Small Business Tax Deductions Checklist for 2026 (Free PDF)

Picture this: You're sitting at your desk with receipts scattered everywhere, QuickBooks open on one screen, and Google on the other searching "can I write off office supplies?" It's 11 PM and tax season has you second-guessing every expense.

Here's the thing, tax deductions aren't just for big corporations. They're your right as a small business owner, and knowing what you can write off is the difference between owing thousands and getting money back.

Our small business tax deductions checklist is built for businesses like yours—restaurants, salons, retail shops, home services, healthcare practices. We're talking real-world expenses: payroll, rent, inventory, that emergency plumber visit at 2 AM.

In this article, you'll find clear definitions of what qualifies, 21 specific deduction categories with examples, a free downloadable checklist, claiming instructions, and red flags to avoid.

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TL;DR: Download our small business tax deductions checklist

Need to get organized fast? This free checklist helps you:

• Track all 21 deductible expense categories throughout the year
• Stop leaving money on the table at tax time
• Organize receipts and records your accountant will actually appreciate
• Stay audit-ready with a simple system you can actually use

Download the checklist

What are small business tax deductions?

A tax deduction reduces your taxable income, which lowers the amount you owe in taxes. These are business expenses the IRS allows you to subtract from your revenue.

What qualifies as a tax deduction?

Expenses must be both "ordinary and necessary":

• Ordinary: Common and accepted in your industry
• Necessary: Helpful and appropriate for your business

A salon can deduct scissors and styling products. A plumber can deduct pipe wrenches and service vehicle costs.

Here's how it works:

If you earn $100,000 and deduct $20,000 in qualified expenses, you're only taxed on $80,000. At a 22% tax rate, that saves you $4,400.

The IRS lays out these rules in Publication 535 (Business Expenses). When in doubt, check there or talk to your accountant.

How to use this checklist

Use this checklist to track expenses throughout the year, not just at tax time. Match your receipts to the 21 categories, add custom line items for your business, and hand it to your accountant when you're ready to file.

The ultimate small business tax deductions checklist (2026)

1. Business start-up costs

You can deduct up to $5,000 in startup expenses in your first year of business. The expenses must be things an established business would normally deduct, but they happened before you officially opened.

Common startup expenses:

• Market research and feasibility studies
• Legal fees for forming your LLC
• Training programs and employee onboarding
• Government filings and permits
• Consulting fees and business planning
• Website development
• Initial advertising campaigns

2. Qualified business income (QBI) deduction

Some small businesses can deduct up to 20% of their qualified business income from their taxes. This deduction applies to pass-through entities like sole proprietorships, partnerships, S corporations, and LLCs. Your QBI is essentially your net profit, excluding capital gains, dividends, and interest income.

There are income limits and phase-outs, so check with your tax professional to see if you qualify. This is one of the most valuable deductions you can claim—and one of the most overlooked.

3. Business vehicle or business use of car

If you use a vehicle solely for business, you can deduct 100% of operating costs—fuel, maintenance, registration, insurance, lease payments, and depreciation.

If you use your personal vehicle for business, you have two options:

Standard mileage rate: Multiply your business miles by the IRS mileage rate (72.5 cents per mile for 2026, adjusted annually). This is simpler.

Actual expense method: Track real costs like gas, oil, repairs, and insurance, then deduct your business-use percentage.

Pick the method that gives you the bigger deduction, but you can't switch between them for the same vehicle.

4. Office space

Rent, security deposits, and lease cancellation fees for office or retail space are fully deductible:

• Deduct $5 per square foot of space used exclusively for business
• Maximum 300 square feet ($1,500 deduction)
• The workspace must have defined boundaries
• Must be used consistently for business
• Must be your primary place of business

5. Charitable donations

Cash or in-kind donations to 501(c)(3) organizations are tax deductible. The IRS sets limits on how much you can deduct based on your adjusted gross income. Sole proprietors, partners, and LLC owners must claim charitable donations on their personal tax returns, not their business returns.

Keep detailed records including receipts, bank statements, and written acknowledgment from the charity for donations over $250.

6. Office supplies

Pens, paper, printer ink, staplers, business software subscriptions, computers, phones, and office furniture all qualify.

Key distinction:

• Items under $2,500: Deduct immediately as supplies
• Items over $2,500: May need to be depreciated over several years

Cloud software subscriptions like project management tools, accounting software, and communication platforms count as office supplies and are fully deductible in the year you pay for them.

7. Depreciation

Depreciation lets you spread the cost of expensive assets over several years:

• Real estate (if you own your commercial space)
• Vehicles
• Large equipment and machinery
• Electronics

For 2026, you can deduct up to $2,560,000 in depreciation for qualifying assets under Section 179. Bonus depreciation at 100% is also available for certain new equipment acquired after January 19, 2025.

