1. Home Office Deduction

What It Is

If you run your business from home, the home office deduction allows you to deduct expenses related to the portion of your home used regularly and exclusively for business. Qualified expenses may include a portion of mortgage interest or rent, utilities, insurance, repairs, and depreciation.

Who’s Eligible

• Primary Place of Business: To qualify, the home office must be your primary place of business—or a dedicated space for meeting clients or storing inventory.
• Regular and Exclusive Use: The space must be used strictly for business. Using a corner of your living room for administrative tasks, for example, might not qualify if that corner also doubles as a kids’ play area.

Record-Keeping Requirements

• Documentation of Expenses: Keep receipts and invoices for utilities, insurance, repairs, and other home-related costs.
• Square Footage: You’ll also need to document the square footage of the office space and the total square footage of the home to determine what percentage of expenses can be deducted.

2. Mileage and Vehicle Expenses

What It Is

If you use your personal vehicle for business-related travel—visiting clients, picking up supplies, or traveling between worksites—the expenses you incur could be tax-deductible. The IRS typically offers two methods:

1. Standard Mileage Rate: A set rate per mile driven for business purposes.
2. Actual Expense Method: Deducting a portion of vehicle-related costs like gas, repairs, insurance, and depreciation.

Who’s Eligible

• Business Travel Only: You can only deduct expenses that directly relate to business travel, not personal errands or commuting to a regular office location.
• Proper Tracking: You must have accurate records to substantiate business miles versus personal miles.

Record-Keeping Requirements

• Mileage Log: Maintain a detailed mileage log indicating dates, destinations, purpose, and miles driven.
• Receipts: For the actual expense method, save receipts for all vehicle-related costs, including maintenance, gas, and insurance.

3. Business Equipment and Office Supplies

What It Is

Costs associated with purchasing business equipment—computers, printers, software, and other tangible items—are often deductible. Office supplies (e.g., pens, paper, and envelopes) also qualify as legitimate business expenses.

Who’s Eligible

• Ordinary and Necessary: According to IRS rules, you can deduct expenses that are ordinary (common in your industry) and necessary (helpful for your trade or business). Most small businesses purchasing everyday supplies or essential equipment can take advantage of these deductions.

Record-Keeping Requirements

• Receipts and Invoices: Keep receipts or digital confirmations of every purchase.
• Categorization: Clearly categorize these items in your accounting system. Larger equipment purchases may be capitalized and depreciated, though Section 179 or bonus depreciation rules could allow you to deduct most or all of the cost in the year of purchase.

4. Advertising and Marketing Costs

What It Is

Whether you’re paying for social media ads, traditional print promotions, or launching an email marketing campaign, advertising and marketing expenses generally qualify as deductible business costs.

Who’s Eligible

• All Business Types: From local brick-and-mortar stores to online service providers, any business spending money on marketing or promotional activities can claim these deductions.

Record-Keeping Requirements

• Invoices and Contracts: Keep contracts, invoices, and statements related to ad placements.
• Purpose: Ensure these expenses are truly for business. Personal branding or social media posts that don’t promote the business might be disallowed.

5. Business Insurance Premiums

What It Is

Most insurance premiums that protect your business—such as general liability, professional liability, commercial property, or cyber insurance—are generally deductible.

Who’s Eligible

• Business-Related Policies: If the insurance policy is directly tied to the business’s operations, it typically qualifies. Coverage for your personal residence won’t count unless you have a valid home office endorsement specifically for business.

Record-Keeping Requirements

• Insurance Bills: Save invoices and proof of payment for each policy.
• Policy Documentation: Maintain copies of your insurance agreements to confirm coverage specifics and business purpose.

6. Retirement Contributions

What It Is

Small business owners who contribute to retirement accounts, such as SEP-IRAs, SIMPLE IRAs, or 401(k) plans, can often deduct contributions made on behalf of themselves and their employees.

Who’s Eligible

• Self-Employed Individuals: Freelancers, independent contractors, and sole proprietors may set up SEP-IRAs or solo 401(k)s to maximize contributions.
• Small Businesses with Employees: Providing a retirement plan for your team not only helps with tax savings but can also boost employee retention and satisfaction.

Record-Keeping Requirements

• Contribution Records: Keep track of dates, amounts contributed, and to which accounts the funds were directed.
• Plan Documentation: Maintain the retirement plan’s governing documents and any notices you’ve provided to employees.

7. Professional Fees and Services

What It Is

Fees paid to accountants, attorneys, bookkeepers, or other professionals for services that support your business are typically deductible. This category also includes costs like software subscriptions for your accounting platform.

Who’s Eligible

• Ordinary and Necessary Services: As long as the professional’s work is directly related to your trade or business, the associated fees are deductible.

Record-Keeping Requirements

• Contracts and Invoices: Keep a record of engagement letters or contracts along with detailed invoices.
• Purpose Documentation: Note the specific business reason for hiring each professional—e.g., for drafting contracts, preparing taxes, or managing payroll.

8. Business Travel and Meals

What It Is

If you travel for work—attending conferences, meeting clients, or visiting remote job sites—transportation, lodging, and a portion of meal expenses may qualify for deductions. Business meals with clients or co-workers are typically 50% deductible in most situations (though specific IRS rules can change).

Who’s Eligible

• Primarily Business Purpose: The trip must be primarily for business. If you add personal days to a trip, you’ll need to separate the non-business portion of expenses.
• Documented Meetings and Agenda: For meals to be deducted, they must serve a clear business purpose.

Record-Keeping Requirements

• Receipts: Keep itemized receipts, not just credit card slips, especially for meals.
• Travel Itineraries: Maintain itineraries or conference agendas that verify your business-related activities.

9. Record-Keeping Best Practices

Diligent record-keeping is the backbone of any successful tax strategy. If you can’t substantiate a deduction, the IRS may disallow it—resulting in additional taxes, penalties, and interest.

• Separate Business and Personal: Always maintain separate bank and credit card accounts for your business. This practice simplifies bookkeeping and helps prove that expenses are truly business-related.
• Use Cloud Accounting: Tools like QuickBooks, Xero, or other platforms automate transaction tracking and integrate easily with expense-reporting apps.
• Digitize Receipts: Scan or photograph every business receipt and store them in an organized digital folder. The IRS accepts electronic copies of documents, so you don’t have to keep physical paper if you don’t want to.
• Consistent Maintenance: Don’t wait until tax season to tidy your books. Adopt a weekly or monthly routine to review expenses, reconcile bank statements, and categorize transactions.

10. Staying Ahead of Changing Tax Laws

Tax regulations evolve frequently. While the core deductions mentioned above remain relatively consistent, each year can bring new rules or adjustments to existing ones. For instance, meal deduction percentages have changed in recent years, and new credits or incentives might be introduced at federal or state levels.

Proactive Planning

• Stay Informed: Subscribe to IRS updates or follow reputable tax news sources.
• Engage Professionals: An experienced accountant or tax advisor can spot changes that impact your business and adjust your strategy accordingly.
• Review Quarterly: As laws shift, you may need to tweak estimated tax payments or business structures to optimize your position.