As a small business owner, one of the most important things you can do to maximize your profits is to take advantage of tax deductions. These deductions reduce your taxable income, meaning less money goes to the IRS and more stays in your business. In 2024, there are numerous deductions that small businesses can leverage, but to get the most out of them, you need to know exactly what you’re eligible for.
In this blog, we’ll cover the most-searched small business tax deductions for 2024. We’ll focus on deductions that can make a real difference for your business, from the home office deduction to vehicle expenses. Understanding these key deductions can save big and keep your business growing.
Home Office Deduction
Many small business owners search for how to claim the home office deduction, and for good reason—it’s a major money-saver if you qualify. The IRS allows you to deduct expenses related to the part of your home used exclusively for business purposes.
What Can You Deduct?
- A portion of your mortgage interest or rent is based on your office size.
- Utilities such as electricity, heat, and internet.
- Homeowners or renters insurance.
- Repairs and maintenance for the office area.
Simplified Option
The simplified home office deduction lets you deduct $5 per square foot of office space, up to 300 square feet. This can be easier to calculate but may result in a smaller deduction than itemizing your expenses.
How to Maximize the Home Office Deduction
To get the full benefit, make sure your home office is used exclusively for business—no mixing it with personal space, like a guest room. Keep clear records of your utility and mortgage payments to ensure you claim the highest deduction possible.
Business Vehicle Expenses
If you use a car for your business, you’ve probably searched for ways to deduct vehicle expenses. Whether you use your personal vehicle or have a business-owned car, you can write off expenses tied to your business mileage.
Two Methods for Deducting Vehicle Expenses:
- Standard Mileage Rate: The IRS mileage rate for 2024 is $0.65 per mile for business use. Track your miles carefully to maximize this deduction.
- Actual Expense Method: This method allows you to deduct the actual costs of running your vehicle, including gas, insurance, repairs, and depreciation.
Tip: Tracking Mileage
Use apps like MileIQ to track your business mileage automatically. This makes it easy to log and claim your deductions.
Office Supplies and Equipment
Search data shows that many small business owners want to know how to deduct office supplies and equipment. From paper and pens to laptops and desks, these everyday business expenses are fully deductible.
Deductible Supplies:
- Printer paper, ink, and pens.
- Computers, printers, and other office equipment.
- Software and subscriptions are used for business purposes.
Section 179 Deduction
If you buy larger items, like computers or office furniture, you can deduct the full cost in the year you purchase them, thanks to Section 179. This allows you to deduct up to $1.16 million of equipment in 2024, making it a powerful tax-saving tool for businesses with large purchases.
Employee Salaries and Benefits
Employee-related expenses are among the most searched-for small business tax deductions. If you have employees, you can deduct wages, bonuses, and benefits like health insurance.
Deductible Expenses:
- Salaries and wages.
- Payroll taxes.
- Health insurance premiums for your employees.
- Retirement contributions like 401(k) match.
Tip: Payroll Software
Using a payroll service or software helps you easily manage employee salaries, deductions, and tax filings. Services like Gusto or QuickBooks Payroll can help you automate this process and keep accurate records.
Independent Contractor Payments
If you work with freelancers or independent contractors, their payments are fully deductible as business expenses. As more small businesses hire contractors, searches for contractor payment deductions have increased.
What to Know:
- Issue a 1099-NEC form to any contractor you pay more than $600 in a year.
- Keep records of all contracts and invoices for each contractor to back up your deduction.
Pro Tip:
Always track contractor payments through accounting software like QuickBooks or Xero so you have clear documentation when it’s time to file your taxes.
Business Travel Expenses
Many small businesses search for ways to deduct travel expenses for client meetings, conferences, or supplier visits. If your travel is for business purposes, you can deduct a wide range of costs.
Deductible Travel Expenses:
- Airfare, trains, or rental cars.
- Hotel stays.
- 50% of meal costs while traveling.
- Transportation at your destination (taxis, Ubers).
Tip: Keep a Travel Log
Maintain detailed records of each trip, including receipts and the business purpose of the travel. This documentation will be necessary if you’re ever audited.
Marketing and Advertising
Searches for advertising and marketing deductions show how important this category is for small businesses. Fortunately, expenses to promote your business are fully deductible.
What’s Deductible:
- Social media ads (Facebook, Instagram, Google Ads).
- Website costs, including development and hosting.
- Business cards, flyers, and brochures.
- Sponsorships or partnerships for brand exposure.
Pro Tip:
If you use a marketing agency, their fees are also deductible. Make sure you keep all invoices to support your deductions.
Rent and Utilities for Business Property
Rent payments are a key deduction for businesses that rent office or retail space. Searches related to business rent deductions are common, as this can be one of the largest expenses for small businesses.
Deductible Property Expenses:
- Monthly rent payments for your office, storefront, or warehouse.
- Utilities like electricity, water, and internet.
- Property maintenance costs.
Tip: Track Your Leases
Make sure your lease agreement is up to date, and keep copies of all payments to your landlord. These records will make it easy to prove your deductions if needed.
Professional Services and Fees
Small businesses often seek deductions for professional services, which are essential for legal and financial guidance. Services like accounting, legal advice, and consulting can be fully deducted.
Common Deductible Services:
- Legal fees.
- Accounting and tax preparation services.
- Business consulting.
Tip: Get Organized
Keep records of contracts and payments for professional services throughout the year. These costs can add up, and every bit helps lower your taxable income.
Business Insurance
Insurance premiums for your business are also tax-deductible. Small business owners frequently search for insurance deductions, knowing these costs can be high.
Deductible Insurance Types:
- General liability insurance.
- Property insurance.
- Workers’ compensation.
- Health insurance for yourself and employees.
Pro Tip:
If you bundle insurance policies, check whether you’re paying for coverage that’s not necessary. Regularly review your policies to ensure you’re only paying for what you need while still maximizing your deduction.
Education and Training
As small businesses grow, many search for how to deduct education and training costs. Whether for yourself or your employees, investing in skill development is a deductible expense.
Deductible Training Expenses:
- Seminars, workshops, and conferences.
- Online courses or subscriptions.
- Books and educational materials related to your business.
Pro Tip:
If the training helps improve your business skills or those of your employees, it’s a legitimate deduction. Keep records of all registration fees, course materials, and travel related to the training.
Interest on Business Loans
Many small business owners search for how to deduct loan interest. If you’ve borrowed money for your business, the interest on those loans is fully deductible.
Deductible Interest:
- Interest on business loans, lines of credit, or credit cards.
- Interest on loans for purchasing business equipment or property.
Pro Tip:
Use business credit cards for business expenses only so you can easily track and deduct interest related to your business.
Charitable Contributions
While not as commonly searched, charitable contributions are still an important deduction for small businesses that support nonprofits.
What You Can Deduct:
- Cash donations.
- Donated goods (valued at fair market price).
- Sponsorship of charitable events.
Tip: Record Contributions
If your business donates to a nonprofit, be sure to get a receipt or documentation showing the donation and its value. This will make it easy to claim the deduction.
Conclusion
As a small business owner, staying informed about the most popular tax deductions can save you money and help you invest more in growing your business. Whether you work from home, have employees, or hire contractors, there are tax deductions you don’t want to miss in 2024. By keeping detailed records and leveraging accounting software, you can ensure you claim every deduction available to you.
Maximize your tax savings by understanding these common deductions and consult with a tax professional to ensure you’re taking full advantage of them. With the right approach, you can reduce your tax burden and keep your business thriving.
