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25 Small Business Tax Write-Offs in 2023

Updated: Apr 24, 2023

Small businesses can benefit from 25 Small Business Tax Write-Offs in 2023. Writing off several expenses as tax deductions can help lower the amount they owe on their income tax. What are the top 25 Small Business Tax write-offs in 2023?

The top 25 Small Business Tax Write-Offs in 2023 are the following:

1. Business Meals

As a small business, you can deduct 50 percent of qualifying food and drink purchases. To qualify, the meal needs to be related to your business, and you need to keep the following documentation related to the meal:

  • Date and location of the meal

  • A business relationship with the person or people you dined with

  • The total cost of the meal

The easiest way to track business meal expenses is to keep your receipt and jot down notes on the back about the meal details.

2. Work-Related Travel Expenses

All expenses related to business travel can be written off at tax time, including airfare, hotels, rental car expenses, tips, dry cleaning, meals, and more. You can reference the IRS website for a full list of deductible business travel expenses. To qualify as work-related travel, your trip must meet the following conditions:

  • The trip must be necessary for your business.

  • The trip must take you away from your tax home, i.e., the city or area where your company conducts its business.

  • You must travel away from your tax home longer than a normal work day, requiring you to sleep or rest on the route.

3. Work-Related Car Use

If you use your car strictly for work-related purposes, you can write off all costs associated with operating and maintaining it. If your car use is mixed between business and personal reasons, you can only deduct costs related to the vehicle's business usage. You can claim the mileage you use for business driving, either by deducting the actual miles traveled for business or by using the standard mileage deduction of $0.56 per mile driven.

4. Business Insurance

You can deduct the cost of your business insurance on your tax return. If you have a home office or use a portion of your home to run your business, you can deduct your renter’s insurance costs as part of your home office write-offs.

5. Home Office Expenses

Under new simplified IRS guidelines for home office expenses, home-based small businesses and freelancers can deduct five dollars per square foot of their home used for business purposes, up to 300 square feet. To qualify as a tax deduction, your work area has to be used exclusively for business (i.e., you can’t write off the square footage of your dining room if you do your work at the table during the day), and you need to use the home office regularly as your principal place for conducting business.

6. Office Supplies

You can write off office supplies, including printers, paper, pens, computers, and work-related software, as long as you use them for business purposes within the year in which they were purchased. You can also deduct work-related postage and shipping costs. Be sure to file all receipts for office supply purchases for documentation.

7. Phone and Internet Expenses

You can deduct these expenses if using the phone and internet is vital to running your business. If you use the phone and internet for work and personal reasons, you can only write off the percentage of their cost that goes toward your business use. For example, if roughly half of your internet usage is business related, you can write off 50% of your internet expenses for the year.

8. Business Interest and Bank Fees

If you borrow money to fund your business activities, the bank will charge you interest on the loan. Come tax season, you can deduct the interest charged both on business loans and business credit cards. You can also write off any fees and additional charges on your business bank account and credit card, such as monthly service fees and any annual credit card fees.

9. Depreciation

When you deduct depreciation, you’re writing off the cost of a big-ticket item like a car or machinery over the useful lifetime of that item rather than deducting it all in one go for a single tax year. Businesses usually deduct depreciation for long-term business investments that are more costly, so they’re reimbursed for the expense over the entire useful lifetime of the item. Here’s how to calculate depreciation:

Depreciation = Total cost of the asset / Useful lifetime of the asset

10. Professional Service Fees

Any professional service fees necessary to your business's functioning, such as legal, accounting, and bookkeeping services, are deductible for tax purposes. Using accounting or bookkeeping software for your business would also qualify as a tax deduction. If you are having trouble determining whether a particular professional service expense is for work or personal use, these guidelines for legal and professional fees from the IRS can help you judge the nature of the expense.

