20 business tax deductions you can write off

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As a business owner, it's essential to have a clear understanding of all the business expense deductions you can write off on your taxes. This helps you save money by reducing your company's tax liability when it comes time to pay your federal income tax bill.

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In this article, we’ll explain what tax write-offs are and how different businesses can write off qualifying expenses. We’ll also share a list of 20 tax-deductible business expenses you can use to lower your company’s income tax liability.

What is a tax deduction?

A tax deduction, also known as a tax write-off, is a business expense that reduces the taxable income on your business tax return. Tax deductions help reduce the amount of tax your business owes for a given tax year. The Internal Revenue Service (IRS) requires all business tax deductions to be ordinary and necessary, which means:

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1. The expenses are common or ordinary for businesses in your industry
2. The expenses are necessary to operate in your industry (even if they’re not indispensable)

Tax deductions vs. tax credits

Tax deductions lower your company’s taxable income, which is multiplied by the tax rate to calculate your tax liability. A tax credit is a type of tax benefit that lowers your company’s tax liability dollar for dollar. Tax credits directly reduce your tax liability and are not used to calculate your taxable income.

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Assume, for example, that a business has a $30,000 tax liability and qualifies for a $5,000 income tax credit for buying new equipment. The tax credit reduces the tax liability by $5,000, for a total of $25,000 in liability.

How do tax write-offs work?

Both individuals and businesses can claim tax deductions on their income tax returns. The most common tax write-off for individuals is the standard deduction, which allows taxpayers to claim a flat deduction amount based on their filing status. Individuals can also claim itemized deductions rather than the standard deduction, but it's a bit more complicated.

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For businesses, the expense section of your income statement is the starting point for tax write-offs. As your company incurs expenses, you record those dollar amounts in expense accounts. At year-end, an accountant identifies all the expenses you can deduct on your tax return.

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Your tax return includes your business revenue and a detailed list of all your business expense deductions. You subtract (or “write off”) all your tax deductions from your revenue to arrive at your adjusted gross income (AGI). Then, your income is multiplied by the tax rate to determine your total tax liability.

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Many businesses must make estimated tax payments throughout the year. If the payments aren’t large enough to cover their tax liability, the company pays the remaining balance when they file their tax return.

20 common business tax deductions

The IRS provides a number of business expense resources you can use to help identify eligible tax deductions you can write off. Frequent changes to tax law might impact your ability to deduct certain business expenses, so for that reason, it’s a good idea to work with a CPA or tax preparer each year to ensure you comply with current tax laws.

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With all that said, each of the expenses listed below is tax-deductible. Here are 20 common tax write-offs to lower your tax liability:

1. Advertising and marketing expenses

Advertising and marketing costs to help generate sales are fully deductible. This includes the cost of meals and entertainment to promote goodwill with both prospects and existing customers.

2. Bad debt expenses

If a customer owes you money and you can’t collect, you can deduct the amount as a bad debt expense. To deduct a bad debt, you must have previously included the amount in your income or loaned out cash.

3. Cost of goods sold (COGS)

The cost of materials and labor incurred to produce a product or service is a business expense. The cost of goods sold is posted as an expense when you sell a product or service to a customer.

4. Depreciation, amortization, and depletion expenses

When your business makes a purchase, you can either capitalize the asset by recording the dollar amount in your balance sheet or immediately expense the spending. If the asset will benefit your business over a period of years, it’s usually better to capitalize it since this strategy correlates the asset’s cost with the revenue it helps generate.

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Depreciation, amortization, and depletion each account for the decline in the asset's value over its useful life. You can write off all of these expenses on your business tax returns:

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• Depreciation expenses: Depreciation expenses account for the decline in the value of a tangible asset, such as a vehicle, machinery, or equipment
• Amortization expenses: This expense accounts for the decline in the value of an intangible asset, including licenses, copyrights, and patents
• Depletion expenses: When natural resources like oil or timber are extracted from a piece of property, it declines in value. Depletion expenses account for this decline.

5. Home office expenses

Business use of your home may entitle you to a business tax write-off. Your use of the business part of your home must be exclusive, regular, and for your business.

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To qualify for this tax deduction, the business part of your home must meet one of these criteria:

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• It’s your principal place of business
• It’s a place where you meet or deal with patients, clients, or customers in the normal course of your business
• It’s a separate structure (not attached to your home) you use in connection with your business

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The IRS lists specific rules for deducting home office expenses. Home office deductions require careful documentation, so it’s a good idea to work with a CPA or tax professional to document this write-off.

6. Insurance premiums

Insurance expenses can include property insurance, liability insurance, and other types of business insurance. You can also write off health insurance costs provided to employees.

7. Interest expenses and bank fees

Interest expenses on long-term loans and lines of credit are deductible, along with bank fees.

8. Meal and entertainment expenses

The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the deduction related to entertainment, amusement, or recreation expenses.

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However, you can continue to deduct 50% of the cost of business meals if you (or your employee) are present, and the food or beverages aren't extravagant. There are some exceptions to the entertainment rule. For example, recreational expenses for employees, such as a holiday party or a summer picnic, are deductible.

