25 Tax Deductions for Small Businesses in 2026

When you file taxes for your small business, the big question is which deductions can lower your taxable income — and where to start. The right tax preparation services for small business can help you stay on track. Below are 25 common small business tax deductions, grouped by category, with the 2026 details that matter most.

What Are Small Business Tax Deductions?

A small business tax deduction is an IRS-approved write-off that reduces your taxable income and lowers your tax bill. To qualify, an expense must be ordinary and necessary for your type of business (Internal Revenue Code §162) — common categories include home office costs, advertising, travel, rent, and utilities. Some owners also qualify for benefits like the qualified business income deduction or specific tax credits.

One quick distinction worth knowing: a deduction reduces your taxable income, while a tax credit reduces the tax you owe dollar-for-dollar. Reviewing deductions year-round — not just at tax time — helps you make smarter spending decisions and plan ahead with a tax professional.

What Changed For 2026: The One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made several business tax breaks permanent and more generous. Three changes matter most for small businesses:

• 100% bonus depreciation is permanent. Qualifying equipment and software acquired and placed in service after January 19, 2025 can be fully expensed in year one, with no scheduled phase-out.
• Section 179 expensing expanded. The annual cap rose from $1 million to $2.5 million, with the phase-out threshold raised to $4 million (indexed for inflation).
• The 20% QBI deduction is permanent. The Section 199A deduction for pass-through owners no longer expires, and the phase-out thresholds were widened.

To weigh the pros and cons of hiring a tax professional for your business, read our related guide.

25 Tax Deductions Every Small Business Owner Should Know

Not every tax deduction will apply to your situation. That said, here are 25 common ones that every business owner should know when it comes to determining what ordinary and necessary expenses you may be able to claim: 

1. Home office deduction: Lets you claim a share of rent, utilities, and mortgage interest if you use a dedicated space at home regularly and exclusively for work. The simplified method lets you deduct $5 per square foot, up to 300 sq ft (a $1,500 max)—see the IRS home office guidance.
2. Office supplies: Items you use for work—shipping materials, printer ink, or software subscriptions—are deductible.
3. Office furniture: Desks, chairs, and filing cabinets may qualify for depreciation or immediate expensing. Under the One Big Beautiful Bill Act, the Section 179 expensing cap rose to $2.5 million for 2025 onward, and 100% bonus depreciation is now permanent.
4. Business property and equipment: Computers, machines, and other business assets may qualify for a deduction or depreciation depending on the asset. Many qualifying purchases can now be fully expensed in year one via Section 179 or 100% bonus depreciation.
5. Marketing expenses: Advertising costs such as website fees, ads, and content creation may be deductible.
6. Legal and professional fees: Fees for accountants, attorneys, and consultants are often deductible as ordinary business expenses.
7. Independent contractors: Payments to contractors are deductible when tied to your business operations (issue a 1099 where required).
8. Employee wages and payroll taxes: Wages and employer-paid payroll taxes (the Social Security and Medicare portions) are deductible.
9. Business insurance premiums: General liability, workers’ comp, and commercial property insurance are deductible.
10. Health insurance premiums: Self-employed owners can often deduct premiums for themselves, spouses, and dependents (with limits).
11. Retirement plans: Contributions to a plan such as a solo 401(k) or SEP-IRA may be tax-deductible.
12. Qualified business income (QBI) deduction: Many pass-through owners can deduct up to 20% of qualified business income. The OBBBA made this 20% Section 199A deduction permanent—details on the IRS QBI page.
13. Business loans and interest: Interest on business loans, lines of credit, and certain business credit cards is often deductible.
14. Mortgage interest: If you own property used for business, you may deduct the portion of mortgage interest tied to that space.
15. Lease payments: Rent and lease payments on business vehicles, equipment, and machinery are often deductible.
16. Property taxes: Property taxes on business-related property you own are generally deductible.
17. Business travel expenses: Flights, hotels, and transportation that are ordinary and necessary for business travel may be deductible.
18. Business meals: Meals with clients or team members for legitimate business reasons may be deductible. Business meals are generally 50% deductible—keep the receipt and note the business purpose.
19. Education expenses: Courses, certifications, conferences, and training that improve your business skills may qualify.
20. Software subscriptions and hosting fees: Software you use for the business and website hosting fees may be deductible.
21. Business property repairs and maintenance: Repairs that keep assets in working condition may be deductible.
22. Registration fees and licenses: Business licenses and registration fees required to operate legally are typically deductible.
23. Startup and organizational costs: Filing fees, market research, and similar costs from forming your business may be deductible. You can generally deduct up to $5,000 of startup costs in your first year, with the rest amortized over 15 years.
24. Business utilities and internet: Electricity, gas, water, phone, and dedicated business internet are deductible when used for operations.
25. Bad debt: If you previously reported income you later couldn’t collect, certain worthless business debts may be deductible.

How Do Self-Employed Individuals Claim Tax Deductions?

If you’re self-employed, you would typically use Schedule C (Form 1040) to report business expenses and calculate your net profit. The resulting net profit (gross income minus expenses) is what you would pay income tax and self-employment tax on. 

Common Tax Deduction Mistakes Business Owners Make

Some of the most common tax deduction mistakes business owners make are: 

• Inaccurate or incomplete record-keeping that results in missing potential deductions or claiming too many deductions. 
• Making record-keeping errors due to mixing business and personal expenses.
• Ignoring small recurring expenses like software subscriptions. 
• Not keeping mileage logs or proof for vehicle deductions. 
• Missing depreciation on equipment purchases. 

If you aren’t sure where to start when calculating deductions, have a complex business situation, or just want to handle the process more efficiently, working with a professional tax preparer can make things easier. We offer services that can help at Milestone. 

Frequently Asked Questions

What’s the difference between a tax deduction and a tax credit?

A deduction lowers your taxable income; a credit lowers the tax you owe dollar-for-dollar. A $1,000 credit saves you $1,000, while a $1,000 deduction saves you a percentage based on your tax rate.

Can I deduct my home office?

Yes, if you use the space regularly and exclusively for business. The simplified method is $5 per square foot up to 300 sq ft (a $1,500 maximum); the regular method deducts a share of actual home costs.

Are business meals fully deductible?

Generally no — business meals are usually 50% deductible. Keep the receipt and note who you met with and the business purpose.

What about vehicle expenses?

Business use of a vehicle is deductible using either the IRS standard mileage rate or your actual expenses. Either way, keep a contemporaneous mileage log. (This is a common deduction worth adding to the list.)

Did the OBBBA change small business deductions?

Yes. It made 100% bonus depreciation permanent, raised the Section 179 cap to $2.5 million, and made the 20% QBI deduction permanent.

How Milestone Helps With Strategic Tax Planning For Small Businesses

Managing taxes for your small business is crucial to ensure you hit deadlines, report accurately, and deduct the appropriate expenses where you can. We offer remote tax preparation services at Milestone that make the process much easier. 

Whether you want to accurately file your year-end tax return or strategically plan throughout the year to optimize your tax situation, we can help with all your needs to ensure you’re making educated business and tax decisions. 

Additionally, we offer several other services that can help small businesses, including bookkeeping, accounting, human resources, and fractional CFO services. 

Want to learn more? Get in touch with Milestone today to learn how we can help you manage small business taxes effectively.