As a small business owner, one of the most effective ways to reduce your income tax bill is to claim all the tax deductions available to your business. At Aiming High Solutions, we’ve seen firsthand how proper bookkeeping throughout the year can help businesses identify and track these valuable tax write-offs.

Disclaimer: Aiming High Solutions provides bookkeeping services and is not a CPA firm, accounting practice, or tax advisory service. The information in this article is educational only and not intended as tax advice. Always consult with a qualified tax professional regarding your specific situation.

What Is a Tax Deduction?

A tax deduction (commonly called a “tax write-off”) is an expense that you can subtract from your taxable income, effectively lowering your tax bill. When you take the amount of a qualified expense and deduct it from your taxable income, you pay taxes on a smaller amount.

However, not all expenses qualify. The IRS has specific criteria for what constitutes a legitimate tax deduction. Below, we’ll explore the most common deductions available to self-employed individuals and businesses organized as sole proprietorships or partnerships.

The Impact of Tax Deductions on Your Bottom Line

Let’s look at a simple example to demonstrate how tax deductions can significantly reduce your tax liability:

Maria runs a graphic design business and earned $70,000 in self-employment income in 2024. Without any deductions, she would need to pay 15.3% in self-employment (SE) tax plus income tax based on her individual tax rate. This could amount to thousands of dollars.

However, with proper bookkeeping, Maria identified $10,000 in legitimate business expenses throughout the year. These deductions reduced her taxable self-employment income to $60,000, saving her approximately $1,500 in SE tax alone, plus additional savings on income tax.

Note: This simplified example doesn’t include income tax savings, which would increase the total benefit.

Why Ongoing Bookkeeping Is Critical for Tax Deductions

Many business owners struggle to recall all their deductible expenses at tax time. That restaurant meal with a client in February? The professional development course you took in April? Without systematic tracking, these deductions are easily forgotten.

This is where professional bookkeeping becomes invaluable. At Aiming High Solutions, we capture these deductions monthly, ensuring you have complete and accurate records when tax season arrives. Our systematic approach helps you:

• Track expenses as they occur
• Categorize them properly for tax purposes
• Maintain the necessary documentation to support your deductions
• Identify tax-saving opportunities throughout the year

Now, let’s explore the top 17 tax deductions that small business owners should know about:

The Top 17 Small Business Tax Deductions

1. Advertising and Promotion

The cost of promoting your business is 100% deductible. This includes:

• Business logo design
• Business cards and brochures
• Print or online advertising space
• Client appreciation cards and gifts
• Website development and maintenance
• Social media marketing campaigns
• Event sponsorships

Remember that expenses for lobbying activities or political campaigns are not deductible.

Note: Expenses for lobbying activities or political campaigns are not deductible.

2. Bank Fees

Having separate bank accounts and credit cards for your business is essential for clean bookkeeping. You can deduct:

• Monthly or annual service charges
• Transfer fees
• Overdraft fees
• Merchant or transaction fees paid to payment processors like PayPal, Stripe, or Square

Personal bank account or credit card fees are not deductible, highlighting the importance of keeping business and personal finances separate.

3. Business Meals

Business-related meal expenses are generally 50% deductible if:

• The expense is an ordinary and necessary part of conducting business
• The meal isn’t lavish or extravagant
• You or an employee is present at the meal

Meals provided to employees, such as ordering dinner during late work sessions, are 100% deductible. Company-wide events like holiday parties and team picnics also qualify for a full deduction.

Maintain detailed documentation for each business meal, including:

• The amount spent
• Date and location
• Who attended
• The business purpose and topics discussed

A good practice is to note the business purpose on the back of the receipt or in your expense tracking system.

4. Business Insurance

Premiums paid for business insurance are deductible expenses. This includes:

• Property coverage for equipment, furniture, and buildings
• General liability insurance
• Professional liability or errors and omissions (E&O) insurance
• Health, dental, and vision insurance for employees
• Workers’ compensation insurance
• Commercial auto insurance
• Business interruption insurance

Life insurance premiums may be deductible if the business (or business owner) is not the beneficiary of the policy.

5. Business Use of Your Car

If you use your vehicle for business purposes, you can deduct the associated costs. There are two methods for calculating this deduction:

Standard Mileage Rate: For 2024, you can deduct $0.67 per mile driven for business purposes. This is the simplest method but requires tracking your business mileage throughout the year.

Actual Expense Method: Track all costs of operating the vehicle, including gas, oil, repairs, tires, insurance, and registration fees. Then, multiply these expenses by the percentage of miles driven for business.

Regardless of the method you choose, you’ll need to keep a detailed mileage log or use a mileage tracking app. Remember that commuting between your home and regular workplace is not deductible—these are considered personal commuting expenses.

Remember: Commuting between home and your regular workplace is not deductible.

6. Contract Labor

Payments to freelancers and independent contractors are fully deductible business expenses. If you pay a contractor $600 or more during the tax year, you must issue them a Form 1099-NEC by January 31st of the following year.

Proper documentation of these relationships is crucial, as misclassification of employees as contractors can result in penalties.