9. Mileage and vehicle expenses

You can deduct vehicle costs using the actual expenses or standard mileage rate method. The 2024 IRS standard mileage rate is 67 cents per mile. Actual car expenses include depreciation, license and registration fees, lease payments, fuel, insurance, repairs, oil, garage rent, tires, tolls, and parking fees.

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Use of your personal vehicle for business purposes can also qualify as a tax deduction, provided you follow the IRS mileage log requirements.

10. Mortgage expenses

You can deduct mortgage interest and any related fees for business property.

11. Moving expenses

If your business incurs costs to move to a new location, the costs are deductible. However, the moving expense deduction for employees has been eliminated. These differences may cause some confusion.

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For 2018 through 2025, employers must include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion of qualified moving expense reimbursements, which are now taxable to employees.

12. Office supply expenses

Office supply costs are tax-deductible and are expensed as soon as you incur them.

13. Professional service expenses

Your business can deduct the cost of legal, accounting, IT, and other professional services.

14. Rent expenses

Rental costs paid for buildings, machinery, equipment, and other assets are deductible.

15. Repair and maintenance expenses

Businesses that require a large investment in fixed assets incur frequent repair and maintenance costs. All these expenses are deductible.

16. Tax and license expenses

You can write off federal, state, and local taxes, as well as licensing fees. You may also be able to write off other taxes, including property taxes, real estate taxes, and others

17. Training expenses

Industry changes may require you to train your employees on new technology or to learn new business procedures. You can deduct these business expenses from your income tax return.

18. Travel expenses

If your employees travel away from their main place of work for business reasons, you can deduct the travel expenses associated with these business trips. Travel expenses for industry or trade conventions are deductible if attendance benefits your business.

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Flights, hotels, and car rentals are deductible expenses, as are baggage, sample, and display material shipping costs. You can also deduct dry cleaning, laundry, business calls, and tips.

19. Utility and IT expenses

Utility costs are deductible, along with subscription costs and other fees for IT hardware and software.

20. Wage and salary expenses

Payroll expenses, including employee wages and payments for independent contractors, are deductible expenses. You can also deduct the employer-paid portion of FICA taxes, along with your business’s payments to federal and state unemployment programs.

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You can write off your company’s contributions to employee benefit programs like retirement plans and healthcare as well.

Tax deductions and business structure

The process for deducting business expenses depends on your company’s business structure:

Sole proprietorship

Sole proprietors deduct business expenses on Schedule C of the 1040 personal tax return. The business profit is added to other sources of income on Form 1040. IRS Publication 334 lists some deductions that apply to self-employed workers:

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Pension plans

If you’re self-employed, you don’t have the ability to participate in a corporate retirement plan, such as a 401(k) plan. Self-employed individuals can set up these types of pension plans to contribute to traditional retirement plans like IRAs:

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• Simplified Employee Pension (SEP)
• Savings Incentive Match Plan for Employees (SIMPLE)
• Qualified plans (including Keogh or H.R. 10 plans)

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SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. You can deduct contributions you make to the plan for your employees on Schedule C. If you’re a sole proprietor, you can also deduct contributions you make for yourself.

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Self-employment tax

Self-employed individuals don’t pay Social Security or Medicare taxes through FICA tax withholdings on wages. The self-employment (SE) tax is a system for collecting these taxes. 

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The 2024 SE tax rate is 15.3%, and self-employed taxpayers compute the tax on Schedule SE of their personal tax return. Fifty percent of the tax is deducted from income on Form 1040.

Limited liability company (LLC)

A limited liability company or LLC is a business structure allowed by state statute. Members are the owners. Depending on how the business is formed, an LLC may file a tax return as a partnership, a corporation, or as part of the owner’s personal tax return.

Partnership

A partnership must file an annual information return to report the income and deductions from its operations, but it doesn’t pay income tax. Instead, it "passes through" profits or losses to its partners.

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Each partner reports their share of the partnership's income or loss on their personal tax return. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partner, and the K-1 data is reported on the partner’s personal tax return.

S corporation 

The S corporation business structure is similar to a partnership for tax purposes. S corporations elect to pass corporate income and losses through to their shareholders. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

C corporation

A C corporation is a separate business entity that pays taxes at the corporate level. If the C corporation generates income and elects to pay a cash dividend to shareholders, the dividend income is taxable on the shareholder’s personal return. C corporations are subject to taxation at both the corporate and shareholder levels.

Track your deductible business expenses with Ramp

As a small business owner or startup founder, navigating your business tax deductions can be a thorny process. But it doesn’t have to be that way.

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Ramp’s comprehensive expense management platform automates business expense tracking and reporting. Ramp uses AI to categorize your business expenses as soon as you incur them, making it easy to identify which expenses are tax-deductible.

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Our modern finance platform saves time, reduces errors, and helps simplify the process of writing off business expenses. We can even offer intelligent recommendations for where you can reduce spend to improve your bottom line.

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Watch a demo video to see why customers who use Ramp save an average of 5% a year.