Business tax deductions you can write off

Many businesses overpay their taxes, often because they miss out on legitimate deductions. In fact, Forbes reports that 93% of businesses pay more than they should.

Business tax deductions are expenses that reduce your taxable income, freeing up money to reinvest in growth, whether that means new equipment, marketing, or hiring. The key is knowing which expenses qualify as write-offs and how to document them properly.

What are business tax deductions?

Business tax deductions, also known as tax write-offs, are expenses that reduce the taxable income on your business return. The IRS requires all deductions to be ordinary and necessary. That means the expense is common, or ordinary, for businesses in your industry, and necessary to operate in that industry, even if it isn’t indispensable.

Everyday examples include office supplies like printer ink and pens, or business travel expenses such as airfare, hotels, and meals while traveling for work.

The Tax Cuts and Jobs Act (TCJA) of 2017 changed several business deductions, and some were set to expire in 2025. H.R.1, passed in July 2025, made many of those provisions permanent. Always confirm with a tax professional that you’re claiming everything you qualify for.

How tax deductions work

Deductions lower the income you pay tax on. For example, if your business earns $100,000 and you have $20,000 in deductible expenses, you’ll only be taxed on $80,000.

The value of a deduction depends on your tax bracket. At a 24% rate, that $20,000 deduction saves you $4,800. At a 12% rate, the same deduction saves you $2,400.

Because the IRS may ask you to verify expenses during an audit, it’s essential to keep receipts, invoices, and records for every deduction you claim.

Why business tax deductions matter

Business deductions free up money you can put back into your company. The benefits apply to every stage of business:

• Startups can stretch limited resources by capturing every eligible deduction
• Small businesses can redirect savings into inventory, technology, or additional staff
• Established companies can optimize their tax strategy to fund larger initiatives such as facility upgrades or market expansion

Consider a consulting firm with $200,000 in revenue. If it claims $40,000 in legitimate deductions, its taxable income drops to $160,000. At a 25% rate, that saves $10,000—funds that can be reinvested in new software, marketing campaigns, or hiring.

Tax deductions vs. tax credits

Tax deductions and tax credits both help you save money, but they work differently:

• Deductions reduce your taxable income; a $1,000 deduction at a 25% rate saves $250
• Credits reduce your tax bill dollar-for-dollar; a $1,000 credit saves the full $1,000

Examples of business tax credits include:

• Research and development credit for qualifying innovation
• Work opportunity tax credit for hiring employees from certain groups
• Small business health care credit for offering coverage
• Disabled access credit for improving accessibility
• Energy efficiency credits for installing qualifying equipment

Both deductions and credits can add up to significant savings, so it’s worth exploring all the options with your tax advisor.

Top business tax deductions for 2025

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 expenses, so it’s a good idea to work with a CPA or tax preparer each year to ensure you’re in compliance.

While this list isn’t exhaustive, here are some of the most common business tax write-offs to help lower your 2025 tax bill.

Home office deduction

If you use part of your home exclusively for business, you may be eligible for a home office deduction. To qualify, the space must be used regularly and exclusively for business activities.

You can calculate the deduction in one of two ways:

• Simplified method: Deduct $5 per square foot up to 300 square feet, for a maximum deduction of $1,500
• Actual expense method: Deduct the business-use percentage of actual home expenses, including rent, utilities, and insurance

Example: You use 200 square feet of a 2,000-square-foot home exclusively for work—10% of your home. If your annual rent and utilities total $27,600, you can deduct $2,760. At a 25% tax rate, that saves you $690.

Regardless of which method you use, you’ll need to provide documentation such as total and office square footage, rent or mortgage payments, and utility costs. The IRS lists specific rules for home office deductions, so it’s smart to confirm details with a tax professional.

Vehicle and transportation expenses

You can deduct the cost of using a vehicle for business based on either the standard mileage rate or actual expenses. The 2025 standard mileage rate is 70 cents per mile.

Example: You drive 15,000 miles in a year, 6,000 of which are for business purposes.

• Using the standard mileage method: 6,000 * $0.70 = $4,200 deduction
• Using the actual expense method: if your total vehicle costs are $8,000 and 40% of your driving is for business, you can deduct $3,200

In this example, the mileage method gives you a higher deduction, but that isn’t always the case.

Choosing the right vehicle deduction method

Choosing between standard mileage and actual expenses can directly impact how much you save on your taxes. The standard mileage rate works best for most small business owners who drive moderate amounts and have lower vehicle costs. It covers gas, maintenance, insurance, and depreciation in one simple calculation and is ideal for older vehicles or those with minimal repair costs.

