The Top Small Business Tax Deductions New Owners Miss

Every legitimate deduction lowers both your income tax and (for most owners) your self-employment tax. Yet new business owners regularly leave money on the table. Here are the deductions to know.

The basic rule

The IRS lets you deduct expenses that are ordinary and necessary for your business. Ordinary means common in your industry; necessary means helpful and appropriate. It doesn't have to be indispensable.

Commonly used deductions

• Supplies and materials: anything you use up in the business
• Software and subscriptions: accounting software, design tools, scheduling apps, cloud storage
• Advertising and marketing: website, ads, business cards, signage
• Professional fees: bookkeeping, tax preparation, legal fees
• Insurance: general liability, professional liability, commercial auto
• Rent and utilities for business space
• Contract labor: payments to independent contractors
• Bank and merchant fees: payment processor fees and bank charges
• Licenses and fees: state and city licenses, LLC annual report fee

Deductions new owners often miss

Vehicle expenses

Business miles are deductible. For 2026, the IRS standard mileage rate is 72.5 cents per mile. Driving to clients, job sites, suppliers and the bank all count. Commuting from home to a regular office does not.

Home office

If you use part of your home regularly and exclusively for business, you may deduct a portion of home expenses or use the simplified method.

Phone and internet

Deduct the business-use percentage of your cell phone and home internet.

Startup costs

You may deduct up to $5,000 of startup costs in your first year (reduced if total startup costs exceed $50,000), with the rest deducted over 15 years.

Equipment

Computers, tools and machinery can often be deducted in full in the year you buy them using Section 179 or 100% bonus depreciation, both strengthened by the 2025 tax law.

Education

Courses, books and conferences that maintain or improve skills in your current business.

Business meals

Generally 50% deductible when there's a clear business purpose and you or an employee attends.

Retirement contributions

SEP-IRA and Solo 401(k) contributions can substantially reduce income tax.

Self-employed health insurance

Premiums for you and your family may be deductible if you meet the requirements.

Half of self-employment tax

Deducted automatically on your personal return.

What's not deductible

• Personal expenses, even if paid from the business account
• Commuting
• Clothing you could wear outside work
• Fines and penalties
• Political contributions

Documentation is everything

A deduction is only as good as its records. Keep receipts (digital copies are fine), note the business purpose for meals and travel, and keep a mileage log.

The bottom line

Most new owners don't need tax tricks; they need to capture the ordinary expenses they're already paying. Clean monthly bookkeeping is the best way to make sure nothing gets missed.

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Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.