Understanding Business Write-Offs: What’s Actually Deductible?

Understanding Business Write-Offs: What’s Actually Deductible?

One of the best ways to lower your taxable income is by taking advantage of business write-offs—but what actually counts as a deductible expense? Let’s break it down to ensure you’re maximizing your savings while staying compliant with IRS rules.

What is a Business Write-Off?

A business write-off, or tax deduction, is an expense that is ordinary and necessary for running your business. These expenses lower your taxable income, meaning you pay taxes on a smaller amount.

Common Business Write-Offs

📌 Office Expenses & Supplies – Computers, printers, software, and office furniture.

📌 Home Office Deduction – If you use part of your home exclusively and regularly for business, you can deduct a portion of rent, utilities, and internet.

Learn more about qualifying for the home office deduction here.

📌 Vehicle & Mileage – Deduct business-related miles using the standard mileage rate or actual expenses (gas, maintenance, insurance).

📌 Marketing & Advertising – Website costs, social media ads, business cards, and branding.

📌 Meals & Entertainment – 50% of business meals with clients or employees are deductible (entertainment itself is not deductible).

📌 Travel Expenses – Flights, hotels, rental cars, and per diem costs when traveling for business.

📌 Professional Services – Legal fees, accounting, and bookkeeping services.

📌 Employee Salaries & Contractor Payments – Wages, benefits, and 1099 payments.

📌 Education & Training – Courses, books, and certifications related to your business.

📌 Depreciation & Large Purchases – Under Section 179, businesses can deduct the cost of equipment, machinery, and certain vehicles in the year they are placed in service.

📌 Retirement Contributions – Contributions to SEP IRAs, Solo 401(k)s, and SIMPLE IRAs can be deducted, helping you save for the future while reducing taxes.

📌 Health Insurance Premiums – If self-employed, you may be able to deduct health insurance premiums for yourself, your spouse, and dependents.

What Can’t You Write Off?

❌ Personal expenses – Unless partially used for business (only the business portion is deductible).

❌ Fines & penalties – IRS or legal fines are not deductible.

❌ Hobbies vs. Business expenses – The IRS won’t allow deductions if your business isn’t profitable over time.

Keeping Proper Records

To claim these deductions, keep accurate records:

✅ Save all receipts and invoices – Digital copies are acceptable.

✅ Use accounting software – Track expenses with tools like QuickBooks or Wave.

✅ Separate personal and business finances – Maintain a dedicated business bank account and credit card.

Final Thoughts

Understanding what’s deductible can significantly reduce your tax liability. The key is keeping good records and only deducting legitimate business expenses.

Need help sorting through your expenses? KB2 Bookkeeping & Tax can help ensure you're maximizing deductions while staying IRS-compliant!