Most small business founders leave $5,000–$15,000 in deductions on the table every year. This guide covers every major write-off category — what qualifies, what doesn't, and exactly how to document each one.
If you use part of your home regularly and exclusively for business, you can deduct it. This is one of the most commonly missed deductions — and one of the most audited, so documentation matters.
The space must be used only for business — not a guest bedroom that doubles as an office. A dedicated desk in a corner of a bedroom doesn't qualify. A room used solely for business does.
Every mile you drive for business purposes is deductible. This includes client meetings, bank runs, post office trips, supply pickups, and driving between work locations. Commuting from home to a regular office is NOT deductible.
Self-employed founders can deduct 100% of health, dental, and vision insurance premiums paid for themselves, their spouse, and dependents. This is an above-the-line deduction — it reduces your Adjusted Gross Income directly, even if you don't itemize.
You cannot deduct more than your net self-employment income. If your business had a loss, this deduction is limited. Also, if you were eligible for employer-sponsored health coverage (through a spouse's employer, for example), you cannot take this deduction for months you were eligible.
Contributing to a retirement account is the single most powerful tax move available to a self-employed founder. Every dollar you contribute reduces your taxable income dollar for dollar — and unlike other deductions, you're also building wealth for retirement.
Any software or subscription used for your business is 100% deductible. This includes everything from your accounting software to your design tools to this membership.
If you use a subscription for both personal and business (e.g., your iPhone plan), you can only deduct the business-use percentage. Keep a log of how you determined the split.
Business meals are 50% deductible — but only when there's a genuine business purpose and you document it properly. This is one of the most audited deductions, so documentation is critical.
Education expenses that maintain or improve skills required in your current business are fully deductible. Note: expenses to train for a new career do NOT qualify — it must relate to your existing business.
All costs associated with marketing and promoting your business are 100% deductible. This is one of the cleanest deductions — almost no gray areas.
Fees paid to professionals who help you run your business are fully deductible. This includes your accountant's fee for preparing this very return — which creates a satisfying recursive deduction.
If you pay any individual contractor $600 or more in a calendar year, you must issue them a Form 1099-NEC by January 31. Failure to do so doesn't disqualify the deduction, but it can trigger IRS penalties. Payments to corporations (LLCs taxed as S-Corps or C-Corps) generally don't require a 1099.
Premiums paid for business insurance are fully deductible as ordinary and necessary business expenses. This includes all the coverage types your business carries.
Fees and interest paid on business accounts and loans are fully deductible. Make sure these are on your business accounts — personal banking fees are not deductible.
Business-related state and local taxes you pay are deductible on your federal return. This is one of the most commonly missed deductions — founders often don't realize the taxes they pay to the state are themselves deductible federally.
If your state charges a gross receipts or gross income tax on your business (like Hawaii's GET at 4% or Washington's B&O tax), every dollar you paid to your state is deductible on your federal Schedule C. At the 22% federal bracket, a $4,000 state tax payment saves you $880 federally.
Estimate how much you could save by claiming each deduction category. Adjust the sliders to match your actual spending.
The IRS can audit returns up to 3 years after filing (6 years if they suspect substantial underreporting). Keep all business records for at least 3 years — 7 to be safe.
What to keep for each deduction type| Deduction | Required documentation | How long to keep |
|---|---|---|
| Home office | Lease/mortgage statements, utility bills, floor plan or measurement of office, photos of workspace | 3–7 years |
| Mileage | Mileage log with date, destination, business purpose, and miles per trip | 3–7 years |
| Business meals | Receipt showing amount + date, who attended, their business relationship, business purpose discussed | 3–7 years |
| Travel | Itinerary, receipts for flights/hotel/meals, documentation of business purpose | 3–7 years |
| Equipment | Purchase receipt, proof of business use, depreciation schedule if applicable | Life of asset + 3 years |
| Contractors | Contracts, invoices, cancelled checks or bank transfers, W-9 on file, 1099-NEC issued if $600+ | 3–7 years |
| Insurance | Premium statements or annual insurance billing summary | 3–7 years |
| Software | Receipts or bank/credit card statements showing charges | 3–7 years |
| SEP-IRA | Contribution confirmation from brokerage, bank transfer records | 7 years |
| Health insurance | Monthly premium statements or annual summary from insurer | 3–7 years |
Create one folder per year, sub-folders per category. Photograph receipts immediately with your phone camera. Name files with the date and vendor (e.g., "2024-03-15 Stripe fees"). Takes 30 seconds per receipt.
Photograph receipts and the app auto-extracts vendor, amount, and date. Integrates with QuickBooks and Xero. Worth it if you have 10+ receipts per week.
Wave and QuickBooks both allow you to attach receipt photos to transactions. If you're already categorizing transactions, just attach the receipt at the same time. No separate filing system needed.
These are the most frequent errors small business founders make with deductions — both leaving money on the table and claiming things incorrectly.
Mistakes that leave money on the tableMany founders skip this because they're afraid of audit risk. In reality, a legitimate home office is a legitimate deduction. If you work from home and have a dedicated space, claim it — properly documented.
You cannot reconstruct mileage logs after the fact without contemporaneous records. The IRS has rejected mileage deductions for logs created after the year ended. Track it in real time — use an app or keep a notebook in your car.
This is the single biggest missed deduction. Many founders put it off because they're busy or don't think they can afford it — but if you can afford to pay taxes, you can afford to redirect some of that money into retirement savings instead.
Founders in states with gross receipts taxes often don't realize those payments are federally deductible on Schedule C. Every dollar you paid to your state in business taxes reduces your federal taxable income.
You can only deduct the business-use percentage of your vehicle. If you use your car 60% for business, you can deduct 60% of actual expenses (or track business miles only). Deducting 100% of a personal vehicle is a major red flag.
The space must be used ONLY for business. A kitchen table where you also eat meals doesn't qualify. A spare bedroom with a guest bed doesn't qualify even if you also work there. The IRS is strict on this.
Groceries, personal clothing, family vacations with one business meeting, gym memberships — these don't qualify as business deductions even if you can stretch a business rationale. The IRS looks for expenses that are "ordinary and necessary" for your specific business.
If you paid an individual $600+ in a year and don't issue a 1099-NEC, you may owe penalties ($60–$330 per form depending on how late). It doesn't disqualify your deduction, but it creates a paper trail problem if audited.