25 Small Business Tax Deductions Write Offs in 2025

First, you have to itemize your deductions to deduct state sales or income taxes, which means you can’t also take the Standard Deduction. Second, your deduction for all state and local taxes is capped at $10,000 ($5,000 if you’re Married Filing Separately) for 2024. This amount increases to $40,000 for 2025 but is reduced for those with Modified Adjust Gross Income greater than $500,000 ($250,000 for married couple filing separately). If you use the cash method of accounting, you normally report income when you receive payment. You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business.

Employees’ Pay

You may want to join hotel membership clubs if you travel a lot for business. Or, it may be worthwhile to join country clubs or other social clubs where local business networking is done. However, as mentioned in the entertainment section, these are not deductible expenses.

Maximize Your Deductions With a Tax Specialist

Unlike HSAs or Archer MSAs, which must be reported on Form 1040, 1040-SR, or 1040-NR, there are no reporting requirements for FSAs on your income tax return. Amounts you contribute to your employees’ HSAs aren’t generally subject to employment taxes. You must report the contributions (including amounts the employee elected to contribute through a cafeteria plan) on Form W-2, box 12, code W.

Child and dependent care credit

• Be sure to get the appropriate forms for your institution in advance of tax season to use this as a qualified business income deduction.
• All features, services, support, prices, offers, terms and conditions are subject to change without notice.
• If you use the cash method of accounting, you normally report income when you receive payment.
• For example, you are an eligible individual, age 45, with self-only HDHP coverage.
• An item-by-item list of the deductions that can be claimed including medical expenses, mortgage interest, real estate tax, charitable contributions, etc.

When done correctly, tax deductions can greatly reduce taxable income, saving money for your business. In this guide, we’ll cover 25 essential small business deductions for the 2025 tax season, covering various expense categories such as meals, travel, office supplies, and more. As mentioned, all business expenses that are ordinary and necessary are tax-deductible. That makes the list of potential business tax deductions very lengthy. Companies are considered legal persons, so many of the personal tax deductions listed earlier can also apply to businesses.

Jury duty pay

You don’t have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Rollovers aren’t subject to the annual contribution limits. Each qualified HSA funding distribution allowed has its own testing period. For example, Liability Accounts you are an eligible individual, age 45, with self-only HDHP coverage.

If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. You don’t have to make withdrawals from your HSA each year. You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. If the excess contribution isn’t included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. There are many benefits to being a self-employed contractor, and a qualified tax advisor can help you optimize your strategy when filing your 1099 independent contractor income tax deductions.

Earnings on amounts in an HSA aren’t included in your income while held in the HSA. A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is enrolled in https://www.bookstime.com/ Medicare. Distributions from a Medicare Advantage MSA that are used to pay qualified medical expenses aren’t taxed.

Business travel

In 2025, you can contribute up to $23,500 in deferred salary to a solo 401(k), plus additional catch-up contributions of $7,500 if you’re age 50 or older. You can also contribute an employer match for yourself, though the combined contributions can’t exceed $70,000 (excluding catch-up contributions). You can easily keep track of payments and issue 1099 forms through an accounting system like QuickBooks, for example. This may also include other types of professional services, such as advertising agencies, insurance brokers, call centers, or other professional services that are common for the nature of your business.

Are there limits on business meal deductions?

Additionally, any employment-related tax credits claimed must be subtracted from the total deduction amount. In conclusion, depreciation and Section 179 deductions are vital tools for self-employed individuals to manage their tax responsibilities effectively. By utilizing these deductions, they can lower their taxable income and keep more of their hard-earned money. In summary, if a debt is deemed uncollectible and meets the criteria, it tax deductible expenses can be deducted, helping to lessen the financial impact on the business. Remember, debts are not taxable income, but if a personal loan is forgiven, taxes may apply. Having separate bank accounts and credit cards for your business is always a good idea.

• The definition of small employer is modified for new employers and growing employers.
• For 2022, the credit is nonrefundable and has been reduced back to a maximum 35% of your expenses.
• Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return.
• However, taxpayers who purchase eligible cars by Sept. 30, 2025, may still be able to snag a credit on their 2025 tax returns.
• However, certain high-income individuals may have paid more if they had multiple employers withholding Social Security taxes.
• Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges.

And if you buy tangible assets for your business, you write-off a sizable portion of the cost. This tax code provision lets you deduct up to the 100% of the cost of tangible assets. If you buy any tangible assets for your business, you may be able to deduct a large portion of the cost in the year you made the purchase. Self-employment tax is a 15.3% tax that is used to fund Social Security and Medicare programs.