Depreciation schedules:

• Computers and cars: 5 years
• Furniture and appliances: 7 years

Work with your accountant on this one—depreciation rules get complicated fast.

8. Legal and professional fees

Fees for attorneys, accountants, bookkeepers, tax preparers, and business consultants are fully deductible as long as the services relate to your business.

Deductible professional services:

• Annual tax preparation fees
• Legal advice for contracts
• Bookkeeping services
• Consulting fees for business strategy

If you paid a lawyer to handle a personal matter, that's not deductible. Keep it business-related.

9. Advertising and marketing

Your website, social media ads, print flyers, local event sponsorships, business cards, SEO services, email marketing tools, and promotional materials are all deductible. You can write off 100% of advertising and marketing expenses up to $5,000 in the tax year.

This category includes:

• Freelance copywriters
• Graphic designers for marketing materials
• Social media managers
• Website hosting and domain fees

10. Employee wages and benefits

Salaries, hourly wages, bonuses, commissions, sick time, vacation pay, and health insurance for employees are all deductible. This applies to businesses that employ people other than the owner—sole proprietors can't deduct their own salary, but they can deduct what they pay employees.

Also deductible:

• Employment taxes
• Workers' compensation insurance
• Retirement plan contributions you make on behalf of employees

Homebase Payroll automatically tracks wages, overtime, PTO accruals, and tips—making this deduction category simple to document and export come tax time.

11. Bad debts

When a customer owes you money but there's no realistic way to collect it, that debt becomes "worthless" and you can write it off.

What qualifies:

• Unpaid invoices
• Employee loans (different from payroll advances) you've given up on collecting
• Vendor or customer lines of credit that have gone bad

The debt must have been included in your gross income to qualify for the deduction. If you use cash-basis accounting and never received the payment, you can't deduct it because it was never counted as income.

12. Education and training

Webinars, certifications, industry books, conferences, trade shows, and professional association memberships are deductible if they improve skills for your current business. The education can't qualify you for a new trade or business—it has to maintain or improve skills you're already using.

Often overlooked deductions:

• Membership dues to trade associations
• Chamber of commerce fees
• Professional organization subscriptions

13. Insurance premiums

Workers' compensation, general liability, professional liability, business property insurance, unemployment insurance, and health insurance for employees are all deductible. If you're self-employed, you may be able to deduct health insurance premiums for yourself and your family on your personal tax return.

Types of deductible insurance:

• Business interruption insurance
• Cyber liability insurance
• Commercial auto insurance

14. Interest on loans and credit cards

You can deduct interest paid on business loans, business credit cards, and lines of credit. The principal payments aren't deductible—only the interest portion.

Credit card processing fees you pay to accept customer payments (like Square or Stripe fees) are also deductible as a business expense, though they fall under merchant services rather than interest.

Keep clear records showing the funds were used for business purposes, not personal expenses.

15. Business meals

Client meetings over lunch, on-shift meals for employees during overtime, team celebrations, and meals while traveling for business are generally 50% deductible. There are exceptions—meals provided to employees for the employer's convenience (like a working lunch during a mandatory meeting) may be 100% deductible through 2025.

Important 2026 change: Starting January 1, 2026, on-site meals and snacks provided for the convenience of the employer (breakroom coffee, cafeteria meals, on-site dining) are no longer deductible. Business meals with clients and meals during travel remain 50% deductible.

Entertainment expenses like taking clients to a baseball game are no longer deductible as of 2018, even if you discuss business. Stick to meals.

16. Telephone and internet expenses

Business phone plans, mobile devices, and internet service are deductible. If you use your personal phone or home internet for business, you can only deduct the percentage used for business purposes.

How to calculate: Track your business calls and data usage for a month to calculate a reasonable percentage. If 60% of your phone use is business-related, deduct 60% of your monthly bill.

17. Inventory

For product-based businesses, inventory costs are deductible as part of your cost of goods sold (COGS).

What counts as inventory costs:

• Raw materials
• Shipping and freight costs
• Storage fees
• Factory overhead
• Direct labor costs for workers who produce the products

You'll need to value your inventory at the beginning and end of each tax year to calculate COGS accurately. The formula: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold.

18. Banking fees

Monthly account maintenance fees, overdraft charges, wire transfer fees, and check printing costs for your business bank account are all deductible.

Also deductible:

• Third-party payment processor fees (PayPal, Venmo, Stripe)

You can't deduct bank fees if you're using your personal bank account for business transactions. This is another reason to open a dedicated business account.

19. Independent contractors

Money paid to freelancers, gig workers, and agencies is deductible as long as the contractor isn't actually an employee and the services are for your business (not personal use). You must send Form 1099-NEC to any contractor you pay more than $600 during the tax year.

