Top Tax Deductions Small Businesses Often Miss

Many small business owners leave thousands of dollars on the table each year by overlooking legitimate tax deductions. Here are the most commonly missed deductions that could significantly reduce your tax liability.

1. Home Office Deduction

If you work from home, you may be eligible to deduct a portion of your rent, mortgage interest, utilities, and home maintenance costs. The simplified method allows a deduction of $5 per square foot (up to 300 square feet), or you can calculate actual expenses based on the percentage of your home used for business.

2. Vehicle Expenses

Business use of your vehicle is deductible using either the standard mileage rate (67 cents per mile for 2026) or actual expenses method. Don't forget to track mileage for client meetings, errands, and business travel.

Many business owners forget to deduct parking fees, tolls, and vehicle registration fees that are business-related.

3. Business Meal Deductions

You can deduct 50% of business meals where you discuss business with clients, prospects, or employees. Restaurant meals, catering for business meetings, and meals while traveling for business all qualify.

Keep detailed records including the amount, date, location, business purpose, and names of attendees.

4. Professional Development and Education

Costs for courses, conferences, workshops, professional certifications, and trade publications that help you maintain or improve skills in your current business are fully deductible. This includes travel expenses to attend these events.

5. Software and Subscription Services

All business-related software subscriptions are deductible, including accounting software, project management tools, cloud storage, website hosting, email marketing platforms, and professional memberships or subscription services.

6. Bad Debts

If you use accrual accounting and have clients who haven't paid invoices, you may be able to deduct these bad debts. This applies when you've already included the income in your revenue but are unable to collect payment despite reasonable collection efforts.

7. Phone and Internet Expenses

You can deduct the business portion of your phone and internet bills. If you have a dedicated business line, the entire cost is deductible. For shared use, calculate the percentage used for business and deduct that portion.

8. Business Insurance Premiums

All business insurance premiums are deductible, including general liability insurance, professional liability insurance, business property insurance, and workers' compensation insurance. Health insurance premiums for self-employed individuals are also deductible.

9. Bank Fees and Interest

Monthly maintenance fees, transaction fees, credit card processing fees, and interest on business loans or credit cards are all deductible business expenses.

10. Start-Up Costs

If you started a business this year, you can deduct up to $5,000 in start-up costs (market research, travel to secure suppliers, advertising, employee training) and $5,000 in organizational costs (legal fees, incorporation fees). Remaining costs can be amortized over 15 years.