25 must-use tax breaks for small businesses in 2025

While small business owners are busy running the business and managing cash flow, it’s important to carve out a little time to ensure you keep as much money as possible in your pocket. 

There are many tax breaks for small businesses—and you probably want to know all of them to help reduce your tax liability and keep more money in your small business. 

We’ve pared down 25 of the highest impact and most generous tax deductions and write-offs available to small businesses in 2025, examples of each, and how much you can deduct.

Jump to:

1. Startup costs
2. Home office
3. Retirement plan contributions
4. Depreciation
5. Section 179
6. Health insurance
7. Meals
8. 1099 deductions
9. Travel
10. Gifts
11. Bad debt
12. Education
13. Auto expenses
14. Taxes
15. Child care
16. Charitable contributions
17. Marketing and advertising
18. Rent
19. Utilities
20. Subscriptions
21. Interest
22. Salaries and wages
23. Legal and professional fees
24. Internet and phone
25. Insurance

Tax breaks FAQ

Small business tax prep checklist

1. Startup costs

Amount: Up to $5,000

Small business owners may take a startup cost deduction of up to $5,000 in startup costs in their first year of business. This can include legal fees, employee training, and market research. 

You can only take this $5,000 deduction ‌if your total startup costs are $50,000 or less. If your startup costs exceed $50,000, you'll see a reduction in your allowable deduction. If your startup costs are over $55,000, you won't be able to take the deduction.

2. Home office 

Amount: Depends on the method you use 

Small business owners who work from home or have a dedicated home office can take this deduction. The home office tax deduction amount depends on the percentage of the home you use for business purposes. There are two methods for determining your home office deduction: 

Simplified method

This method is the easiest for home office deductions. You can deduct $5 per square foot of your home office space, but only up to $1,500. 

Your home office deduction for the simplified method is:

Square feet of your home office x $5 

So, even if your home office is over 300 square feet ($5 x 300 square feet = $1,500), you can only take $1,500 as a deduction.

Regular method

The regular method is a bit more complicated, but it also means you can deduct more expenses. With the regular home office deduction, you’ll need to keep track of all your home expenses. This includes the cost of home repairs, upkeep, rent, and utilities. 

For this method, your allowable deduction would be: 

(Square feet of your home office / total home square feet) x home expenses

For example, say your home office is 300 square feet and your home is 1,500 square feet. Your total home expenses for the year were $10,000. Your deduction using this method would be $2,000.

3. Retirement plan contributions

Amount: Varies by the plan you have

Making contributions to retirement accounts is a smart move for your financial future—and they are business write-offs. The amount you can deduct depends on the type of plan you have or set up. 

For example, the limits for 2025 are: 

• 401(k) plans: $23,500 ($31,000 if you’re 50 or older)
• Simple IRAs: $16,500 ($20,000 if you’re 50 or older) 
• Traditional IRAs: $7,000 ($8,000 if you’re 50 or older) 

Matching contributions—those made to your employees’ accounts—are tax deductible to a limit. The total limit for a 401(k), including employee and employer contributions, is $70,000 for 2025 ($77,500 if you’re 50 or older).

4. Depreciation

Amount: up to 100% of the depreciation expense

Depreciation is a tax break that allows businesses to write off the cost of certain assets over time. This can include equipment, vehicles, and property.

For most assets, nearly the entire purchase price is tax deductible over time. By deducting part of the cost every year, businesses can reduce their taxable income and lower their tax bill.

5. Section 179 

Amount: Up to 100% of the asset's cost, with limits

Section 179 of the tax code allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. This is a powerful incentive to invest in your business, as it allows you to write off a significant expense upfront rather than depreciating it over time.  

For the 2024 tax year, the maximum Section 179 deduction is $1,220,000. However, this deduction starts to phase out if the total cost of qualifying property placed in service during the year exceeds $3,050,000. It's important to note that Section 179 can be used for new and used equipment, making it a flexible option for businesses of all sizes.  

How to take advantage of Section 179: You'll need to elect to do so on your tax return (Form 4562). Be sure to keep detailed records of your asset purchases, including the date placed in service and the percentage of business use, to ensure you can accurately claim this deduction.  

6. Health insurance

Amount: 100%

Small businesses can deduct the entire cost of health insurance premiums for their employees as business expenses for taxes. To be deductible, however, employers must generally pay 50% or more of their employees’ premiums. 

Self-employed individuals, including independent contractors, freelancers, and sole proprietors, can also deduct 100% of the self employed health insurance premiums they pay for themselves and their families.

7. Meals

Amount: 50% or 100% 

Meals can also be small business deductions—but it’s either 50% or the entire tab. Meals for employees and companywide social events are 100% tax deductible, such as food for holiday parties. 

