12 Non-Deductible Expenses Small Business Owners Can’t Claim (2026)

After attending her local Chamber of Commerce meetings and presenting, or exhibiting, at various trade shows, small business owner Becky Beach was shocked to learn that the $1,000+ she spent on business attire to look extra stylish and professional was a non-deductible business expense. “I was thinking I could deduct the clothing expenses, which is why I paid so much for my new wardrobe,” she says.

She’s not the only one who has had a nasty surprise on their tax return. Often, small business owners get some small consolation from the money they spend on business purposes and niceties because they believe it will be tax-deductible at the end of the tax year. And, just like Beach, they are often disappointed.

Sometimes, it’s because of the nature of the expense—many investments self-employed people make are considered capital expenses and are just not tax-deductible—but, other times, it’s because of confusion over new laws impacting small business tax deductions.

We talked to some accountants to get the scoop on non-deductible business expenses that they routinely find their clients believe might be tax-deductible. While they still might be smart expenses to invest in your business, it’s good to know what the IRS will say about them come tax time.

Jump to:

1. Extravagant business gifts
2. Volunteer time
3. Daily commute expenses
4. Clothing costs
5. Meals for employees
6. Business travel expenses for spouses
7. Entertainment
8. Social membership dues
9. All marketing costs
10. Fines and penalties
11. Political contributions and lobbying
12. Land purchases and improvements

2026 tax considerations for small business expenses

Be careful what you deduct

Not every dollar you spend running your business qualifies for a write-off. Here are a few non-deductible expenses that are commonly misunderstood.

1. Extravagant business gifts

Your customers literally pay your bills, when you think about it, so it’s only natural to want to say thank you with a tangible object of your appreciation—whether it’s at the holidays, on their anniversary of doing business with your company, or after a particularly large or complex project. However, you’ll want to check the price tag on the item you are purchasing. Business gifts are only deductible up to $25 per customer. So, if you want to be able to deduct the whole amount, you should probably choose a smaller bouquet of flowers (or just spring for it if they’re worth it, but don’t expect to be compensated).

2. Volunteer time

Say you’re a graphic artist who bills out your time at a healthy hourly rate, and you do 10 hours of pro bono work, designing a website for a cause that’s dear to your heart. Unfortunately, you can’t write off the fair market value of your volunteer time. Many small businesses think that volunteer time can be deducted the same way charitable contributions can. This is unfortunately not the case.

However, you can deduct unreimbursed expenses such as gas, parking, and tolls if you use your vehicle to perform volunteer work for a qualified charitable organization. This applies whether you are traveling to the organization's site or to another location to attend meetings or carry out duties directly related to your volunteer service. For example, you can deduct expenses if you travel out of town for a board meeting. These deductions must be claimed as itemized deductions on Schedule A of your individual federal tax return. They cannot be deducted as a small business expense on Schedule C.

Note that the standard mileage rate for volunteer work differs from that for business use. It is .14 per mile for charitable organizations versus .70 per mile for business use.

3. Daily commute expenses

Say you work in a coworking office space or have a small office. The expenses associated with commuting each day are non-deductible, including your parking. Even though the travel is being done for work, the IRS still considers it personal use. However, if you drive to a client site or a meeting, those expenses can all be included on your taxes at the .70 per mile driven, as noted above. Another method is to use the “actual expense” associated with using your personal vehicle.

Your car itself—whether a lease or purchase payment—is also not tax-deductible. Another way small business owners might try to skirt this and deduct their car payment is “by slapping a logo on it,” says tax accountant Thomas Williams, but that also would not be admissible.

4. Clothing costs

We already covered the fact that those fancy clothes aren’t deductible—well, unfortunately, neither is cleaning them, says David Danic, director of tax at Summit CPA Group, who finds that many clients want to deduct their dry cleaning costs. “However, if you’re traveling for business and need to get the laundry dry-cleaned while away, that is deductible.” Check the IRS website for additional rules pertaining to business tax deductions for travel, gift, and car expenses.

One exception to note is if you are required to wear a uniform for work and have to buy the pieces yourself, you may then deduct that expense.

5. Meals for employees

Love to show your appreciation to your hard-working team by surprising them with pizza? Or, maybe you just like to have specialty brew available to save them a trip to the coffee place? Unfortunately, you can only deduct 50% of the cost of meals or snacks you buy for your team. Many small business owners learn that the hard way. “We used to have a working lunch every other Friday out of the company’s pocket; I thought our bills were 100% deductible since it was a business expense, so I was surprised when my accountant told me I could only deduct half,” says Harsha Reddy, co-founder and editor-in-chief of SmallBizGenius. The exception: meals provided at occasional company events, like holiday parties or employee picnics, are 100% deductible. Additionally, meals provided “for the benefit of the employer” to more than half the employees are 100% deductible - an example would be an employer who orders pizza for employees working late on Friday night to encourage them to stay longer at work.

