As a small business owner, why put blood, sweat, and tears into your business if you’re not taking advantage of tax breaks for small businesses to minimize your tax liability and keep as much of your hard-earned cash as possible?
There are several tax breaks for small businesses, and you probably want to take advantage of them to save money.
We’ve listed 21 top tax deductions and write-offs for small businesses in 2025, with examples and details on how much you can save.
Table of Contents
1. Start-Up Costs Deduction
There are many expenses involved in starting a small business, but some of them can actually help you save on taxes.
You can deduct:
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- Advertising for your grand opening
- Trips to find suppliers or customers
- Paying for professional advice
- Training staff before your business officially opens
The IRS allows you to deduct up to $5,000 in startup costs and up to $5,000 in organizational costs for the first year.
2. Home Office
If you are a small business owner working from home, you can save money with the home office tax deduction—one valuable tax break for small businesses you should try not to overlook.
To take advantage of this deduction, you should use part of your home exclusively and regularly for business purposes.
This can be a spare bedroom, converted garage, or dedicated office space.
Depending on your office size and home-related expenses, this tax break can cover part of your rent or mortgage, utilities, internet, repairs, and more.
This can mean hundreds or even thousands of dollars in tax savings each year for many business owners.
It’s a simple but powerful way to keep more of your income—just for working from home.
3. Retirement Contributions
Contributing to retirement accounts can be a smart financial strategy for small business owners, and it is one of the tax breaks for small businesses that you can take advantage of.
You can deduct contributions you make to retirement plans for yourself and your employees.
Whether you are putting money into a traditional 401(k), a simple IRA, or a traditional IRA, these contributions reduce your taxable income, meaning you owe less in taxes.
However, contributions to Roth retirement plans are not tax-deductible and should be weighed carefully with a tax advisor.
By adding funds to certain retirement accounts, you are investing in your future while gaining tax deductions for your business.
It is a win-win: you build long-term wealth while cutting your current tax bill.
4. Depreciation and Section 179
For small business owners, investing in new assets like equipment or furniture typically means spreading the cost over the asset’s useful life due to IRS depreciation rules.
However, thanks to Section 179, you have the option to accelerate this process significantly.
This provision allows you to deduct up to 100% of the purchase price of tangible assets in the year they are bought and put into use.
Here’s an example: If you invest $100,000 in new machinery with a predicted useful life of five years, traditional methods will allow you to deduct $20,000 per year over five years.
However, with Section 179, you can opt to deduct the entire $100,000 in the year of purchase, boosting your short-term cash flow and reducing your taxable income substantially right away
5. Health Insurance Premiums
Many small business owners cover the costs of health insurance but often miss out on a key deduction.
You are allowed to deduct 100% of your premium cost. This includes coverage for your family if they are on the same plan.
Even if the insurance is under your spouse’s name, as long as you are included under the plan, you can deduct the portion that your household pays for the insurance.
This can lead to significant tax breaks for small businesses, providing an excellent opportunity for you to take advantage of.
6. Meals Expenses
As a small business owner, when you dine with someone to discuss business, such as a client, partner, vendor, or prospective customer, you can deduct a portion of the meal costs from your income.
As long as you include at least one business contact and have a business-related discussion, you can deduct 50% of the meal expenses or 50% of the standard meal allowance.
If the meal occurs while you are on business travel, the deduction can be 100%.
This can be one of the most satisfying tax breaks for small businesses.
7. Travel Expenses
When you travel for business purposes, direct business expenses are fully tax deductible. This includes flights, hotels, meals, and transportation.
However, in order to deduct these expenses, there must be a business purpose for the travel expense.
To write off airfare, there must be a business reason for the travel.
Reasons can include attending a board meeting, seminar, conference, or meeting with a prospect.
To write off lodging, there must be business conducted for each day of lodging expenses you wish to deduct.
Lodging expenses are not deductible for personal days during your travel.
8. Education Expenses
As a small business owner – improving your business skills can provide new opportunities.
Therefore, the education expenses you incur to enhance your skill or trade are tax deductible.
This includes money spent on classes, seminars, trade shows, industry magazines, and books.
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9. Marketing and Advertising
The ability to write off your advertising expenses is one of the best tax breaks for small business owners.
The money you spend to promote your business is fully tax deductible and can be used to offset income on your tax return.
In fact, some business owners use this deduction to justify aggressive advertising spend.
For example, if you own an online boutique and spend $15,000 on Facebook ads, Google ads, and influencer partnerships, you can deduct this amount from your taxable income.
This deduction helps lower your tax bill while promoting your brand.
10. Rent and Utilities
If you rent space for your small business, you can deduct these costs from your taxes.
This applies whether you’re renting an office, warehouse, or even a small area like a shed or garage for business use.
In addition to rent, do not forget about your utilities.
Expenses like electricity, water, gas, internet, trash service, and phone lines tied to your business space can also be covered.
As long as the space and utilities are necessary for your business operations, these expenses are tax deductible.
11. Subscriptions
Any subscriptions you maintain for your business operations are completely tax deductible. This is one of the tax breaks for small businesses to remember.
Necessary subscription-based services include those that support your business activities such as software, trade magazines, and other online resources.