Business meals are 50% tax-deductible for clients or prospects. The meal must be business-related and reasonably priced, and you or an employee must be present. 

Note that entertainment expenses are no longer tax-deductible. Meals at entertainment events are still tax deductible if bought separately. 

8. 1099 deductions

Amount: 100% 

Small business owners or self-employed individuals also have 1099 tax deductions. These 1099 write-offs can reduce your tax liability, whether you’re an owner or a freelancer. 

If you hire a contractor or freelancer, you can deduct the entire cost. Say you pay a freelancer $1,500 for work on your website. The entire $1,500 is fully tax-deductible.

If you’re a freelancer or contractor who receives a 1099-NEC, you may be eligible for certain 1099 deductions, such as claiming part of your self-employment tax as a deduction.

9. Travel

Amount: 100% 

If you need to travel out of town for business, the cost of getting to and from your destination is tax-deductible. Lodging expenses are also 100% tax-deductible. 

Travel tax deductions include: 

• Plane tickets
• Hotels 
• Rental car costs
• Parking fees
• Cost of taxis or ride-sharing

The primary purpose of your trip must be business. You may engage in leisure activities on the trip, but business must be the main reason for the trip. You should also keep records of your business travel expenses, including receipts, invoices, or other documents showing your expenses.

10. Gifts

Amount: Up to $25 per person

Gifts for clients, customers, and employees are deductible. But there’s a catch—the limit is $25 per person each year. Promotional items with your company's name, such as calendars or pens, don’t count toward that limit if they cost $4 or less.

11. Bad debt

Amount: 100% 

Small businesses that cannot collect a debt can write it off and get a tax deduction. It has to be a business debt—not a personal one. This can include loans to employees, suppliers, or customers, as well as uncollectible accounts receivables. 

To deduct it, you generally have to have previously included the debt amount in your income or lent out your cash and show the intent to make a loan and not a gift. You can then deduct a business bad debt from your gross income when calculating your taxable income.

12. Education

Amount: 100% 

The IRS offers tax breaks for small businesses that pay for education expenses. To qualify for the education deduction, costs must add value to the business and improve or maintain necessary skills.

Tax deductions examples for valid education expenses include:

• Classes
• Workshops
• Seminars
• Publication subscriptions
• Books

However, general education courses unrelated to the business or an employee's role typically won't qualify for this small business tax deduction. You may also deduct the cost of work-related education expenses if you’re a self-employed individual. 

13. Auto expenses 

Amount: 100% or percent of vehicle usage

Small business owners can deduct auto expenses, even if it’s their own car. If the vehicle is solely for business use, all costs are tax-deductible. If it’s for business and personal activities, the standard mileage rate or actual expenses method will determine the deduction amount.

Standard mileage rate

The standard mileage rate is the easiest. You track your miles and multiply that by the IRS standard mileage rate. For 2025, the rate is $0.70 per mile. 

For example, if you used your personal vehicle to drive 5,000 miles for business, your deduction would be $3,500, or 5,000 x $0.70. 

Actual expenses

The actual expenses method means you track all vehicle-related expenses, such as insurance, fuel, and maintenance. You’ll also track the number of miles you drove for business. Your deduction amount will be the total expenses for your car multiplied by the percentage of business-related miles. 

Total vehicle expenses x (business miles / total miles)

14. Taxes

Amount: 100% 

Any business-related taxes you pay are tax deductible. This includes taxes you pay for payroll, such as Social Security and Medicare taxes. 

Other examples include:

• State and local income tax
• Sales tax for business purchases 
• Real estate tax for business property 

Note that certain business taxes are not tax-deductible, including estate and gift taxes, as well as federal income taxes. 

15. Child care

Amount: 0% 

Childcare expenses are generally not tax-deductible business expenses. However, employers that provide child care can get tax credits if they meet certain requirements. Tax credits allow you to deduct a dollar-for-dollar amount on your tax return to reduce the income tax you owe. 

To qualify for these credits, the employer must ensure ‌childcare providers meet state licensing requirements. The childcare must also be necessary for the employee to work. These tax credits may also vary by state. 

16. Charitable contributions

Amount: Generally 60% 

There are tax breaks for small businesses that make charitable contributions. . 

Small business owners can deduct: 

• Up to 100% of charitable contributions if it's on their personal taxes. Small business owners who run sole proprietorships, partnerships, or limited liability companies (LLCs) can take advantage of this. 
• Up to 25% of the contribution is deductible if the business operates as a corporation.

17. Marketing and advertising

Amount: 100%

Business marketing costs for small businesses are fully tax-deductible. This includes expenses for campaigns to generate or retain customers.