There are many tax deductions, aka tax write-offs that all small business owners can use in 2023.
Small Business Tax Write-Offs in 2023

11. Salaries and Benefits

If you’re a small business owner with employees, you can write off their salaries, benefits, and vacation pay on your tax returns. There are a few requirements for writing off salary and benefit expenses:

  • The employee is not a sole proprietor, partner, or LLC member of the business

  • The salary is reasonable and necessary

  • The services delegated to the employee were provided

11. Salaries and Benefits

If you’re a small business owner with employees, you can write off their salaries, benefits, and vacation pay on your tax returns. There are a few requirements for writing off salary and benefit expenses:

  • The employee is not a sole proprietor, partner, or LLC member of the business

  • The salary is reasonable and necessary

  • The services delegated to the employee were provided

12. Charitable Contributions

You can deduct charitable donations that you make to qualifying organizations. If your business is set up as a sole proprietorship, LLC, or partnership, you can claim these expenses on your personal tax forms. You claim charitable donations on your corporate tax return if your company is a corporation.

13. Education

Any educational expenses you incur to bring value to your business are fully taxable. The requirements for education-related expenses are that the course or workshop must improve your skills or help maintain your professional expertise. Educational expenses that qualify for deductions include:

  • Courses and classes related to your field of work

  • Seminars and webinars

  • Trade publication subscriptions

  • Books related to your industry

14. Child and Dependent Care

Costs you incur for caring for children or adult dependents are tax deductible. If your children are twelve or younger, you can write off the costs associated with their care. Adult dependents also qualify for deductions, including spouses and other related adults who cannot care for themselves because of physical or mental disability.

15. Energy Efficiency Expenses

Upgrades that you make to your home to ensure it’s more energy efficient can qualify for tax credits. You can claim 30 percent of the cost of alternative energy equipment for your home, including solar panels, solar water heaters, and wind turbines. The IRS site offers further details on the home energy tax credits.

16. Investments

If you borrow money to make investments, you can write off the interest paid on loan. You can deduct the interest to the point that it matches what you earned in investment income.

17. Foreign-Earned Income Exclusion

Under certain circumstances, American citizens with businesses based abroad can leave the foreign income they’ve earned off their tax return. To qualify for the exclusion, your tax home must be based abroad. This article can help you better understand the requirements for foreign-earned income exclusion.

18. Medical Expenses

You can claim insurance premiums and medical expenses, including doctor’s fees, prescription drugs, and home care. You can deduct your health and dental insurance premiums if you’re self-employed and pay for your health insurance.

19. Real Estate Taxes

Real estate taxes paid at the state and local levels can be deducted from your income taxes. Property taxes are included in these deductions, and you can claim up to a total of $10,000.

20. Mortgage Interest

You can deduct interest payments toward mortgage loans to buy, construct or improve your home if you use your home for business purposes. If you take out loans against your home equity, you can deduct the interest on those loans.

21. Moving Expenses

If you move and the main reason for doing so is work-related, you can deduct the costs of the move fully. To qualify, your move has to pass the distance test. To pass the distance test, your new job location has to be at least 50 miles farther from your former home than your old job location was from your previous home.

22. Retirement Contributions

If you contribute to an Individual Retirement Account, doing so helps reduce your taxable income for the year. Your total IRA contributions can’t exceed the total income you earned that year, or they can’t exceed the annual maximum contribution, whichever one is less.

23. Advertising and Promotion

You can fully deduct expenses related to promoting your business, including digital and print advertising, website design and maintenance, and printing business cards.

Recommended: High Standards Business Solutions

24. Client and Employee Entertainment

If you take business clients out, you can deduct the expense if you discuss business during the meeting and the entertainment takes place in a business setting for business purposes. You can deduct 50 percent of the cost of these entertainment expenses. You can also deduct as much as 100 percent of the cost of social events held for your employees.

25. Startup Expenses

If you launched a new business venture in the latest tax year, you could deduct as much as $5,000 in startup expenses you incurred in the lead-up to your business launch. That can include costs associated with marketing your new business, travel, and training costs.

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