Here are some examples of typical deductible subscriptions:
- Project management software
- Cloud storage solutions
- Accounting software programs
These subscriptions are considered ordinary and necessary expenses for running your business effectively.
12. Employee Salaries and Contract Labor
Small business owners can fully deduct the costs associated with paying their employees.
This includes all forms of compensation like salaries, wages, bonuses, and additional benefits.
However, these payments must be considered reasonable and typical for the work performed.
To ensure these employee compensation costs are deductible, small business owners should document all payment details.
In the case of one-time contractor work, proper documentation should also be provided.
This documentation should include records of hours worked, pay rates, and any extra benefits or bonuses provided to employees.
13. Vehicle Expenses
If you use a vehicle for your business, you can apply the vehicle tax deduction to reduce your taxes. This may be one of the more common tax breaks for small businesses.
The IRS gives you two options to claim vehicle deductions:
- Business mileage: You can deduct each business mile you drove with the IRS standard mileage rate.
- Actual vehicle expenses: You can deduct a percentage of specific costs like gas, repairs, insurance, lease payments, maintenance, and registration fees.
You are required to keep documentation for the use of your vehicle for business, regardless of how your tax deduction is calculated.
14. Repairs and Maintenance
If you spend money to repair or maintain your small business property, the cost may be deductible.
Your deduction depends on whether the expense would be considered a repair or a renovation.
Repairs are fully deductible. Renovations are partially deductible and must be depreciated over time.
The IRS defines these as:
- Repair: A procedure to keep your property running in normal operating condition.
- Renovation: An improvement that increases the value of the property.
Understanding the difference between a repair and a renovation is key to helping maximize tax breaks for small businesses.
15. Bank Fees
Every small business should maintain a separate bank account from personal finances.
This setup helps in managing your business more effectively and allows you to deduct various banking fees from your taxes.
You can write off monthly account maintenance fees, wire transfer charges, ACH transactions, overdrafts, late payments, and other related fees.
16. Legal and Professional Fees
As a small business owner, you can deduct 100% of your legal fees, provided they are necessary for your business operations.
This includes costs related to handling tax issues, defending against discrimination claims, and managing the legal aspects of business sales.
However, it’s important to note that legal fees for personal matters or hobbies are not deductible.
Only those expenses directly related to your business activities are eligible for tax deductions.
17. Internet and Phone
Phone and internet costs might be necessary for running a small business and are fully deductible from your taxes.
You can deduct the entirety of expenses incurred for business use.
If you use your phone and internet for personal and business purposes, you can only deduct the portion that is used for business activities.
It is important that you accurately claim only the business-related portion of these costs on your tax return.
18. Augusta Rule
The Augusta Strategy is a smart tax move that allows you, as a business owner, to rent your home to your business for up to 14 days per year—and get some significant tax benefits.
Rental payments to your business are tax-deductible, which reduces your income subject to taxes. Additionally, the income is tax-free to the recipient if it is executed correctly.
This only works if there’s a valid business purpose for the rental, such as hosting:
- Team or board meetings
- Staff training
- Company events
- Photo or video shoots
- Planning sessions
To make sure it is done right, consult a tax planner before using this strategy.
When done correctly, it is a powerful way to move money out of your business and into your pocket—tax-free.
19. Hiring Children
Hiring your kids to work for you is a strategy that can help lower your tax bill.
This allows you to deduct their wages as a business expense.
If you pay them less than the standard deduction (about $14,000), they will not owe any income tax on that money.
This allows you to shift income from your higher tax rate to their lower one, keeping more money in your family overall.
However, your children will need to be doing legitimate work for the compensation your business pays them.
Be sure to get a CPA involved to carefully plan around write-offs like this.
20. Switching to an S Corp
Switching your business structure to an S Corporation offers several tax advantages.
An S Corp is a type of corporation that meets specific Internal Revenue Code requirements, allowing it to be taxed as a pass-through entity.
One of the main benefits of an S Corp is the potential to save on self-employment taxes.
In an S Corp, only the salary paid to the employee-shareholders is subject to employment tax.
Any additional profits are distributed as dividends, which are taxed at a lower rate and are not subject to self-employment taxes.
21. QBI Deduction
As a small business owner, you may want to look into the Qualified Business Income (QBI) deduction, which lets you deduct 20% of your net business income.
For example, if your business makes $100,000, this deduction could lower your taxable income to $80,000. In this scenario, this $20,000 tax deduction would save someone almost $5,000, assuming they are in a 24% tax bracket.
Now, to qualify for this deduction, your business needs to be a “qualified” trade or business. Furthermore, specialized service trades or businesses are generally excluded from this deduction if the taxpayer’s income is above the allowed amount.
Because there are several exceptions to the rules to qualify for this deduction, it is advisable to review your business structure and income to determine QBI eligibility.
If you are looking to maximize the benefits of these rules, make sure you consult with an experienced CPA.
Bottom Line
Taking advantage of these tax breaks can go a long way in helping you save money and reinvest it back into your business.
Remember, every dollar saved is a dollar earned.
If you need a helping hand in sorting through these details, our CPAs are here to help you get the most out of your tax deductions.
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