As a business owner you wear A LOT of hats. Operations, marketing, business development, and the list goes on. With all that hard work, I’m sure one of your goals is to earn a healthy profit. Which is awesome!!

There’s just one small problem… when you earn a profit, you also earn the fun requirement to pay taxes. Not as awesome.

With that being said, there are a lot of tax deductions that business owners can take advantage of to help lessen their tax burden. Be sure to check out this list of 10 must see tax write-offs for entrepreneurs!

#1 Qualified Business Income Deduction

Under the 2018 tax reform (Tax Cuts & Jobs Act), a 20% deduction on business income for small business owners was implemented. This includes freelancers, sole proprietors, LLC’s, partnerships, and S corporations. This is a huge win for entrepreneurs, because it generally means that for $100,000 of net income, $20,000 is tax free!

There are a lot of complex calculations and limitations around this deduction, including a phase-out of the deduction for certain high-income earners (over $160K for single filers and $321K for joint filers). So be sure to work with an accountant to maximize this for your business.

#2 Home Office Deduction

If you use part of your home regularly and exclusively for your business, you can claim the home office deduction. Under this deduction you can write-off a portion of your utilities, rent, mortgage interest, depreciation, cleaning fees, etc. based on the square footage of your home used for your business.

The IRS also provides a simplified calculation for figuring the deduction (this is for my business owners who aren’t so awesome at tracking their expenses!). It simplifies the calculation and record keeping requirements, but does not change the criteria (i.e. a portion of your home must still be used exclusively and on a regular basis for business purposes). In general, you can calculate the deduction by multiplying the area of your home used for business by $5, up to a maximum deduction of $1,500.

For more details, check out this Home Office Deduction post!

#3 Health Insurance Premiums

You can deduct the costs of your health insurance premiums as a self-employed person, as long as you meet certain criteria. First, your business must claim a profit. And second, you and your spouse can’t be eligible to enroll in an another employer’s health plan. You can only claim premiums paid for the months when you were not eligible for an employer’s health plan.

#4 Meal Expenses

You can generally write-off meal expenses during business travel or if you dine with a business contact. In a normal year, you can deduct up to 50 percent of the meal expense as long as the food or beverages are not considered lavish or extravagant. Further, the meeting must include business either directly before, during or after the meal is consumed.

Due to Covid, in 2022 any business meals conducted at a restaurant or provided from a restaurant are actually a 100% deduction!

For more on writing off meals, check out this post!

#5 Business Travel

If you travel out of town for business, the cost of getting to and from your destination and any business related expenses when you’re at your destination can be deductible. This includes your flight, train, car rental, and hotel.

Meals are deductible when you’re out of town for business or if it is long enough that you need to stop for sleep or rest to properly perform your duties.

#6 Giving Business Gifts

Holiday gifts for clients, customers and other business associates qualify as deductible business expenses. However, there’s a catch… and unfortunately it’s pretty outdated: A taxpayer can only deduct $25 annually for business gifts given directly or indirectly to any one person. Promotional items, such as calendars or pens, and other smaller expenses such as shipping and engraving don’t count toward the $25 limit.

For all of the juicy details, check out this post!

#7 Depreciation

Business owners are allowed to fully write-off the entire cost of new purchases such as computers, furniture and equipment, in lieu of depreciating the cost of the asset over a number of years. This includes new and used property. Basically this means you get to write-off the cost of your new equipment in the year of purchase instead of spreading that expense over 5 or 7 years. HUGE win for entrepreneurs!

#8 Retirement Plan Contributions

There are a variety of retirement plans available to small businesses that allow tax advantageous ways to save for retirement. Contributions made by the owner for herself or himself and for employees can be deducted. Here are a few options:

• Set up a 401(k) if you want to cover employees.
• IRAs and SEP IRAs are retirement plans that that are great for business owner’s without employees.

There are lots of rules and contribution limitations with each plan, so be sure to consult with a financial planner before deciding on a plan.

#9 Start-up Costs

The IRS encourages entrepreneurs to open a new business by allowing a write-off of up to $5,000 for start-up expenses. Start-up costs include amounts paid either to create a trade or business or to investigate the creation or acquisition of a trade or business. Examples include: advertisements for the opening of the business, and travel and other necessary costs for securing prospective distributors, suppliers or customers. Once the company actually begins operations all business expenses are deductible.

#10 Research and Development

To qualify for this credit, a business must incur expenses for the purpose of discovering information that is technological in nature and for the development of a new or improved business component. For example, a florist that invests in developing machinery that automates the making of flower bouquets may qualify.

I hope this helps highlight the many tax breaks that are available to small business owners. These tax deductions and credits will help to reduce your tax liability and put more money in your pocket! Remember to plan ahead, document your expenses (hello bookkeeping!) and retain receipts. And of course, be sure to consult with a tax professional if you need help understanding any of these write-offs!

Candace is the founder of NewWay Accounting and is a CPA who specializes in working with fellow entrepreneurs. She strives to take the fear and anxiety out of taxes and help empower small business owners to feel more confident and in control of their finances.