The actual expense method may yield a larger deduction if you drive a newer or more expensive vehicle, log high repair bills, or put serious mileage on your car. You’ll deduct the business-use percentage of all costs: fuel, oil changes, repairs, insurance, registration, lease payments, and depreciation.

Both methods require detailed recordkeeping. For standard mileage, keep a log of every business trip with dates, destinations, and purposes. For actual expenses, save every receipt related to vehicle costs. You must choose your method in the first year you use the vehicle for business; switching later can be restricted.

Business insurance premiums

Most business insurance premiums are deductible as ordinary and necessary expenses. This includes coverage for general liability, professional liability, property, workers’ compensation, and business interruption.

Health insurance premiums

Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, their spouse, and dependents as an adjustment to income. To qualify, you must show a net profit for the year and be ineligible for coverage through an employer plan (yours or your spouse’s). The deduction can’t exceed your net self-employment income and reduces both income and self-employment tax burdens.

Startup costs and organizational expenses

Launching a business comes with significant upfront expenses, and the IRS provides some relief. You can deduct up to $5,000 in startup costs and $5,000 in organizational costs in your first year, as long as your total costs don’t exceed $50,000. Once you pass that threshold, the first-year deduction is reduced dollar-for-dollar.

Any remaining startup costs are amortized over 15 years, meaning you spread the deduction out gradually. Qualifying expenses include market research, advertising, employee training before launch, and legal or accounting fees related to formation.

Buying an existing business

Buying an existing business follows different rules. The purchase price gets allocated among the assets you acquire—inventory, equipment, goodwill, and more. You can’t deduct the purchase price as a startup cost, but you can depreciate or amortize individual asset categories. Due diligence and legal fees related to the acquisition may qualify as deductible startup expenses.

Office supplies and equipment

Office supplies are consumable items used in daily business operations that usually cost less than $2,500 and last less than a year. You can fully deduct these costs in the year of purchase. Examples include paper, pens, printer ink, and cleaning supplies.

Office equipment, such as computers, furniture, and machinery, typically must be depreciated over time. Two key rules allow you to deduct these costs more quickly:

• Section 179 deduction: Lets you deduct the full purchase price of qualifying equipment (up to $1.25M in 2025) in the year you buy it
• Bonus depreciation: H.R. 1, passed in July 2025, made 100% bonus depreciation permanent, allowing you to fully deduct the cost of qualifying equipment in the year of purchase

Professional services and fees

Professional services and fees paid to attorneys, accountants, consultants, and other business advisors are fully deductible as ordinary business expenses. This includes tax preparation, legal advice, business consulting, and financial planning.

Software and subscription costs for business purposes are deductible as operating expenses. Monthly or annual fees for tools such as accounting software, project management apps, or cloud storage can be deducted in the year they’re paid. Permanent software licenses may need to be depreciated over several years depending on cost and type.

Education and training expenses that maintain or improve skills required for your business are also deductible. That includes workshops, seminars, online courses, certifications, and business-related conferences.

Travel and entertainment

Business travel expenses such as airfare, hotel accommodations, rental cars, taxi fares, and 50% of meal expenses are generally deductible when travel is ordinary, necessary, and directly related to your work.

Commuting between your home and regular workplace isn’t deductible, and personal portions of mixed business and personal trips must be separated. The IRS also requires that travel expenses be reasonable, not lavish or extravagant.

Meals and entertainment

You can deduct 50% of the cost of business meals if you (or an employee) are present and the food or beverages aren’t extravagant. This includes client meetings and networking events. Recreational expenses for employees—such as a holiday party or company picnic—are fully deductible.

Employee-related expenses

Wages, salaries, bonuses, and commissions paid to employees are fully deductible as ordinary and necessary payroll expenses. You can also deduct the employer-paid portion of FICA taxes and contributions to federal and state unemployment programs.

Employee benefits such as health insurance premiums, retirement plan contributions, life insurance, and disability insurance are also deductible, though rules differ for business owners.

You can additionally deduct training and education expenses for employees, including seminars, webinars, and conferences, along with any related travel costs.

Lesser-known but valuable deductions

Beyond the common write-offs most businesses claim, there are several other deductions that can make a real difference at tax time. These often get overlooked but can add up to meaningful savings when tracked and documented properly.

Advertising and marketing

Advertising and marketing expenses are generally considered ordinary and necessary business costs that can be deducted in the year they’re incurred. This includes traditional ads, digital campaigns, promotional materials, trade shows, and other marketing efforts that help promote your business and generate revenue.

Your website expenses—such as design, hosting, and updates—also qualify as deductible business costs. The same applies to content creation for blogs, social media, or email campaigns.

