Small business tax deductions 2026: 32 every owner should claim

Operating expenses

Anything ordinary + necessary to run your business. The IRS uses both words; "ordinary" means common in your industry, "necessary" means appropriate for your business. Both bars are low.

• Office rent + utilities — including coworking memberships
• Office supplies — paper, ink, pens, the boring stuff
• Software + SaaS subscriptions — including project management, CRM, accounting
• Phone + internet — business-use portion
• Postage + shipping
• Professional fees — lawyer, accountant, business coach
• Bank + payment processing fees

People + payroll

• Employee wages + payroll taxes
• Contractor + freelancer payments — 1099 amounts
• Employee benefits — health insurance, retirement contributions
• Training + continuing education
• Employee meals — 50% deductible if business purpose

Marketing + business development

• Advertising — Google Ads, Meta Ads, LinkedIn Ads, print, anything paid
• Website + hosting — design, hosting, domain renewals
• Marketing tools — email service, SEO tools, design software
• Business meals — 50% deductible (or 100% if provided to employees at the office)
• Conference + trade show fees

Travel + vehicle

• Business travel — flights, hotels, taxis, rental cars
• Vehicle mileage — IRS 2026 rate: 67¢/mile for business use
• Parking + tolls on business trips

Home office (if applicable)

Two methods. Simplified: $5/sq ft up to 300 sq ft = $1,500 max. Regular: actual percentage of home expenses (rent/mortgage interest, utilities, insurance, depreciation) based on office square footage as a % of total home.

Requirements: regular + exclusive use of the space for business. The "exclusive" part is what most owners miss — your kid's playroom doubling as your office on Mondays doesn't count.

Capital + equipment

• Section 179 immediate expensing — up to $1.16M of equipment fully deductible in year of purchase (2026 limit)
• Bonus depreciation — 60% of equipment cost in 2026 (down from 80% in 2025, scheduled to phase to 40% in 2027)
• Computer + software — usually fully deductible under Section 179

Insurance

• General liability insurance
• Professional liability / E&O
• Cyber insurance
• Health insurance — full deduction for self-employed owners

Retirement + tax-favored

• Solo 401(k) contributions — up to $69,000 in 2026
• SEP IRA contributions — up to 25% of self-employment income
• SIMPLE IRA — for small teams
• HSA contributions — if high-deductible health plan

What most owners miss

• QBI deduction — 20% of qualified business income, subject to phase-outs above ~$200k single / $400k joint
• Startup costs — up to $5,000 deductible in year 1, rest amortized over 15 years
• Bad debts — for accrual-basis businesses (sales already booked that won't pay)
• Cost of goods sold — full deduction, but tracking inventory matters

One warning

The IRS notices when deductions look disproportionate to revenue. A consultant claiming $40k of meals on $80k revenue gets flagged. The deductions above are all legitimate; the issue is overclaiming any one category. Keep receipts, especially for travel + meals.

For complex situations: hire a CPA. Their fee is itself deductible.