The ultimate small business tax deduction guide (what you can really write-off)

For small businesses and startups, every dollar counts. Tax deductions for small businesses can reduce taxable income and help companies keep a larger revenue share. After all, the point of a business is to make money!

Many entrepreneurs miss out on valuable small business write-offs or hesitate to claim them due to concerns about compliance. According to Forbes, 93% of businesses leave money on the table at tax time. Between juggling sales, operations, and everything in between, business owners don’t have the time to learn the tax code’s nuances.

Maximizing deductions calls for rigorous record-keeping and an understanding of what’s legally deductible. That’s where Pilot shines. Our bookkeeping and tax services let small business owners capture all eligible deductions while staying IRS-compliant on federal and state levels.

So, let's cut to the chase and talk about what you can actually write off.

Why small business tax deductions matter

Tax deductions directly reduce your taxable income, lowering the amount owed to the IRS. Pilot solves the problem of streamlining tracking and claiming eligible deductions, resulting in a significant cut in their tax bill and a better annual bottom line.

The IRS allows deductions for “ordinary and necessary” expenses—or, in other words, those essential to running a business. But many business owners either miss legitimate deductions or can't properly document them. Both cost you money.

When you fail to claim a deduction, you’re volunteering to pay extra taxes. That’s money that could be reinvested in hiring, marketing, or growth initiatives. On the other hand, improperly claiming deductions can trigger IRS scrutiny. Nobody wants that, so documenting expenses correctly is step one towards maximizing tax deductions for small businesses.

14 common small business tax deductions you can claim

Here are 14 small business tax deductions that, if done correctly, can lead to massive savings. 

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• Office expenses (rent, utilities, supplies)
• Business-related travel (flights, hotels, meals)
• Vehicle expenses (mileage, maintenance)
• Home office deduction (eligibility and calculation)
• Employee salaries and benefits
• Professional services (Bookkeeping, legal, consulting)
• Marketing and advertising
• Software and subscriptions
• Business insurance premiums
• Retirement plan contributions
• Educational expenses (courses, workshops, professional development)
• Bank fees and interest on business loans
• Startup costs for new businesses
• Health insurance premiums for the self-employed

1. Office expenses (rent, utilities, supplies)

If you rent office space, rent payments, utilities, and office supplies are all deductible business expenses. This includes:

• Lease payments for office space
• Electricity, water, internet, and phone bills
• Office furniture and supplies (paper, pens, computers, printers)

Pro tip: Even if you run your business from home, you may still be able to claim a home office deduction (more on that below).

2. Business-related travel (flights, hotels, meals)

Getting paid to travel and getting a tax break from said travel? It sounds too good to be true. Not the case. Business trips can be tax-deductible if they are necessary and directly related to your business. Eligible expenses include:

• Airfare and hotel stays
• Meals and entertainment (50% deductible)
• Taxi, rental cars, and other transportation costs

IRS compliance tip: Keep detailed receipts and a travel itinerary explaining each trip's business purpose. In the event of an audit, providing proof of your tax claims is the best way to avoid fines.

3. Vehicle expenses (mileage, maintenance)

You can deduct mileage and related expenses if you use a personal or business vehicle for work. There are two ways to claim this deduction:

1. Standard mileage rate: The 2025 IRS-set mileage rate is 70 cents per mile.
2. Actual expenses: You can deduct gas, repairs, insurance, depreciation, and maintenance costs based on the percentage of business use.

Pro tip: Use a mileage tracking app to log your driving. Most apps let you easily categorize when you’re conducting a “business trip” vs. a “personal trip,” which is very important if you’re using your personal car for both business and pleasure.

4. Home office deduction (eligibility & calculation)

You may qualify for the home office deduction if you run your business from home. This applies to:

• A dedicated workspace used exclusively for business (up to 300 square feet)
• A percentage of rent/mortgage, utilities, and internet costs

If you have a two-bedroom apartment and that second bedroom is exclusively used for business? That’s deductible. But trying to claim part of your one-bedroom apartment? No good, and take it from us, don’t try to mess with the IRS.

5. Employee salaries and benefits

If you have employees, wages, salaries, and benefits are fully deductible. This includes:

• Payroll taxes
• Health insurance and retirement contributions
• Paid time off

Even independent contractors are deductible—just ensure they receive a 1099-NEC if they are paid over $600 annually.

6. Professional services (bookkeeping, legal, consulting)

Any professional service necessary for running your business is deductible, including:

• Bookkeeping and tax preparation (like Pilot!)
• Legal and consulting fees
• HR and payroll services

In case it wasn’t obvious, that means Pilot will save you money on your taxes. Then, you can write off our services on next year’s tax form and save money that way, too.