Promotional items like branded merchandise, trade show giveaways, and advertising materials are fully deductible too. Keep receipts for everything from business cards to custom swag you hand out at events. These marketing investments both reduce your taxable income and help attract new customers.

Rent and utilities

Rent paid for business property is deductible as long as it’s used exclusively or primarily for business. That includes office space, warehouse or retail locations, and even parking or equipment leases.

If you rent your home and use part of it as a home office, you can deduct the percentage of rent corresponding to the space used for business.

Utilities are also deductible, including electricity, water, gas, heating, cooling, and trash removal for your business premises. For home-based businesses, you can deduct the portion of these costs that corresponds to your office’s share of total square footage.

Internet and phone services

Internet and phone services used for business purposes are deductible, with the amount based on the percentage of business use versus personal use. If you have a dedicated business line or internet connection, you can deduct 100% of those costs. For mixed-use plans, calculate and deduct only the business portion.

Property taxes

If you own commercial property or pay property taxes on business real estate, those costs are deductible too. This includes taxes on offices, warehouses, retail spaces, or land used for business. Keep your tax documents organized throughout the year to make filing easier.

Interest and bank fees

Interest on business loans, lines of credit, or credit cards used for business expenses is deductible as a business cost. This includes interest on equipment financing and mortgages for business property.

Bank fees and service charges related to business accounts are also deductible. These include monthly maintenance fees, overdraft charges, transaction fees, and other service costs.

Credit card processing fees are fully deductible too. Whether you pay a flat monthly rate or a per-transaction fee, these expenses add up over time and can help lower your taxable income.

Special considerations for different business structures

The process for deducting business expenses depends on how your company is structured. Sole proprietors, LLCs, partnerships, S corporations, and C corporations all have different rules, forms, and opportunities for deductions.

Sole proprietorship

Sole proprietors deduct business expenses on Schedule C of Form 1040. The business’s profit or loss is included with your other income on your personal return. IRS Publication 334 lists deductions that apply to self-employed workers.

Pension plans

If you’re self-employed, you can set up retirement plans such as:

• Simplified Employee Pension (SEP)
• Savings Incentive Match Plan for Employees (SIMPLE)
• Qualified plans such as Keogh or H.R. 10 plans
• Solo 401(k)

These plans offer tax advantages for both you and your employees. You can deduct contributions you make to employees’ accounts on Schedule C and also deduct your own contributions. For 2025, the contribution limit for a solo 401(k) is $70,000, or $77,500 if you’re 50 or older.

Self-employment tax

Self-employed individuals don’t pay Social Security or Medicare taxes through payroll withholding. Instead, they pay the self-employment (SE) tax to cover those obligations.

For 2025, the SE tax rate is 15.3%. You’ll calculate it on Schedule SE of your personal return, and you can deduct 50% of that amount on Form 1040.

Limited liability company (LLC)

An LLC is a flexible business structure allowed by state law. Members are the owners, and depending on how it’s organized, the LLC may be taxed as a sole proprietorship, partnership, or corporation.

LLCs may also qualify for the qualified business income (QBI) deduction, which allows eligible pass-through business owners to deduct up to 20% of their qualified business income. This benefit applies to sole proprietorships and S corporations as well.

Partnership

A partnership must file an annual information return (Form 1065) to report income, deductions, and other financial details, but it doesn’t pay income tax directly. Profits and losses “pass through” to the partners.

Each partner reports their share of income or loss on their personal return, using Schedule K-1. The partnership itself provides copies of these K-1s to each partner.

S corporation

An S corporation is taxed similarly to a partnership in that income and losses flow through to shareholders, who report them on their personal returns at individual tax rates. The corporation files Form 1120-S to report its results.

S corporations also have some unique deduction rules:

• Health insurance premiums: Shareholders who own more than 2% of the company can deduct health insurance premiums, though the process differs from other business types. The premiums are included in W-2 wages and then deducted on the shareholder’s personal return.
• Retirement plan contributions: S corporations can establish plans such as SEP-IRAs, SIMPLE IRAs, or 401(k)s and deduct contributions made for employee-shareholders
• Business losses: Losses can pass through to shareholders and offset other income on their personal returns, subject to IRS basis and passive activity rules

Because S corporation tax treatment can be complex, it’s often worth consulting a CPA to ensure compliance and to optimize deductions.

C corporation

A C corporation is a separate legal entity that pays taxes at the corporate level. Profits distributed as dividends are taxed again on shareholders’ personal returns—what’s known as “double taxation.”