6. Business travel expenses for spouses

If you’re headed to a convention or other meeting that involves business travel, you might want to bring your spouse or family along. Unfortunately, even if the primary purpose of the travel is business-related, you can’t expense the airfare and associated expenses for your significant others.

However, you can deduct your business travel expenses, such as airfare and lodging, and any registration fees you incur to attend a trade show are deductible. But, if you are exhibiting, be aware that purchases for samples or gifts are not.

7. Entertainment

You can no longer deduct business entertainment expenses, such as tickets to a sporting event. “I see a lot of confusion among my clients regarding the new tax laws surrounding business entertainment expenses,” says Evan Reeves Alonzo, a CPA and attorney.

Prior to 2018, taxpayers were allowed a 50% deduction for both business meals and entertainment expenses incurred. For 2021 and 2022 only, Congress temporarily enhanced the deduction so meals from restaurants were 100% deductible. That provision expired, and today, in 2025, business meals are back to being 50% deductible, and business entertainment expenses are no longer deductible at all. “If the event includes both a meal and entertainment, the deductible meals portion must be broken out from the total cost of the event,” says Alonzo.

8. Social membership dues

Even if you have great success landing new clients while playing a round of golf or “sweatworking” through a spin class, the IRS disallows any expenses related to membership at social clubs, such as a country club or a fitness club. You may deduct dues for professional business memberships, though, such as the Chamber of Commerce or an industry trade association.

9. All marketing costs

And, finally, you might assume that all your marketing costs are deductible, and ads purchased online, or in print, are indeed deductible, assures Danic. Where it gets more complicated is in website development. Routine website costs like hosting and domain renewals are usually deductible in the year paid. For new website development, expenses that create a long-term asset or custom functionality may need to be capitalized under IRS rules.

Beginning in 2025, research and software development costs that qualify as domestic research and experimental (R&E) can generally be expensed immediately, instead of being amortized over multiple years. Foreign R&D costs must still be amortized, and businesses may elect to amortize qualifying domestic costs as well. Check current IRS guidance or consult a tax professional to confirm the right treatment.

10. Fines and penalties

The IRS doesn’t allow businesses to deduct fines or penalties paid for breaking the law. That includes late filing fees, parking or speeding tickets, and safety or compliance fines. These costs are considered punitive, not business expenses.

However, there are limited exceptions. Payments made to fix an issue—like restoring property or bringing equipment into compliance—may be deductible if clearly identified in a legal agreement or government order. When in doubt, check the details with a tax professional or visit the IRS website for the latest guidance.

11. Political contributions and lobbying

Under Internal Revenue Code Section 162(e), political contributions and lobbying expenses are not tax-deductible, even if they might appear connected to your business. That includes contributions to campaigns, political parties, or advocacy groups, as well as any costs related to influencing legislation. Even if your involvement supports your industry or business interests, these expenses aren’t considered deductible business costs.

12. Land purchases and improvements

Land is considered a capital asset, but the IRS doesn’t allow you to deduct its cost or depreciate it over time. That’s because land doesn’t wear out, lose value from use, or become obsolete the way equipment or buildings can. Any amount you spend to buy land—including the purchase price, legal fees, and closing costs—must be capitalized as part of the land’s value.

Even improvements that permanently enhance the property, such as grading, clearing, or landscaping, are treated as part of the land and aren’t depreciable. Only certain land improvements with a limited useful life—like fences, driveways, or parking lots—can be depreciated separately. See the IRS site for details.

What Small Business Owners Need to Know for the 2026 Filing Season

Looking ahead to the 2026 filing season, here are key updates on deductions and credits small business owners should know.

Section 179 deduction change

For 2025, small businesses can expense up to $2,500,000 of qualifying property. The Section 179 phases out once purchases exceed $4 million, and the limit for certain SUVs is $31,300. 

Bonus depreciation is restored to 100% 

The One Big Beautiful Bill Act (OBBBA) has reinstated 100% bonus depreciation for most qualified property; the previously scheduled step-down that would reduce bonus depreciation in the coming years has been eliminated.

Business mileage rate 

The standard mileage rate for business use of a car, van, pickup, or panel truck is 70¢ per mile in 2025.

Permanent 20% QBI deduction 

LLCs and other pass-through businesses can permanently deduct up to 20% of qualified business income, reducing taxable income.

State Tax Law Changes

State-specific deductions, credits, and thresholds have been updated in many jurisdictions for 2025. Always verify with your state’s Department of Revenue for localized changes affecting small businesses.

Be careful what you deduct

Business expenses like start-up costs and home offices have rules that are easy to understand, while other costs like life insurance and credit card payments get more complicated. 

The bottom line about tax breaks for small businesses? It’s wise to consult with an accountant or another professional tax preparer before filling out your Schedule C to ensure that you are not inadvertently trying to claim a business tax deduction that’s actually non-deductible under the law.