Small Business Tax Deductions for 2023

Do you want to know one of the easiest ways to reduce your income tax bill? It’s claiming for all of your business’s relevant and possible tax deductions. We know that filing your taxes can be intimidating and time-consuming, but we hope to make things simple by sharing the easiest tax write-offs that can help you now.

What are Small Business Tax Deductions?

These are the allowable expenses that can reduce your business’s taxable income. The IRS taxes a business on its net income, which is calculated by subtracting business expenses from gross income. And they consider many operating expenses as tax-deductible.

However, these deductibles have to be considered both ordinary and necessary expenses. An ordinary expense is one that is common and accepted in your business – for example, the cost of coffee beans and milk for a coffee shop. A necessary expense is one that is helpful and appropriate, such as travel expenses to an out-of-town industry convention.

So, now that you know what a small business tax deduction is, let’s take a look at 15 small business tax deductions that will help your business save money on taxes.

15 Small Business Tax Deductions to Know:

1. Vehicle Expenses

If you use your vehicle solely for business, you can deduct the vehicle’s entire operating costs. If you have it for business and personal use, you can deduct the costs associated with business-related usage. Also, make sure you keep records during the year to prove the use of your vehicle for business, such as gasoline, maintenance, parking, and tolls. Or an easier way is to use the IRS standard mileage rate.

2. Home Office

Most self-employed people have a space at home that’s dedicated to their work. For this space to be considered tax-deductible, you will need to show that you use the home office or work area exclusively for conducting business activities. So the kitchen table doesn’t count, unless of course you’re a chef. This home office space must also be your principal place of business.

3. Work-Related Travel Expenses

All expenses related to business travel can be written off – including airfare, hotels, rental cars, tips, dry cleaning, meals, etc. To qualify as a work-related trip, it must be necessary to your business, take you away from the city or area in which you conduct business, and for a period longer than a normal workday.

4. Phone and Internet Expenses

Both the phone and internet expenses are deductible. If you use the phone and internet for a mix of work and personal reasons, then you can only write off the percentage of their cost that goes toward your business use.

5. Business Interest and Bank Fees

You can deduct the interest charged on business loans and business credit cards. As well as the monthly service fees and credit card fees the bank charges.

6. Business Insurance

You are able to deduct the premiums you pay for business insurance. This includes property coverage for your furniture, equipment, and buildings, liability coverage, group health, malpractice, workers compensation, vehicle insurance, life insurance, and business interruption insurance.

7. Office Supplies are Small Business Tax Deductions

Most office supplies can be 100% written off. Office supplies and equipment such as printers, paper, stationery, computers, and work-related software are your more traditional supplies. But for, say, a coffee shop, to-go cups and plastic spoons can be considered business supplies. For the most part, you can also deduct the cost of postage, shipping, and delivery services.

8. Education

The cost of classes, workshops, and seminars that add value to your business and increase employee expertise is fully deductible. Also, subscriptions to professional publications, books tailored to your industry, and transport expenses to and from classes are included.

9. Business Meals

You can deduct 50% of the food and beverage costs of a qualifying business meal. Remember, the expense must be an ordinary and necessary part of carrying on your business – so nothing extravagant, and an employee must be present. Also, 50% of the cost of meals provided to your teams when working late and celebrating the end of a project or the end of a year is deductible. Remember to record each event.

10. Advertising and Promotion

The cost of advertising is entirely deductible. This also includes hiring a company to design a logo, the cost of printing business cards and brochures, paying for media ad space, launching a new website, social media marketing, and sponsoring events.

11. Professional Service Fees

Do you use professional services like legal, bookkeeping, etc., to run your business? If so, these are deductible expenses. And if you perhaps use software for a bookkeeping program at your business, the software, too, qualifies as a small business tax deduction. However, if you’re still struggling to figure out whether a professional service qualifies, the IRS’s website provides helpful guidelines.

12. Salaries and Benefits

Paying your employees their salaries, bonuses, commissions, and taxable fringe benefits are, luckily, deductible business expenses. And don’t forget your salary too. If you own a C or S corporation and perform more than minor services, you can be considered a salaried employee, and your salary is, therefore, deductible. Unfortunately, sole proprietors, partners, and LLC members aren’t considered employees and therefore can’t have their salaries written off.

13. Charitable Contributions

A business owner can claim charitable contributions as a deduction on their Schedule A. The donation must be given to a qualified charitable organization, of course. Although sole proprietors, LLCs, and partnerships can’t deduct these types of contributions, corporations can deduct charitable contributions of up to 25% of their taxable income.

14. Child and Dependent Care

To claim this deduction, your child or dependent needs to be under 13 years old or physically or mentally unable to care for themselves. The credit is between 25% and 30% of your allowable expenses, depending on your income. 

15. Work Related Gifts are Small Business Tax Deductions

Some businesses see gifting as an essential part of their marketing and branding strategy. In addition, these gifts for clients, customers, and business associates are considered deductible business expenses. There is a limit, however of $25 annually for business gifts given to one individual. Promotional items branded with your business name don’t count towards this limit if each one costs $4 or less and are one of many widely-distributed items.

Other Deductions Include:

Business interest and bank fees, depreciation, energy efficiency expenses, investments, foreign-earned income exclusion, medical expenses, real estate taxes, mortgage interest, moving expenses, retirement contributions, startup expenses, cleaning supplies and janitorial services, contract labor, legal and professional fees, local transportation, maintenance and repairs, rent, research and development, work opportunity credit, and more.

Do you need advice on small business tax deductions in addition to applying for a business loan? Give Your FundingTree a call at 704-904-0774, and we will help you to save money this tax season.