35 business deductions you need to know for 2026

The following content is for general informational purposes only and is not intended to provide tax, legal or other professional advice. Individuals should consult with their professional advisors for advice on their tax obligations. All information is sourced from the IRS websites linked at the bottom of the page. Please refer to the IRS websites for the most current information.

Taxes can’t be avoided, but there’s no reason to pay more than you have to. When you file your taxes in 2026, make sure you’re taking any available deductions if they apply to you and your small business. Knowing what you can deduct will make tax time easier next year.

What are small business tax deductions?

When you take a tax deduction, it reduces the amount of income you have to pay taxes on. A deduction is different from a credit, which is a reduction in the amount of tax you have to pay. These deductions can include everyday costs like office supplies, phone bills, or business meals, as well as larger investments like equipment, software, or retirement contributions.

What business expenses are tax deductible?

These are the most common deductions that many small business owners can take:

1. Mileage

If you drive your car for business purposes, you can deduct mileage at the IRS standard rate (70¢ per mile for 2025 returns filed in 2026; the 2026 rate will be announced later). This includes driving to client meetings, project sites, or business errands.  

You can either use the standard IRS mileage rate (which changes yearly) or calculate actual vehicle expenses, including gas, repairs, insurance, and depreciation. Keeping a mileage log makes it easier to track and substantiate your deductions. 

2. Business travel

Going out of town to meet with a client or complete a project? Your travel expenses may be deductible. This includes airfare, trains, taxis, rideshares, rental cars, and lodging. Meals while traveling for business are also partially deductible.  

Be sure to keep receipts and document the purpose of your trip, including dates and the people you met with, to ensure your deduction is allowed by the IRS. 

3. Meals

For 2026, you can generally deduct 50% of business-related meal costs. Certain rare exceptions (like meals provided to crew members on vessels) qualify for a 100% deduction under the OBBBA (One Big Beautiful Bill Act), but most business meals remain at 50%.  

Business meals include meals with clients, customers, or employees where business is discussed. Take care to document who attended, the business purpose, and the date to support your deduction. Meals at events or conferences may also qualify if properly recorded. 

4. Self-employment tax

When you work for an employer, you each pay half of the FICA tax that covers Social Security and Medicare. When you’re self-employed, you are the employer and the employee, so you are responsible for both portions. The tax includes 12.4% for Social Security and 2.9% for Medicare. The good news is half of this total amount is deductible as a business expense.  

5. Home office

If you use part of your home as your office, you may be able to deduct a portion of your home expenses such as rent, property taxes, insurance, utilities, and maintenance.  

There are two methods for calculating the home office deduction: the simplified option, which uses a standard rate per square foot, or the regular method, which calculates actual expenses proportionate to the office space. To qualify, the space must be used exclusively and regularly for business activities. 

6. Office rent

If you don’t work out of your home but rent your office space, that expense is generally deductible. This includes rent, common area maintenance fees, and even utilities included in your lease. If your office lease includes shared space or amenities, such as a receptionist or conference room, you may also be able to deduct a portion of those costs. 

7. Internet, phone, and utilities

Deduct the cost of your internet service, cell phone and landline, and utilities. Note that, if you work from a home office, this may be part of your home office deduction. Even if only a portion of your phone or internet use is for business, you can deduct that proportional amount. 

8. Retirement contributions

If you make contributions to employee retirement accounts (even your own), this company match is deductible. Eligible plans include 401(k), SEP-IRA, SIMPLE IRA, and more. Roth plans are not eligible – those are funded with after-tax money.  

Related: Choosing a retirement plan for your business 

9. Consultants. If you hire a consultant for a project or to help you with your business, the amount you pay them is a deductible expense. Consultants might include marketing experts, IT specialists, or business strategists. Be sure to have a contract and retain invoices to document the purpose and business necessity of the service.

10. Contractors

If you hire workers on a contract basis, you can deduct the amount you pay them. This includes freelance work, independent contractors, or gig workers. Payments should be properly documented with contracts and 1099 forms issued to contractors when required.  

11. Employees

You can generally deduct the amount you pay your staff from your business income. This includes wages, bonuses, benefits, and certain employer-paid taxes. 

12. Equipment

If you purchase business equipment, like computers, printers, copiers, etc., you may be able to deduct their costs. Under recent law changes, many businesses can deduct the full cost upfront using Section 179 expensing, rather than depreciating them over time. 

13. Depreciation

If you have business equipment, machinery, vehicles etc., that you expect to have for more than a year, you may be able to claim the depreciation of these assets as a deduction. Section 179 expensing now allows many businesses to deduct the full purchase price immediately. 

14. Supplies

The supplies you need to run your business, like paper, pens, printer toner, shipping materials, or cleaning supplies, can be deducted. Even small or recurring purchases count, as long as they’re necessary for your business operations. Keeping receipts and a running list of office expenses helps ensure you don’t miss any deductions. 

15. Insurance

You can deduct the amount you pay for your liability insurance, workers compensation insurance, etc. (You do have liability insurance, right? If not, get a quote today.) 

16. Professional services

You can deduct the amount you pay your attorney, accountant, and other professionals whose services you use for your business.  

17. Interest

Whether you borrow money for working capital or to purchase equipment, machinery, or supplies, you may be able to deduct the finance charges or interest you pay. This includes bank loans, lines of credit, and certain personal loans used exclusively for business purposes. 