Common examples:

• Freelance writers
• Graphic designers
• Virtual assistants
• Cleaning services
• Seasonal help
• Marketing consultants

20. Retirement plan contributions

Contributions to traditional IRAs, Roth IRAs, Solo 401(k)s, SEP-IRAs, SIMPLE IRAs, and Keogh plans are deductible. The amount you can deduct depends on the type of plan and your income level.

For self-employed individuals, you can typically deduct contributions made on your own behalf, which is a powerful way to reduce taxable income while saving for the future.

21. Business travel

Flights, train tickets, hotel stays, car rentals, rideshare services, and even dry cleaning while on business trips are deductible.

Requirements for travel deductions:

• Trip must be overnight
• Must travel at least 100 miles from home
• Must have a clear business purpose

You can also deduct 50% of meals while traveling and the full cost of shipping materials (like trade show displays) to and from your destination. Keep detailed records of dates, destinations, business purpose, and all receipts.

How to claim business tax deductions

Knowing what you can deduct is only half the battle. The other half is actually claiming those deductions correctly when you file your taxes. The good news is that the process is straightforward if you've been tracking expenses throughout the year. 

Here's exactly what you need to do:

Save every receipt

Every time you spend money on your business, save proof. It doesn't matter if you snap a photo with your phone, scan it into QuickBooks, or toss it in a folder—just don't lose it. 

Set up whatever system works for you, whether that's a cloud folder, accounting software, or even a shoebox (though we don't recommend the shoebox).

Track expenses as they happen

Don't wait until April to figure out what you spent all year. Every month, go through your expenses and assign them to the right category from this checklist. Think of it like doing dishes—way easier to clean as you go than to face a year's worth all at once. 

If you're using Homebase for payroll, this step is already done for wages, overtime, PTO, and tips. Just export the reports and you're set.

Fill out the right tax forms

This part depends on how your business is set up:

• If you're a sole proprietor or single-member LLC, you'll use Schedule C attached to your regular Form 1040
• If you're an S corporation, you'll file Form 1120S 
• Partnerships use Form 1065

You might also need extra schedules for things like depreciation (Form 4562), vehicle expenses, or the home office deduction. Your tax software or accountant will walk you through this.

Get help if things get complicated

If you're dealing with depreciation on expensive equipment, trying to figure out the QBI deduction, operating in multiple states, or just starting out and want to get it right from day one—hire a professional. 

A good CPA doesn't cost you money; they save you money by catching deductions you'd miss and keeping you out of trouble with the IRS.

Get organized for tax season with our checklist

Ready to track your deductions? Download the free small business tax deductions checklist and start organizing your expenses today. Then try Homebase to automate the documentation for your biggest expense category—payroll.

Download the checklist

How Homebase helps you stay tax-ready

Tax deductions only help if you can actually document them. That's where Homebase comes in—it handles the tracking automatically so you're not scrambling come tax season.

What Homebase does for your taxes:

• Tracks everything automatically: Hours, wages, overtime, PTO, and tips get recorded in real time. No spreadsheets, no manual calculations, no wondering if your numbers are right.
• Exports with one click: Send timesheets, payroll records, W-2s, and 1099s straight to QuickBooks, Gusto, or your tax software. Year-end forms generate themselves.
• Keeps you compliant: Get break tracking, overtime alerts, and state-specific labor law guidance. Avoid penalties that wipe out the money you just saved through deductions.

Try Homebase for free and stop stressing about payroll documentation.

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FAQs about small business tax deductions

What expenses can a small business write off?

Small businesses can write off operating costs like rent, employee wages, advertising, inventory, office supplies, insurance, legal fees, and equipment. 

The IRS allows deductions for expenses that are "ordinary and necessary"—meaning they're common in your industry and helpful for running your business. Check the 21-category checklist above for the complete list of what qualifies.

What is the most overlooked tax break?

The most overlooked tax breaks include the QBI deduction (up to 20% of qualified business income), Section 179 depreciation, bad debt write-offs, bank fees, and membership dues. Many small businesses also forget to track legitimate travel expenses, marketing costs, and home office deductions. These add up to thousands in missed savings.

What is the $75 rule in the IRS?

The $75 rule means the IRS doesn't require physical receipts for business expenses under $75. However, you still must record the amount spent, date, location, and business purpose. One important exception: lodging always requires a receipt regardless of the amount, even for a $60 hotel stay.

What expenses can I claim as a small business?

As a small business, you can claim expenses like payroll, rent, utilities, legal and accounting fees, insurance premiums, advertising, business software, and equipment purchases. To qualify as deductible, each expense must be ordinary (common in your industry), necessary (helpful for your business), and directly tied to your business operations.

Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.