Examples of deductible advertising costs include:

• Ads on social media platforms
• Newspaper and TV ads
• Sponsoring events or conferences

To claim the deductions, business owners must keep records of all marketing expenses, including receipts, invoices, and payments, to verify the costs.

18. Rent

Amount: 100%

Rent payments for business properties are generally 100% tax-deductible. This includes rent for office space, retail space, manufacturing facilities, storage units, and other spaces used exclusively for business purposes.

Important considerations: 

• Exclusive business use: To deduct the full amount of rent, you must use the space solely for business. If you use any part of the space for personal use, you'll need to calculate the percentage used for business and deduct only that portion of the rent.
• No Option to Purchase: If you have an agreement to purchase the property at some point, the payments are not considered rent and are not deductible.

Be sure to keep thorough records of your rental agreement and any related expenses, such as leasehold improvements.

19. Utilities

Amount: 100%

Utilities are another common business expense that is often tax-deductible. This includes:

• Electricity
• Gas
• Water
• Trash removal
• Internet
• Phone

Similar to rent, if you use utilities for both business and personal purposes, you can only deduct the portion attributable to business use. Keep accurate records to support your deduction, such as separate meters for business and personal use if possible.

20. Subscriptions

Amount: 100%

Subscriptions you have as part of your business are 100% tax deductible. This includes subscription software services, trade publications, and online resources necessary for your business. 

Common software subscriptions that your business can deduct include:

• Project management tools
• Cloud storage
• Accounting software

Most business subscriptions are ordinary and necessary costs of operating a company. They can include membership dues as well.

21. Interest

Amount: 100%, up to 30% of taxable income

Interest your business pays on debt, such as loans or credit cards, is tax-deductible. Your business must be legally liable for the debt. Businesses with revenue of $27 million or less can deduct 100% of their interest expenses. 

For all others, there is a limit on the tax deductibility of interest expenses. The deduction cannot be above 30% of your taxable income. Say your business has a taxable income of $50,000 and pays $25,000 in interest. You can only deduct $15,000 ($50,000 x 30%).

22. Salaries and wages

Amount: 100%

Small business owners can deduct the entire cost of paying employees. This includes salaries, wages, bonuses, and benefits. However, salaries must be reasonable and ordinary. 

To qualify for deducting employee compensation costs, small business owners must properly document all payments, including keeping detailed records of hours worked, pay rates, and any additional benefits or bonuses.

23. Legal and professional fees

Amount: 100%

All of your legal fees as a small business owner are tax-deductible, assuming they’re necessary for your business.

Deductible legal fees can be for such things as:

• Tax issues
• Discrimination claims
• Business sales

Legal fees unrelated to your business, such as those for personal matters or hobbies, are not deductible.

24. Internet and phone

Amount: 100%

Phone and internet expenses for small businesses are eligible for deductions. All phone or interest usage for your business is tax deductible. If you use your phone and internet for both personal and business, only business-related use is deductible.

25. Insurance

Amount: 100%

Business insurance premiums are typically 100% tax-deductible. This is a valuable deduction, as it can help offset the cost of protecting your business from various risks.

Types of deductible Insurance:

• General liability insurance: This covers your business if you're held responsible for bodily injury or property damage.
• Professional liability insurance (errors and omissions): Protects against claims of negligence or errors in your professional services.
• Product liability insurance: If your business manufactures or sells products, this covers claims of injury or damage caused by those products.
• Property insurance: Covers damage or loss to your business property, including buildings, equipment, and inventory.
• Business interruption insurance: Provides coverage for lost income and expenses if your business is forced to close temporarily due to a covered event (e.g., fire, natural disaster).  
• Workers' compensation insurance: Covers medical expenses and lost wages for employees injured on the job.
• Commercial auto insurance: Required if your business owns vehicles; covers accidents and other vehicle-related incidents.
• Data breach insurance: Helps cover the costs associated with a data breach, including legal fees, notification costs, and credit monitoring for affected individuals.
• Directors and officers (D&O) insurance: Protects directors and officers from personal liability for decisions made in their official capacity.

These are just some of the common types of business insurance that can be deducted, so be sure to explore all applicable options for your specific needs.

Stay on top of your business taxes—download the small business tax deductions checklist below. It includes a list of tax deductions and deductible business expenses. 

Find peace of mind come tax time

Figuring out how to write off business expenses doesn’t have to be difficult. Being a small business owner is stressful enough. Tax breaks for small businesses provide valuable cash to reinvest in your business. But staying on top of new tax breaks and tracking deductions can be time-consuming. 

Small business accounting software like QuickBooks can help manage these write-offs easier. You’ll find tax time a bit easier—and hopefully, a lower tax bill. 

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