7. Marketing and advertising costs

Investing in business growth through marketing and advertising is fully deductible. This includes:

• Paid digital ads (Google, Meta, LinkedIn)
• Website costs and SEO services
• Business cards, brochures, and direct mail campaigns
• Out-of-home campaigns like billboards, bus wraps, or benches
• Video and photography productions

8. Software and subscriptions

Many businesses rely on cloud-based software and digital tools, which are tax-deductible. This includes:

• Accounting software (QuickBooks, Pilot)
• CRM platforms (HubSpot, Salesforce)
• Productivity tools (Slack, Zoom)

This is a friendly reminder that Pilot is software, too, so our services can easily be used as tax deductions for small businesses.

9. Business insurance premiums

Protecting your business is crucial, and insurance premiums are deductible. This includes:

• General liability and professional liability insurance
• Workers’ compensation insurance
• Cyber liability coverage
• Unemployment insurance

10. Retirement plan contributions

Small business owners can deduct contributions to retirement plans such as:

• SEP-IRA – Contributions are deductible up to 25% of compensation.
• Solo 401(k) – Deduct contributions to $69,000 (2024 limit).

11. Educational expenses (workshops, courses, professional development)

Any educational expense that enhances business skills is deductible. This includes:

• Online courses and training programs
• Business books
• Industry conferences and seminars
• Certifications or licenses

If you have employees, you understand the importance of ongoing training, mentorship, and professional growth. We always like to help our clients find tax breaks when they’ve invested in their people, and we can identify tax return opportunities on that investment. 

12. Bank fees and interest on business loans

If you’ve taken out a business loan, you can deduct:

• Interest on business-related loans and credit cards
• Bank fees, transaction fees, and payment processing fees

13. Startup costs for new businesses

New business? Deduct up to $5,000 in startup expenses on line-items such as:

• Business formation fees
• Legal and consulting costs
• Initial marketing expenses

14. Health insurance premiums for self-employed individuals

If you’re self-employed and pay for your own health insurance, your premiums are deductible—even for your family. Some restrictions may apply to this depending on your state and the size of your business.

How to maintain accurate records for tax deductions

Pilot is here to help maximize your tax savings potential. To get to that point, organized, accurate bookkeeping is required. Clean books aren't just satisfying—they're essential for claiming every deduction your small business deserves. Here's what works:

• Use accounting software: Automated bookkeeping tools, like Pilot’s bookkeeping platform, streamline expense tracking and ensure all transactions are properly categorized.
• Keep every receipt: The IRS requires proof for many deductions, so maintain digital or physical copies of receipts, invoices, and bank statements. A simple scanning app can help store receipts securely.
• Separate business and personal finances: Mixing personal and business expenses can create tax headaches. Open a dedicated business bank account and credit card to simplify tracking and avoid compliance issues.
• Log mileage and travel expenses: If you deduct vehicle or travel expenses, keep a detailed mileage log and record business-related transportation, lodging, and meals. Many mobile apps are available to help you organize your drives.

Accurate record-keeping doesn’t just help at tax time—it ensures financial clarity year-round. With Pilot handling your books, you'll have clean records without the headache. The first year with us might involve some cleanup, but after that? Smooth sailing. The more regularly your books are maintained, the easier it is to find your small business tax deductions. 

Can you really write that off? Tax myths that'll cost you

You may have heard through the rumor mill about some tax deductions. We’ll even admit that certain deductions aren’t as straightforward as they seem. So, let’s set the record straight:

Myth: “I can deduct all meals.”
Fact: Only 50% of business meals are deductible unless provided at an office event.

Myth: “Clothing is deductible.”
Fact: Unless required for your job (e.g., uniforms, safety gear), it’s not deductible.

Myth: “I don’t need receipts for small expenses.”
Fact: The IRS may request proof, so always keep records. This includes all physical and digital receipts. The best practice is to store all receipts in one digital place, which may require you to purchase a scanner to upload any physical-only receipts.

Maximize your deductions with Pilot’s bookkeeping & tax services

Small business tax deductions can dramatically reduce your tax bill, but tracking every eligible expense while staying compliant can be time-consuming and complex. Many business owners miss deductions because they don’t have the time or tools to stay organized. That’s where we’re here—to help you capture every deduction and maximize your tax savings without the hassle.

Specifically, Pilot helps solve the common issues faced by small business owners and entrepreneurs:

• Automated bookkeeping: Pilot ensures your expenses are accurately tracked and categorized so you never miss a deductible expense.
• Integrated tax preparation: By combining bookkeeping and tax preparation in one place, Pilot maintains your back office processes for a stress-free tax season.
• Expert support: Our experienced tax professionals provide guidance to ensure compliance on state and federal levels while maximizing deductions.

With Pilot’s bookkeeping and tax services, you can focus on running and growing your business while we handle the financials. We’ll help you keep organized records, avoid costly mistakes, and ensure every tax deduction is accurately claimed. 

Ready to Maximize Your Small Business Tax Deductions?

You've built a business because you're good at what you do—not because you love tax code. We're good at what we do: making sure you don't overpay taxes.

While you focus on growth, we'll handle the numbers. Because nobody starts a business dreaming about tax forms.

Ready to stop overpaying? Let's talk.

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