This is a plain-English walkthrough of the most common categories small business owners can deduct, what records you need to keep, and a few that get misunderstood. It's educational content, not tax advice — talk to a CPA for your specific situation.
The big categories
Rent and utilities (for business space)
Rent for office, retail, warehouse, or other business space is fully deductible. So are utilities (electricity, water, internet, business phone) tied to that space.
Note: as of October 1, 2025, Florida no longer charges sales tax on commercial rent — so if your bookkeeping still shows sales tax being paid on rent, that's an error to correct.
Home office
If you use part of your home regularly and exclusively for business, you can deduct a home office. Two methods:
- Simplified method: $5 per square foot, up to 300 square feet ($1,500 max)
- Actual expense method: percentage of home expenses (mortgage interest, insurance, utilities, depreciation) based on the square footage used for business
The simplified method is easier. The actual method usually gives a larger deduction if you track the underlying expenses cleanly. The IRS does scrutinize home office deductions — the space has to be used regularly and exclusively for business. A kitchen table doesn't qualify.
Salaries, wages, and contractor payments
Employee wages, payroll taxes (the employer side), benefits, and bonuses are deductible. Payments to independent contractors are also deductible — and if you paid any single contractor $2,000 or more in 2026, you'll need to issue a 1099-NEC.
Vehicle and mileage
If you use a vehicle for business, you can deduct either:
- Standard mileage rate — 72.5 cents per business mile in 2026
- Actual vehicle expenses — gas, maintenance, insurance, depreciation, etc., multiplied by business-use percentage
You can't switch between methods freely once you've started using one on a particular vehicle, so think about which fits your situation first. Standard mileage is simpler; actual expenses can be larger if you have a high-cost or heavily-used vehicle.
The IRS requires contemporaneous mileage logs. Use an app.
Travel
Business travel is deductible — airfare, lodging, ground transportation, and 50% of meals while traveling. The trip has to be primarily for business, with a clear business purpose.
What's not deductible: travel that's primarily personal (a vacation with one business meeting tacked on doesn't make the whole trip deductible). Spouse or family travel is also generally not deductible unless they have a legitimate business reason to be there.
Meals
Most business meals are 50% deductible. The 100% meal deduction temporarily available during 2021–2022 (the COVID-era restaurant exception) is gone.
What's deductible:
- Meals with clients or prospects with a clear business purpose
- Employee meals while traveling
- Meals at a business meeting or conference
What's not:
- Lavish or extravagant meals
- Personal meals with no business purpose
- "Lunch with my employee" without a real business discussion
Keep the receipt and note who you were with and what was discussed.
Insurance
Business insurance — general liability, property, errors & omissions, workers' comp, business interruption — is deductible. Health insurance premiums paid for employees are deductible. Self-employed owners can often deduct their own health insurance premiums as an above-the-line adjustment, separate from business expenses.
Professional services
Fees paid to accountants, bookkeepers, lawyers, consultants, and other professionals are deductible. So are professional dues, association memberships, and licensing fees.
Software, subscriptions, and tools
Software you use for business (CRM, accounting, project management, design tools) is deductible. Subscriptions to industry publications, online services, and business resources are deductible.
A clean rule: if it's used for business, it's deductible at the business-use percentage. If it's mixed personal/business, you have to allocate (Netflix isn't deductible just because you watched it during a work trip).
Marketing and advertising
Advertising costs, marketing campaigns, website hosting, design work, printing, business cards, signage, and similar marketing expenses are deductible.
Education and training
Continuing education, professional development, courses, books, and conferences that maintain or improve skills used in your business are deductible. Note: education that qualifies you for a new trade or business generally isn't deductible.
Office supplies and equipment
Office supplies (paper, pens, postage) are deductible. Equipment with a useful life over a year and meaningful cost may need to be depreciated rather than expensed immediately, though Section 179 and bonus depreciation often let you expense it in the year of purchase.
Interest
Interest on business loans, business credit cards, and business lines of credit is deductible. Interest on personal credit cards used for business is also deductible to the extent it relates to business expenses — though this is much harder to track, which is why dedicated business cards exist.
Bank fees and processing fees
Bank fees, wire fees, merchant processing fees, and payment platform fees (PayPal, Stripe, Square) are all deductible. These are easy to miss because they're often netted out of revenue automatically.
A few that get misunderstood
Clothing. Generally not deductible — even if you only wear it for work. Exceptions: uniforms with company branding, protective gear, and specialty clothing not suitable for everyday wear.
Client gifts. Capped at $25 per recipient per year. Spend more if you want — but $25 is the deduction limit.
Entertainment. Generally not deductible. Sports tickets, golf outings, concerts — gone under current tax law, even when client-related. Meals are still 50% deductible; tickets aren't.
Personal expenses run through the business. This isn't a gray area — it's not deductible, and the IRS audits it. Keep personal expenses out of the business.
Records you need
For every deduction, you need supporting documentation:
- The receipt or invoice
- Proof of payment (bank or credit card statement)
- For meals and travel: business purpose and who was involved
- For mileage: contemporaneous log
- For mixed-use items: business-use percentage and how you calculated it
How long to keep these records →
Common mistakes
- Mixing personal and business expenses — the most common audit trigger
- Not keeping receipts — undocumented expenses get disallowed
- Reconstructing mileage at tax time — IRS expects contemporaneous logs
- Over-deducting — claiming personal items as business deductions
- Under-deducting — missing legitimate deductions because the bookkeeping isn't clean
The last one is more common than the IRS-feared first two. Most owners leave deductions on the table because they don't have the records to support them — not because they got greedy.
Frequently asked questions
Yes, partially. Start-up costs (up to $5,000) can be deducted in the first year of business, with the remainder amortized over 15 years. Higher start-up costs are amortized over the full 15 years.
Allocate based on business-use percentage. Cell phones, vehicles, home internet, and similar mixed-use items can be deducted at the business portion. Document how you arrived at the percentage.
Throughout the year. Reconstructing deductions at tax time is how legitimate deductions get missed. Clean monthly bookkeeping makes deduction tracking automatic.
If your records support the deductions you claimed, you have nothing to worry about. If they don't, the deductions can be disallowed. Audits are rare for small businesses (well under 1% of returns), but the people who get audited are usually the ones with the worst records.
Where to start
The difference between owners who claim every deduction they're entitled to and owners who don't isn't tax knowledge — it's bookkeeping. Clean records make every deduction easier to find, document, and defend.
SoFlo360 helps small business owners keep their books in shape so deductions don't get missed at tax time. Spanish-friendly support is available for owners who'd rather handle financial conversations in Spanish.
Book a free consultation or learn more about our bookkeeping services.
This post is educational content, not tax advice. For your specific tax situation, consult a qualified CPA or tax professional.