Top 20 Business Expenses to Write Off for Huge Tax Savings – Small Biz Numbers Girl (2024)

As a self-employed biz owner, you’re DOUBLE CHARGED on your tax bill.

Once for income tax, which is the tax we all know and love (to hate). And once for self-employment tax–which is an entirely separate tax. This tax alone can clean out your pocket up to 15.3% of your profit.

And if there’s ONE thing in this entire world that can reduce both your income and self employment tax at the same time…

It’s your business deductions.

So you definitely wanna be squeezing out as much tax savings as possible out of all of those $$$ you spend on your business. And that really comes down to 3 basic things:

1. Knowing what business expenses you should be writing off
2. Taking the steps to maximize your tax savings from these expenses
3. Deducting these expenses safely and correctly, so you can stay on Uncle Sam’s good side

We’re of course gonna be focusing on #1 here. I’m sharing with you 20 of the biggest business expenses that you should be keeping in your arsenal of tax deductions.

But before we get the party train rolling…

What we’re gonna be talking about here are the deductible business expenses. There are definitely other kinds of deductions and tax savings available to business owners. (And we’ll cover a lot of them throughout my blog). But here, the focus is on writing off the actual costs in your business.

And that’s all I have to say about that. Now, let’s get to that list now, shall we?

Startup costs are the expenses that your business incurs before it even opens its doors. You can deduct up to $5,000 of qualifying startup costs in the first year your business becomes operational. If your startup costs are greater than the first-year limit, then the additional amounts will be deducted evenly over the following 15 years (this type of deduction is called Amortization).

📝Examples: market & industry research costs, pre-opening employee wages & training, and pre-opening advertising & marketing.

Even in business, no owner is an island. So we might choose to outsource some of the more general or non-core tasks to other service providers. This is referred to contract labor, or outside services. Payments for these types of services are totally deductible.

📝Examples: freelancers, virtual assistants & OBMs, graphic & web designers, brand & marketing photographers.

Along the same lines as contract labor and outside services are legal and professional services. The only actual difference here is that these are services that require specialized training and knowledge, and perhaps even certification. These professional services are definitely deductible business expenses.

📝Examples:attorneys, accountants, consultants.

Let’s face it, when you have a business, you gotta toot your own horn. And in today’s day and age, marketing comes in many different flavors.

Maybe your business thrives on online ads. Or perhaps you’re old school and prefer using printed materials. Or maybe you have your own unique way of putting your business out there. However, you’re doing it, you can deduct the costs to advertise, market, or in any way promote your business.

📝Examples: online ads (e.g., Google ads, FB ads), physical ad materials (e.g., flyers, posters, business cards), and promotional trinkets (e.g., pens, keychains).

You might be thinking, how can things like pens and file folders be on the list of biggest deductible expenses? The thing is, no matter what kind of business you have, pretty much all businesses have back-end office and administrative tasks. And these are pretty much the tasks that are routine (aka never-ending). So for many, these so-called little expenses actually add up to be one of the largest deductions every year.

📝Examples: postage, writing materials, stationery & paper supplies, organizational supplies.

If there was a cost I’ve heard business owners grumble about, it would be merchant processing fees. And trust, I get it. I’ve don it myself a few times. These are the giant chunk of fees you get charged when you allow your customers or clients to pay with a credit card or other 3rd party payment processor. And you’re pretty much being charged on like every. single. transaction. I don’t have to tell you that these fees can add snowball into a hefty chunk of change, so you’ll definitely want to include them in your business write offs.

When doing bookkeeping, record the fees and the actual sales amount separately, rather than just lumping them together and recording the net sale/deposit.

📝Examples: Stripe, Square, and Paypal fees.

Sometimes business might take you away from home. It may be for something like visiting an out-of-state client, a business conference, or a trade show. When a trip is primarily for business purposes, it is considered a business trip, and costs for these types of trips are tax deductible. Just a note, the travel must be at least 100 miles away from the place you normally do business.

Also, throwing in a little bit of “me time” into the trip is typically okay. It can still be considered a business trip as long as your itinerary remains primarily for business. Be sure not to pay for any of the personal costs from the business, and not to include them in any deductions.

📝Examples: airline tickets, baggage handling, lodging, ground transportation.

Some of your major business purchases like are a special type of expense, and need a little extra TLC when deducting. More specifically, I’m talking about fixed assets (aka capital expenditures). These are the stuff you buy for your business that is meant to be used for a long time, at least one year.

And because they are long-term items, you typically can’t deduct the cost for these fixed assets all at once. Instead, they are written off over a period of time. This is referred to as depreciation. Think of depreciation as the “wear and tear” from using the asset over time.

📝Examples: office equipment, furniture, machinery, and buildings/real property (but not land, which doesn’t depreciate).

In some cases, it might make more financial sense for your business to rent or lease instead of buy. In these cases, you wouldn’t deduct the depreciation for the fixed assets. Since your business doesn’t own it, it’s not yours to depreciate. However, you can deduct any rental or lease payments for the property.

📝Examples: rent/lease payments for commercial real property (e.g., business office, storefronts), equipment, machinery.

Unless your business address is “30 Under-A-Rock”, chances are technology plays at least some part in your business. Heck! You’re probably racking up deductions just on internet services and tech alone! So make sure you’re claiming all those expenses on taxes so you “short circuit” your tax bill. (Hah? No? Okay.)

📝Examples: internet, software subscriptions, web hosting costs, domain.

Your business is valuable. So you gots to make sure to protect it. You can deduct the premiums paid to insure your business.

📝Examples: general business insurance, professional liability insurance, worker’s comp, and cyber insurance.

At some point, many businesses will incur some sort of “I.O.U.”. Whether this be a formal business loan used to grow our business, or something as simple as making business purchases on credit, most of our businesses have some sort of liability.

