25 Small Business Tax Deductions (Write-Offs) You Need in 2025

Learn about the tax write-offs and small business tax deductions you may be missing and get ideas for how to use them.

Running an online store? Your everyday business expenses—from post office trips to home office electricity bills—could reduce your bill this tax season. The key is recording these expenses properly in your small business accounting records. 

Tracking and claiming all eligible business expenses can dramatically lower your tax bill. Many business owners miss out on deductions simply because they don’t know what’s available or how to claim them.

This guide covers essential tax write-offs and small business tax deductions you might be missing and shows you how to use them to reinvest in your business.

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What is a tax deduction?

A tax deduction lowers your taxable income, which reduces the taxes you pay at year end. You can choose between two types of deductions: the standard deduction and the itemized deduction.

Why tax deductions matter for your business

Tax deductions help your business keep more earnings by lowering your tax bill. When you pay less in taxes, you have more money to put back into growing your business.

How to claim small business tax deductions

You have two main options for claiming deductions on your tax return:

• Fill out and submit IRS forms yourself
• Use tax software like Intuit’s TurboTax that guides you through available deductions

25 small business tax deductions

1. Packaging and shipping
2. Home office and workspaces
3. Utilities
4. Improvements and repairs
5. Coworking space
6. Business interest and bank fees
7. Business insurance
8. Health insurance
9. Retirement plans
10. Professional services
11. Legal fees
12. Bad debts
13. Independent contractors
14. Employees
15. Advertising
16. Marketing tools and services
17. Website fees, like Shopify
18. Domain and web hosting
19. Online services
20. Classes and education
21. Trade magazines
22. Business travel and vehicle expenses
23. Qualified Business Income (QBI) Deduction
24. Startup costs
25. Claim credits

1. Packaging and shipping 

Every part of getting products to your customers can be tax deductible, including:

• Shipping and postage costs
• Packaging materials (boxes, tape, labels)
• Packing supplies (paper, bubble wrap)
• Printing supplies (ink, shipping labels)
• Shipping software subscriptions

“Shipping … is not just the cost of goods sold. You need packing material, and there are postage costs as well. When I look at my credit card bill at the end of the month, it’s a huge expense,” says Trisha Okubo of Maison Miru.

The IRS considers these costs “ordinary and necessary”—meaning they’re common in your industry and essential for your business. Both criteria must be met to qualify for the deduction.

2. Home office and workspaces

Working from home? You might qualify for the home office deduction. Here’s what you need to know:

Requirements:

• You should use the space exclusively for business. If you occasionally do paperwork at the kitchen table, your kitchen does not qualify as a home office.
• You make it your main place of business. You might need to prove this with a consistent, printed schedule. You spend most of your work time there.
• You have no other regular workspace. That means no external office or coworking space from which you run your business.

When calculating your home office deduction, you can choose from two different methods:

The simplified method lets you deduct $5 per square foot of your home used for business, up to a maximum of 300 square feet.

The regular method requires calculating what percentage of your home is used for business, then applying that percentage to home expenses. This includes costs like mortgage interest, property taxes, and utilities.

Choose the method that gives you the better deduction for your situation. Most tax software will calculate this for you, but you can report simplified deductions on Schedule C of Form 1040, or use Form 8829 for the regular method.

⚠️ Keep good records: The IRS reviews home office deductions carefully. Take photos of your workspace and maintain a schedule showing when you use it. File these with your tax records each year.

3. Utilities

If you qualify for the home office deduction, you can deduct a portion of your household utilities—heat, water, and electricity.

4. Improvements and repairs

Home office maintenance falls into two categories. Repairs, like fixing a broken window, can be fully deducted in the current year. Improvements must be depreciated over up to 27.5 years and include betterment, adaptation, or restoration—like installing a larger window.

Talk to your accountant before making changes to ensure proper classification.