7. Depreciation

When purchasing business assets like furniture, equipment, or machinery, depreciation rules typically require you to spread the cost over several years. However, the IRS provides several options for deducting the full cost in one year:

De Minimis Safe Harbor Election: Small businesses can expense assets costing less than $2,500 per item in the year of purchase.

Section 179 Deduction: This allows businesses to deduct up to $1,250,000 of property placed in service during the tax year, including new and used business property and off-the-shelf software.

Bonus Depreciation: Businesses can deduct 100% of the cost of eligible assets, including machinery, equipment, computers, and furniture.

For vehicle purchases, special limitations apply. Consult with a tax professional to determine the best approach for your specific situation.

8. Education

Educational expenses that maintain or improve skills required in your current business are fully deductible. These include:

• Classes and workshops in your field
• Professional seminars and webinars
• Industry-specific books and publications
• Trade journal subscriptions
• Professional certification maintenance
• Transportation to and from educational activities

Note that education that qualifies you for a new career or is unrelated to your current business doesn’t qualify for this deduction.

9. Home Office Expenses

If you use part of your home exclusively and regularly for business, you may qualify for the home office deduction. There are two calculation methods:

Simplified Method: Deduct $5 per square foot of your home used for business, up to a maximum of 300 square feet ($1,500).

Standard Method: Calculate the percentage of your home devoted to business use, then apply that percentage to actual home expenses, including mortgage interest or rent, utilities, real estate taxes, and repairs.

To qualify, your home office must be:

• Used regularly and exclusively for business (a dedicated space)
• Your principal place of business (where you conduct important business activities and spend the most time working)

If using the standard method, you’ll need to file Form 8829 with your tax return.

10. Interest

Interest paid on business loans and credit cards is generally deductible if:

• You are legally liable for the debt
• Both you and the lender intend for the debt to be repaid
• You have a true debtor/creditor relationship

For loans that are part business and part personal, you can only deduct the interest associated with the business portion.

11. Legal and Professional Fees

Fees paid to lawyers, accountants, bookkeepers, tax preparers, and consultants are deductible when they’re necessary and directly related to operating your business.

If these services include personal matters (like estate planning), you can only deduct the portion related to your business.

12. Moving Expenses

While personal moving expenses are no longer deductible for non-military taxpayers, businesses can still deduct the cost of relocating business equipment, inventory, and supplies from one business location to another.

Maintain detailed records of all costs associated with your business move to substantiate this deduction.

13. Rent Expense

Rent paid for business locations, equipment, or machinery is fully deductible. This includes:

• Office or retail space
• Storage facilities
• Equipment rentals
• Vehicle rentals for business purposes

14. Salaries and Benefits

Compensation paid to employees—including salaries, wages, bonuses, commissions, and benefits—is generally deductible as long as:

• The payments are reasonable and necessary
• The services were actually performed
• The “employee” is not the sole proprietor, a partner, or an LLC member

Benefits might include health insurance, retirement plan contributions, education assistance, and paid time off.

15. Taxes and Licenses

Various taxes and licenses related to your business operation are deductible, including:

• State and local income taxes
• Payroll taxes
• Real estate and personal property taxes on business assets
• Sales taxes
• Excise taxes
• Business licenses and permits
• Regulatory fees

Federal income taxes, however, are not deductible business expenses.

16. Telephone and Internet Expenses

If telephone and internet services are necessary for your business, you can deduct these costs:

• Business cell phone expenses
• Internet service fees
• VoIP services
• Secondary landlines dedicated to business use

For a home phone line, the first landline is considered a personal expense and is not deductible, even if used primarily for business. For services used for both personal and business purposes, you can only deduct the percentage used for business—making it essential to track and document business usage.

17. Travel Expenses

Business travel expenses are deductible when the trip is ordinary and necessary and takes you away from your tax home (the general area where your business operates). Deductible expenses include:

• Transportation to and from your destination (airfare, train, bus, or car)
• Lodging costs
• Meals (generally 50% deductible)
• Local transportation at your destination (taxis, rideshares, public transit)
• Baggage fees and shipping costs for business materials
• Dry cleaning and laundry services during business trips
• Business calls and internet access
• Tips related to business travel services
  

  Travel Expense Category	Examples	Deductibility
  Transportation	Airfare, train, rental car	100%
  Lodging	Hotel, Airbnb	100%
  Meals	Restaurants, room service	50%
  Local transportation	Taxis, rideshares, subway	100%
  Incidentals	Baggage fees, tips, laundry	100%
  Communication	Wi-Fi, business calls	100%

Proper documentation is critical—keep records of expenses, dates, the business purpose, and whom you met with.

How Aiming High Solutions Can Help

Tracking all these potential deductions throughout the year requires systematic bookkeeping. At Aiming High Solutions, our bookkeeping services help you:

Let us take the stress out of tax preparation by ensuring your financial records are accurate, complete, and optimized for tax purposes. With our meticulous bookkeeping, you’ll have confidence that you’re claiming every legitimate deduction available to your business.

The Bottom Line

Tax deductions are a powerful way to legally reduce your tax liability. With proper bookkeeping and financial management, you can ensure you’re taking advantage of every legitimate write-off available to your business.

Contact Aiming High Solutions today to learn how our professional bookkeeping services can help you maximize your tax deductions and minimize your tax bill!