18. Website

The money you pay to have your website designed, hosted, and maintained is deductible. This includes design services, domain registration, hosting fees, and website security services.  

19. Software

You may be able to deduct any software you purchased as well as subscriptions you may pay monthly. Don’t forget your cloud storage costs, office software, accounting software, customer relationship manager, project management software, etc.  

20. Courses

If you pay for classes, workshops, or training for yourself or your employees that improve skills or knowledge related to your business, those costs are deductible. This includes online courses, seminars, certifications, or even in-person workshops. Document the business purpose for IRS records. 

21. Marketing and advertising

Deduct the amount you paid for social media boosting, as well as print, radio, TV, or billboard ads. If you paid someone to design or place those ads, that’s a deduction too.  

22. Licenses

The cost of business licenses required by your state or municipality is generally deductible. Even renewal fees and certain compliance costs may qualify. Keep copies of licenses and receipts for your records.

23. Qualified Business Income (QBI) Deduction

Many small business owners and pass-through entities can take a 20% deduction on qualified business income. This deduction is now permanent under recent law and applies to partnerships, S-corporations, and sole proprietorships. There are rules around income thresholds, type of business, and wages paid, so it’s best to consult your tax professional to see if you qualify.

24. Startup costs

If your business is new, you can deduct up to $5,000 in startup expenses, like legal fees, marketing, or training, in your first year. Any remaining startup costs can be amortized over 15 years.

25. Business vehicle expenses beyond mileage

If you own a business vehicle, you can choose to deduct actual expenses such as gas, maintenance, insurance, and depreciation instead of using the standard mileage rate. This includes gas, oil, maintenance, insurance, registration fees, and depreciation. Using the actual expense method may result in a larger deduction if your vehicle has high operating costs.  

26. Bad debt

If your business invoiced a client or customer, and included the amount in income but never received payment, you may be able to deduct the amount as a business bad debt.

27. Business gifts

You can deduct up to $30 per recipient per year for business gifts. This includes gift baskets, promotional items, or other small presents given to clients, vendors, or partners. Keep a record of who received the gift, the date, and the business purpose to support your deduction.  

28. Health insurance premiums

Self-employed business owners can deduct health insurance premiums for themselves, their spouse, and dependents, even if they do not itemize deductions. This includes medical, dental, and long-term care premiums. Deductible premiums must be paid for policies that cover you and your family and cannot exceed the net profit from your business.

29. Qualified business energy expenses

Investments in energy-efficient equipment or improvements to your business location may qualify for additional tax deductions or credits. Examples include solar panels, energy-efficient HVAC systems, or upgrades that reduce energy consumption.  

30. Vehicle depreciation for luxury vehicles

If your business vehicle exceeds a certain cost, you can still deduct depreciation, although there are limits under IRS luxury vehicle rules. This applies to high-cost vehicles used for business purposes.  

31. Net operating losses (NOLs)

If your business has a net loss, you may be able to carry it forward to offset income in future years, reducing your future tax liability.

32. Charitable contributions

If your business is a C-corporation, donations to qualified charities may be deductible, subject to certain limits. Contributions can be in cash, goods, or even services provided to charitable organizations.  

33. State and local taxes

Business-related state, local, and property taxes are deductible. This includes sales tax, property tax on business property, and state income taxes allocated to your business.

34. Interest on business credit cards

Interest on credit cards used exclusively for business expenses is deductible. Only the interest attributable to business spending is deductible, so separate business and personal credit cards when possible.

35. Tax credits

In addition to deductions, small businesses may qualify for credits, which directly reduce tax liability. Common credits include:

• Research and Development (R&D) Credit: Available to businesses investing in innovation or technology.
• Work Opportunity Tax Credit (WOTC): For hiring individuals from certain targeted groups who face barriers to employment.
• Employee Retention Credit (ERC): For eligible businesses that retained employees during qualifying periods.

Some of these deductions have changed since last year, and it’s possible they may change again. Keep abreast of tax changes in the IRS website.

Keeping impeccable records of everything you spend will help you take advantage of all these deductions at tax time. After all, no one wants to pay more than they have to.

Frequently Asked Questions

What counts as a deductible business expense? 

Business expenses that are ordinary and necessary for running your business, like supplies, rent, or software, are generally tax deductible.

Can I deduct home office expenses? 

Yes, if part of your home is used exclusively and regularly for business, you may be able to deduct a portion of your mortgage, rent, utilities, and other related expenses.

Are meals and entertainment fully deductible? 

Business meals are generally 50% deductible. Entertainment expenses are no longer deductible in most cases.

What is the Qualified Business Income (QBI) deduction? 

The QBI deduction allows eligible pass-through businesses to deduct up to 20% of qualified business income, subject to income limits and other rules.

Can I deduct health insurance premiums? 

Yes, self-employed business owners can deduct premiums for themselves, their spouse, and dependents.

What’s the difference between a contractor and an employee deduction?

Payments to contractors are fully deductible as a business expense. Employee wages and benefits are also deductible, but make sure you comply with payroll reporting requirements.

Can I deduct startup costs?

Yes, new businesses can deduct up to $5,000 in startup costs in the first year, with the remainder amortized over 15 years.

Do I need to keep receipts for deductions?

Yes. Absolutely. The IRS recommends keeping receipts, invoices, and documentation to substantiate any deduction you claim.