If you use part of your home exclusively and regularly for business, you can deduct a portion of your home expenses such as rent/mortgage interest, utilities, property taxes, and insurance.
Tracking Tip: Keep a detailed record of your home office square footage and the total square footage of your home to calculate the percentage of expenses that can be attributed to business use.
Business Supplies and Equipment
Deduct the cost of items such as office supplies (paper, pens, printer ink), business-related equipment (computers, printers, phones), and other necessary tools for your business.
Tracking Tip: Keep receipts for all purchases and maintain a list of equipment, including when it was purchased and its cost. If the equipment is expected to last more than a year, you may need to depreciate the asset.
Meals and Entertainment
You can generally deduct 50% of the cost of business-related meals, provided the meal is directly related to business activities, such as meeting clients.
Tracking Tip: Record the date, location, and business purpose of every meal, and keep itemized receipts. The IRS requires detailed documentation.
Vehicle Expenses
If you use a vehicle for business purposes, you can deduct either actual expenses (fuel, maintenance, insurance) or use the standard mileage rate.
Tracking Tip: Log your mileage regularly, including the date, business purpose, and miles driven. Alternatively, keep receipts for actual expenses if you choose that method.
Salaries and Wages
Salaries, wages, and bonuses paid to employees, as well as contractor payments (1099 contractors), are tax-deductible.
Tracking Tip: Maintain detailed payroll records, including pay stubs and contractor agreements, to ensure all salaries and wages are properly recorded.
Retirement Plan Contributions
Contributions to retirement plans such as a SEP IRA, SIMPLE IRA, or 401(k) are tax-deductible. This helps reduce your taxable income while building retirement savings.
Tracking Tip: Keep records of all contributions to retirement plans, including dates, amounts, and types of plans used.
Insurance Premiums
The cost of business insurance (e.g., liability, property, health insurance) is deductible. This includes health insurance premiums for yourself and your employees if you're self-employed.
Tracking Tip: Track all insurance payments and maintain clear documentation about the policies and their purposes.
Interest on Business Loans
The interest you pay on business loans or business credit cards is deductible.
Tracking Tip: Keep records of the loan or credit card statements, showing the interest paid.
Rent or Lease Payments
If your business rents office space or equipment, those payments are deductible as a business expense.
Tracking Tip: Keep all lease or rental agreements and monthly payment records for documentation.
Professional Services
Fees paid to accountants, attorneys, consultants, and other professionals who provide services directly related to your business are deductible.
Tracking Tip: Maintain detailed invoices or contracts showing the services provided, the dates, and the amounts paid.
Training and Education
The cost of continuing education, training, and professional development that directly improves your business is deductible.
Tracking Tip: Keep receipts, registration forms, and proof of payment for courses, seminars, and related materials.
Advertising and Marketing
Costs associated with advertising your business, including print ads, online ads, signage, and marketing materials, are deductible.
Tracking Tip: Retain copies of ads, receipts for marketing materials, and digital records for online ads.
Travel Expenses
Travel expenses for business trips (airfare, lodging, meals, transportation, etc.) are deductible.
Tracking Tip: Keep a travel log with dates, destinations, and business purposes for each trip, along with receipts for expenses.
Bad Debts
If you have uncollectible debts that you’ve tried to recover, you may be able to deduct them.
Tracking Tip: Keep detailed records of the debt and your attempts to collect it.
Depreciation
Depreciation allows you to deduct the cost of large purchases (e.g., office furniture, machinery, and vehicles) over time instead of all at once.
Tracking Tip: Work with an accountant to determine the correct depreciation schedule for each asset.
Startup Costs
If you’re in the early stages of your business, you can deduct up to $5,000 in startup costs and $5,000 in organizational costs in the first year.
Tracking Tip: Keep all receipts and records for expenses incurred while getting your business off the ground.