5. Coworking space

Renting coworking space? You may be able to deduct your membership fees along with your share of utility costs and office supplies. Check with your CPA about specific deductions for your situation.

6. Business interest and bank fees

The interest you pay on business credit cards and small business loans is typically tax deductible. You can also deduct fees charged for maintaining or using your business checking account.

7. Business insurance

Business insurance premiums are tax deductible for ecommerce businesses, whether you’re an S corporation, self-employed, or an LLC. Common deductible business insurance types include:

• Data breach insurance
• Commercial property insurance
• Professional liability insurance
• General liability insurance
• Workers’ compensation insurance

If these policies are common and necessary for your business, you can write off the full premium amount.

8. Health insurance

Self-employed merchants may qualify for health insurance premium deductions. The Small Business Jobs Act of 2010 allows you to deduct 100% of health insurance costs as an adjustment to your taxable income. This applies to coverage for yourself, your spouse and dependents, and children under the age of 27 at year end. Claim this deduction on Form 1040, Line 29 as an above-the-line deduction. Note that you can’t claim a tax credit for months that you had health insurance through you or your spouse’s employer. Consult your tax professional for details.

9. Retirement plans

Self-employed merchants can deduct retirement plan contributions through the retirement savings contributions credit as an adjustment to taxable income. Common retirement plans include:

• Simplified Employee Pension (SEP) IRA: A retirement savings plan established by employers—including self-employed people—for retirement benefits.
• Savings Incentive Match Plan for Employees (SIMPLE): A retirement plan for small businesses with fewer than 100 employees. SIMPLE IRAs work like traditional IRAs but with lower contribution limits than 401(k)s.
• Qualified plan (defined-contribution or defined-benefit): These include defined benefit plans (pensions) where employers contribute all funds, and defined contribution plans (like 401(k)s) where you contribute your own money.

10. Professional services

The cost of consulting with small business finance professionals is deductible. This includes fees paid to business lawyers, CPAs, bookkeepers, online bookkeeping services, and tax consultants.

11. Legal fees

You can deduct legal fees for business-related services like preparing contracts, filing trademarks and copyrights, negotiating leases, or defending your business in court.

12. Bad debts

Bad debts—money customers or clients owe that you can’t collect—may be deductible after one year. This includes loans to suppliers and clients, business loan guarantees, and credit sales to customers. See this IRS publication for details on bad debt deduction rules. 

13. Independent contractors

Services from freelancers or independent contractors hired for your business—like product photographers—are tax deductible. Always collect 1099 forms before work begins and file them properly with both the contractor and the IRS.

⚠️ Stay compliant: The IRS watches for employers who try to avoid employment taxes by classifying employees as contractors.

14. Employees

Your business can deduct reasonable and necessary employee-related expenses, including:

• Employee pay
• Vacation pay and sick time
• HSA employer contributions
• Employee assistance programs
• Life insurance coverages
• Education
• Meals and lodging 

How you claim these deductions depends on your business structure:

• Sole proprietorships and single-member LLCs: Use Schedule C’s Expenses section
• Partnerships and multi-member LLCs: Use Form 1065’s Deductions section
• Corporations: Use Form 1120 or Form 1120-S (for S corporations) Deductions section

15. Advertising

Grow your business while reducing taxes by deducting advertising costs. This includes ads on Instagram, local newspapers, and the fees you pay for writing and design. If you hire marketing professionals to create ads, deduct their wages as you would for any 1099 worker.

16. Marketing tools and services

Email and social media management tools like Klaviyo or AdEspresso count as ordinary and necessary marketing expenses. You can deduct these subscription costs.

“Our best deductible expense goes into paid marketing—toward lead generation and filling the top of our funnel,” says Ryan Gruss of The Loop Loft. 

17. Website fees, like Shopify

Shopify provides essential tools for running your online store. These fees qualify as ordinary and necessary business expenses for ecommerce businesses.

