salary and distributions.
Estimated tax payments: Self-employed filers must make quarterly estimated payments to avoid underpayment penalties.

Record-Keeping Requirements

The IRS requires adequate records for every business deduction:

Receipts for expenses over $75 (and all lodging expenses regardless of amount)
Mileage log with date, destination, business purpose, and miles driven
Bank and credit card statements showing business expenses
Home office measurements and total home square footage

Use apps like QuickBooks Self-Employed, Expensify, or mileage trackers to automate record-keeping.

How sharper.tax Helps

sharper.tax analyzes your tax return to identify missed business deductions, compares your deduction profile against peers with similar income, and flags opportunities like retirement contributions and the QBI deduction. We show the tax savings for each deduction so you can prioritize. Sophisticated tax planning used to require a high-end CPA — we make it available for free.

Sources

The information above is educational and not tax advice.