5 Essential Tax Deductions Every Small Business Should Know

Running a small business comes with many financial responsibilities, and maximizing your tax deductions is one of the best ways to keep more of your hard-earned money. Understanding which deductions you qualify for can significantly lower your taxable income and reduce the amount you owe to the IRS. Here are five key deductions every small business owner should be aware of.

1. Home Office Deduction

If you use a portion of your home exclusively for business, you may qualify for the home office deduction. The IRS allows small business owners and self-employed individuals to deduct a percentage of their home expenses, including:

- Rent or mortgage interest

- Utilities

- Property taxes

- Homeowners insurance

To qualify, your home office must be a dedicated workspace used regularly and exclusively for business activities. The simplified method allows a deduction of $5 per square foot (up to 300 square feet), while the actual expense method calculates deductions based on the percentage of your home used for business.

2. Business Vehicle Expenses

Do you use your car for business purposes? Whether you're meeting clients, making deliveries, or traveling for work, you can deduct vehicle expenses. You can choose between:

- Standard Mileage Deduction – The IRS sets a mileage rate each year (check the latest [standard mileage rates](https://www.irs.gov/tax-professionals/standard-mileage-rates)).

- Actual Expenses – Deduct the percentage of business-related expenses such as gas, maintenance, insurance, and depreciation.

To support your deduction, keep a mileage log that records each business trip's date, purpose, and miles driven.

3. Equipment and Office Supplies

Purchasing necessary office supplies and equipment for your business can be deducted as an expense. This includes:

- Computers, printers, and office furniture

- Business software and subscriptions

- Notebooks, pens, and other essential supplies

Larger purchases, such as expensive machinery or technology, may qualify for Section 179 deductions, allowing you to deduct the full purchase price instead of depreciating it over several years.

4. Marketing and Advertising Costs

Investing in marketing is essential for business growth, and advertising expenses are fully deductible. This includes:

- Website design and hosting fees

- Social media ads and Google Ads

- Business cards, flyers, and print materials

- Sponsorships and networking events

If you hire a professional marketing service to manage your brand, those fees are deductible as well.

5. Retirement Contributions

If you contribute to a retirement plan such as a SEP IRA, SIMPLE IRA, or solo 401(k), you may be eligible for a tax deduction. Contributing to a retirement plan not only helps you save for the future but also lowers your taxable income for the year.

Consider consulting with a CPA to determine the best retirement savings strategy for your business and how to maximize your tax benefits.

Understanding tax deductions can help small business owners reduce tax liability and increase savings. Keeping detailed records and working with a trusted CPA ensures that you maximize all eligible deductions while staying compliant with IRS regulations.

If you need help navigating small business tax deductions, ASK CPA is here to help. Contact us today to schedule a consultation and make tax season stress-free.