When you pay down business debts and liabilities, these payments are NOT deductible. They’re not actually expenses, they’re just your business returning something borrowed. However, if any part of the payment is for interest that is charged on business liabilities, this portion IS deductible as an expense.

When you record any payments for loans or any other liabilities, make sure you allocate it between the principal portion and the interest portion. This makes it much easier to determine which amounts are deductible later on when it’s time to file tax returns.

📝Examples: interest portion paid on business loans, lines of credit, credit cards, or any other business liabilities.

You can deduct all payments made for taxes charged to the business. You can also write off for all the licenses and permits that are required for you to operate your business.

📝Examples: payroll tax, franchise tax, LLC registration and renewal fees, business license.

If only we could open a business and POOF! We’re automatically gifted with all the business skills we need to run it…if only.

But you, being the savvy business owner that you are…you’re probably gobbling up all the resources you can get your hands on to help you hone in on these skills. And you know something? Most of these resources are deductible.

You can write them off if they maintain or improve the skills required to run your business. However, if these resources also turn you into an expert in an entirely different field, they cannot be deducted. (For most business owners, this is not an issue; they’re not trying to qualify for a whole different career, anyways).

You should also steer clear of deducting resources geared more toward personal development, even if these resources are “business” related. Think things like business mindset or business motivation. They might be great resources, but not-so-great deductions.

But again, if they help maintain or improve actual skills needed in your business, go ahead and include them in your list of write offs for taxes.

📝Examples: business books, business courses, business audiobooks.

Building your amazing, hard-working dream team doesn’t come cheap. But the good news is, all those payroll expenses become a pretty sizeable deduction come tax filing season. So if you think about it, not only does your staff help you grow your profits, they also help you save more of it in taxes. They’re a win-win! Think about that a little bit…then take a moment to show them some love.

📝Examples: salary & wages, overtime, paid-time off, year-end bonuses

And speaking of…those employee benefit programs that your business is funding to keep your employees happy and healthy? You can add that to the pile of deductible business expenses, too.

📝Examples: health insurance, dependent care assistance program, group-term life insurance

It’s just a little bit hard to run a business without the lights on…So whatever utilities you need to operate your business office, storefronts, work sites, or any other physical business location–go ahead and list those down as a tax deduction, too.

📝Examples: electricity, gas, water, refuse disposal

Sending a little something as a thank you to a client? Or passing out year-end gifts to remind your customers how much you value them? Whatever your reason, gifts to clients and your other business contacts can be the gift that keeps on giving…on your tax return.

Here’s the kicker: You can only write off up to $25 of the gift’s value to each contact (I know, right!). Unlike other tax limits or rates that are adjusted for inflation, the $25 limit hasn’t budged since 1962. Sigh. Regardless, this can still add up to a nice deduction.

And as a silver lining, engraving, gift wrapping, and other incidental items are not subject to the $25 limit.

📝Examples: gifts to clients, vendors, and other business contacts

Business meals are a totally legitimate tax deduction. The issue is, a lot of business owners don’t actually know the tax definition of a “business meal”, and mistakenly write off meals that don’t qualify. I don’t want you to be one of them, so here’s the criteria. If you want to write a meal off for taxes, it must meet ALL of the following criteria.

physically attended by you or an employee

also joined by at least business contact, such as a current/potential customer or client, vendor, or another business owner in your network

business must be discussed at some point of the meal

not lavish or extravagant (nice restaurants are fine, just use common sense and good judgment

paid fully by your business. You cannot deduct the expense if the “other person” paid. Also, refrain from splitting the check.

Usually, you can deduct 50% of the cost of each business meal. However, for tax years 2021 and 2022, 100% of the costs for business meals can be written off.

📝Examples: meals with clients, vendors, and other business contacts

Business meals are a totally legitimate tax deduction. The issue is, a lot of business owners don’t actually know the tax definition of a “business meal”, and mistakenly write off meals that don’t qualify. I don’t want you to be one of them, so here’s the criteria. If you want to write a meal off for taxes, it must meet ALL of the following criteria.

physically attended by you or an employee

also joined by at least business contact, such as a current/potential customer or client, vendor, or another business owner in your network

business must be discussed at some point of the meal

not lavish or extravagant (nice restaurants are fine, just use common sense and good judgment)

paid fully by your business. You cannot deduct the expense if the “other person” paid. Also, refrain from splitting the check.

Usually, you can deduct 50% of the cost of each business meal. However, for tax years 2021 and 2022, 100% of the costs for business meals can be written off.

These would be all the miscellaneous supplies and materials that you use in your business. These can also include supplies that are specific to your industry or particular business. For example, a photographer’s supplies may include film, while a vet’s may include pet supplies and small tools.

📝Examples: general supplies, business/industry-specific supplies, packaging.

News flash: most of the things you use for business are deductible! Even the ones you don’t find in this list. Of course, there are a few exceptions, but the rule of thumb is, if it’s a cost of doing business, it’s probably a business write off.

To be considered a business deduction, the expense must be:

• Ordinary – expenses that you commonly use in business, and is customary or usual for your industry or specific business
• Necessary – this does NOT mean it has to be an absolutely bare essential expense. It just means the expense should helpful and appropriate for your business.

Additionally, the expense should NOT be:

• Extravagant – The expense should be reasonable and not be a reckless or extreme purchase. What you don’t want is for your expenses to stick out like a sore thumb on your tax return. It’s all about using good judgment.
• Primarily personal – the expense itself should first and foremost to benefit the business, or specifically incurred for/by the business.

If the expense meets all of these criteria, it’s a pretty safe bet that you can include that bad boy in your business tax write-offs. But, of course, always talk to your tax pro.

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