C corporations file Form 1120 and can deduct ordinary and necessary business expenses such as salaries, rent, insurance, and employee benefits. Because the corporation itself pays taxes, its deductions don’t flow through to owners’ individual returns.

Common mistakes to avoid

Even experienced business owners make deduction mistakes that can cost them money or create audit issues. Here are some of the most common pitfalls to watch out for:

• Mixing personal and business expenses: Use separate bank accounts and credit cards to keep transactions clean and deductible
• Poor recordkeeping: Track expenses year-round with accounting software or a spreadsheet instead of scrambling at tax time
• Missing documentation: The IRS requires detailed proof for meals, travel, and vehicle deductions—logs, receipts, and business purposes are essential
• Overlooking small but frequent expenses: Minor costs like software subscriptions and supplies add up; a $15 monthly subscription is $180 a year
• Fear of legitimate deductions: If an expense is ordinary, necessary, and documented, it’s safe to claim—don’t leave money unclaimed out of caution

Taking every legitimate deduction while keeping thorough records helps you stay compliant and reduce your tax bill.

How to maximize your business tax deductions

Smart deduction strategies can significantly reduce your tax burden while keeping you compliant with IRS rules. These best practices can help you make the most of every legitimate write-off.

• Track expenses year-round: Record every business-related purchase as it happens. Use accounting software and expense-tracking apps to stay organized and avoid missed deductions.
• Stay current on IRS rules: Tax laws change often. Subscribe to IRS updates or work with a CPA to stay informed about new deductions and phaseouts.
• Review deductions annually: Revisit your deduction categories each year to catch anything you might have missed, from home office costs to professional development
• Consult a professional: A qualified CPA or tax advisor can help navigate complex rules, especially for mixed-use assets or multi-entity businesses
• Plan ahead: Don’t wait until tax season. Time major purchases, such as equipment or software, strategically to optimize your deductions before year-end.
• Keep documentation organized: Store receipts, invoices, and mileage logs in one place. Organized records protect you during an audit and simplify tax filing.

Consistent recordkeeping and proactive planning throughout the year make it easier to capture every legitimate deduction and reduce your taxable income.

Documentation best practices

Good recordkeeping makes tax season easier and helps ensure you don’t miss legitimate deductions. Staying organized throughout the year saves time and stress when it’s time to file.

Keep every receipt and document your expenses

Detailed records are the foundation of accurate deductions. Save all receipts related to business expenses, even small ones like coffee meetings or parking fees—they add up. Get in the habit of logging purchases immediately with the date, amount, business purpose, and people involved.

Keep these records for at least three years after filing, or up to seven years for larger deductions or losses. Property and investment records should be retained for as long as you own the asset plus seven years after sale.

Use financial tools and automated solutions

Business expense tracking software can automate much of the recordkeeping process. These tools categorize transactions, flag deductible expenses, and integrate with accounting systems.

Many mobile apps let you photograph receipts on the spot and store them digitally. Some also offer mileage tracking and time logging to capture every eligible expense accurately. Automation reduces manual work and minimizes the chance of losing key records.

Implement practical organization strategies

Beyond software, consistent habits make documentation easier to maintain.

• Digital receipt storage: Scan or photograph paper receipts and organize them in labeled folders by month or expense type. Cloud storage ensures accessibility and security.
• Regular expense reviews: Set aside time monthly to review and categorize expenses. Regular upkeep prevents backlog and helps you spot trends or missed deductions.
• Separate business and personal accounts: Use dedicated business bank accounts and credit cards to keep transactions clean and fully deductible
• Paper storage: For physical documents you must keep, use clearly labeled folders or binders organized by year and expense category, stored in a safe, accessible location

Consistent organization throughout the year makes tax preparation smoother and gives you confidence if you’re ever audited.

When to consult a tax professional

Even the most organized business owners can benefit from professional tax guidance. A qualified CPA or tax advisor can help you navigate complex rules, ensure compliance, and uncover deductions you might otherwise miss.

Consider seeking professional help if any of the following apply:

• You operate multiple businesses or entities
• Your company has international operations or clients
• You’ve had a major change in business structure or ownership
• You’re planning large equipment purchases or expansion projects
• You’ve received a notice or audit letter from the IRS

Tax professionals stay current on the latest laws and can recommend timing strategies for big decisions, such as when to buy assets or hire staff, to help optimize your deductions.

If you’re facing an IRS audit or inquiry, professional representation is especially valuable. A tax expert can handle communications with the IRS and guide you through any required documentation or follow-up.

Consulting a professional before tax season can save you money, time, and stress, helping you make the most of every legitimate deduction.

Use Ramp to track your deductible business expenses

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.

Ramp’s best-in-class expense management software 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.

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.

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