18. Domain and web hosting

Your online presence is essential for ecommerce. You can deduct domain names, ecommerce web hosting, web design templates, stock images, and Shopify theme upgrades.

19. Online services

Deduct the cost of services you use to connect with customers, including:

• Email marketing platforms for newsletters
• Social media scheduling tools like Hootsuite
• SEO tools like SEMRush

20. Classes and education

Education that improves your business skills is tax deductible. This includes certification courses and practical training—like photography classes that help you take better product photos. Transportation to business-operations-related classes qualifies as a travel expense.

“I use the education expense quite a bit. One thing that’s important to me is the Japanese idea of kaizen, of continuous education—and of having an experimental mindset,” says Trisha Okubo of Maison Miru.

21. Trade magazines

Industry-specific trade magazine subscriptions are tax deductible. Note that general business magazines don’t qualify—the content must relate directly to your industry.

22. Business travel and vehicle expenses

Using your vehicle for business operations like package deliveries or client meetings? You can claim these expenses in one of two ways:

• Standard mileage rate: 67¢ per mile in 2024 (track with apps like MileIQ).
• Actual costs: Total expenses for fuel, maintenance, and repairs.

If you use your vehicle for both business and personal purposes, calculate the percentage used for business. You can also deduct other business travel costs like parking fees, cab fares, and conference tickets.

23. Qualified business income (QBI) deduction

The QBI deduction lets eligible businesses deduct up to 20% of their qualified business income, based on taxable income. Consult your CPA to learn if you qualify.

24. Startup costs

Deduct expenses incurred to start your business partially in your first year, and spread the rest over time. This includes business licenses, registration fees, and costs to open your online store through platforms like Etsy or Shopify. 

25. Claim credits

Tax credits directly reduce the tax you owe. Common credits include: 

• Employer-provided child care
• Work opportunity credit
• Clean vehicle credits
• Energy-efficient home-builder credit
• Research credit
• FICA tip credit

Other business tax considerations

Understanding deductible expenses

The IRS allows deductions for expenses that are both ordinary and necessary for your business operations. “Ordinary” means common in your industry, while “necessary” means essential for running your business. 

Keep receipts for all business-related expenses and consult your CPA to confirm before filing. While you might be tempted to get creative with deductions, focus instead on strategic tax planning for better cash flow management. Tax deductions involve many gray areas, so work with your tax adviser to stay within IRS boundaries.

Self-employment tax

Self-employed individuals pay a 15.3% self-employment tax covering Social Security (12.4%) and Medicare (2.9%). Half of this tax is deductible as a business expense. Calculate this using Form 1040. 

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Please consult a licensed CPA to answer any questions you may have. 

Small business tax deductions FAQ

What can be written off as business expenses?

Basic operating expenses are typically tax deductible, including employee salaries, equipment, supplies, rent, utilities, legal and accounting fees, business cards, industry publications, and online services.

How do you maximize tax deductions as a small business?

Track expenses year-round, plan ahead for tax season, and document all potential deductions. Work with a tax professional to identify all eligible deductions for your business.

How much can a small business write off on taxes?

There’s no universal cap on deductions. The amount varies based on your expenses, location, and business structure. All deductions must be ordinary, necessary, and reasonable for your business.

Are deductions different for various businesses?

Yes. Deductions vary widely by industry and business type. For example, craft businesses might deduct raw materials like clay or paint, while food businesses might deduct expired inventory.

How do I handle deductions with business losses?

If your business operates at a loss, you can use net operating loss (NOL) to offset taxable income in other years.

What business expenses are fully deductible?

Most ordinary and necessary business expenses are 100% deductible, including:

• Operating costs
• Marketing and advertising
• Equipment and tools

What can’t I deduct?

Common non-deductible business expenses include:

• Fines and penalties
• Personal expenses
• Political contributions
• Illegal expenses
• Gifts over $25
• Business attire
• Club memberships
• Family travel expenses