Ask a room of small business owners whether they claim every deduction they’re entitled to, and the confident hands drop quickly once specifics start. The tax code allows you to deduct every ordinary and necessary expense of running your business — but only if you know it qualifies and can prove you paid it.
The rule that governs everything
“Ordinary and necessary” is the whole test: common and accepted in your trade, and helpful and appropriate for your business. It’s deliberately broad. The constraint that actually costs owners money isn’t the law — it’s documentation. An expense you can’t substantiate is a deduction you don’t have.
Commonly missed deductions
- Startup costs. Up to $5,000 of pre-launch expenses deductible in year one, the rest amortized. Many owners never total what they spent before opening day.
- Self-employed health insurance. Premiums for you and your family — an above-the-line deduction most miss in year one.
- Retirement contributions. A Solo 401(k) or SEP IRA can shelter tens of thousands of dollars of profit — the single biggest lever many owners never pull.
- Business use of personal phone and internet. The business-use percentage is deductible. Small monthly, real annually.
- Professional development. Courses, certifications, conferences, industry subscriptions — deductible when they maintain or improve skills for your existing business.
- Bank and processing fees. Merchant processing, software subscriptions, and account fees quietly total four figures for many businesses.
- Bad debts, casualty losses, and one more year of that unused equipment — the miscellany a good year-end review sweeps up.
The home office, demystified
Owners skip this one out of audit fear, and mostly needlessly. If a space in your home is used regularly and exclusively for business, you can deduct either a simplified $5 per square foot (up to 300 sq ft) or the actual-expense percentage of rent or mortgage interest, utilities, and insurance. The exclusivity rule is the real test — a dedicated room qualifies; the kitchen table doesn’t.
Vehicles: actual costs vs. mileage
Business driving is deductible by standard mileage rate or by the business-use percentage of actual costs (fuel, insurance, maintenance, depreciation). Mileage is simpler; actual costs often win for expensive or heavily-used vehicles. Two things matter either way: commuting from home to a regular workplace doesn’t count, and a contemporaneous mileage log — an app counts — is what stands up to scrutiny.
Deductions that invite trouble
Track it or lose it
Every missed deduction traces back to the same root cause: expenses scattered across personal cards, cash, and memory. The fix is boring and completely effective — a separate business account and card, books reconciled monthly, receipts captured digitally as they happen.
That’s precisely what monthly bookkeeping buys you: by the time your return is prepared, every deduction is already found, categorized, and documented. Ask us for a deduction review — we’ll tell you what your last return left behind.
