Local and National tax laws are changing all the time and deductions are no different.
It's important to stay on top of the newest changes to the laws to keep them from
holding your business back. Tax deductions are used to reduce your taxable income
(the portion of your income that can be taxed). Knowing when and how to use them can
maximize your tax savings because less taxable income means less taxes paid and
more money to grow your business.
Here are 4 common eligible deductions for small businesses and also 4 commonly
mistaken business deductions that are actually not deductible.
Eligible Deductions
Home Office Expenses
Probably one of the most common deductions for small businesses filing as a sole proprietor is home office expenses! C-corps and S-corps (and their owners) can't claim home offices. To qualify, the space must be used exclusively and consistently for business purposes. For example, using your dining table for work but also for meals wouldn't qualify. Additionally, if the business has a physical location outside of the owners home, the deduction can't be claimed.
For employees, this home office deduction was eliminated for tax years 2018–2025, under the Tax Cuts and Jobs Act (TCJA), unless you come under specific exceptions (e.g., certain performing artists, armed forces reservists, or fee-based government officials). This means that most employees who work from home, even when required by their employer, cannot deduct home office expenses during this period.
The deduction cannot be more than the gross income that comes from the business use of your home. If your home office expenses are more than the income from your business, the excess expenses cannot create a loss. However, they can often be carried forward to future tax years.
Advertising
Another important tax deduction is advertising expenses. They are generally deductible
as long as they are ordinary and necessary for your business. The IRS allows businesses to deduct advertising costs that directly promote the business, its products,
or its services. This includes but is not limited to:
Traditional Advertising:
● TV, billboards, radio ads, etc.
Digital Advertising:
● Online ads, social media promotions, SEO, etc.
Promotional Materials:
● Business cards, logo design, and branded merchandise.
Website Costs:
● Building, hosting, and maintaining a website, if it's used to advertise or promote
your business.
Sponsorships and Events:
● Costs for sponsoring events, sports teams, or charities if your business name or
brand is prominently displayed.
Direct Marketing:
● Email marketing campaigns, direct mail, and newsletters sent to potential or
existing customers.
Networking and Public Relations:
● Expenses for participating in trade shows, expos, or industry events to promote
your business.
● Hiring a PR firm to promote your brand or manage your reputation.
To be deductible, advertising expenses must not be for personal purposes or related to
a hobby. Also, expenses for political advertisements, donations to political campaigns,
or lobbying efforts are not deductible. By carefully documenting and categorizing your
advertising expenses, you can take full advantage of this tax deduction.
Equipment Purchases
Yes, equipment expenses for your business can be deductible, but how you go about
deducting them depends on the cost and how the equipment is used. For the most part,
equipment like computers, machinery, tools, or office furniture qualifies as a business
expense if used predominantly for business.
You can deduct the entire amount in the year of purchase for those items that cost less
and are used up quickly, such as supplies. However, if you are making larger purchases (over 2,500 per item) for equipment that lasts longer, the IRS views them as capital assets to be depreciated over several years. This means you must then write off a portion of the cost of the
equipment each year over the period of its useful life.
Continuing Education
To be deductible, your expenses must be for education that either improves skills needed for your current job or be required by the law to keep your present salary, status or job. However, these expenses are not deductible if the education is part of a program that prepares you for a new trade or business or fulfills the minimum educational requirements for your current trade or business.
Commonly Mistaken Deductions

Personal Appearance Expenses
In most cases, personal appearance (such as clothing, salons, gym memberships) expenses are NOT tax-deductible, as the IRS considers them personal expenses rather than business-related. However, there are a few specific circumstances where such expenses may qualify for a deduction. Examples in which these might be allowed include:
Uniforms or Specialized Clothing
- If you buy any clothes that are needed for your work that aren't suitable for everyday wear, including company-branded shirts and uniforms that people in healthcare, fire protection, or law enforcement need.
Costumes or Wardrobe for Performers
- If you’re an actor, musician, or entertainer; clothing and makeup that is exclusively used for performances may qualify for a deduction. (e.g., a performer buying a costume for a role or heavy stage makeup for a production)
Professional Photoshoots or Media Appearances
- If you’re in an industry where maintaining your appearance is directly tied to your business (e.g., TV host, model, or public speaker), the costs for grooming or styling may be deductible when tied to specific business activities like: a professional portfolio photoshoot or a recorded TV segment or marketing campaign.
Entertainment Expenses
The IRS no longer allows most entertainment-related expenses as deductions. Client Entertainment includes expenses that involve entertaining clients at athletic events or concerts, amongst others. These are no longer deductible even if business was discussed. Also recreational activities such as the costs of holiday parties, retreats, or other recreational activities with clients are also non-deductible.
Employee entertainment, like a holiday party or team-building event, may still be deductible. Also, business meals during these events are partially deductible (50%) if properly documented. We advise that you clearly separate entertainment costs from meals and document the business purpose of the expense.
Home Office Expenses (Misused)
While home office expenses can be deductible, it's common for small business owners to overestimate what qualifies. It’s common for folks to try to deduct their entire mortgage, rent, or utility bills. However, this isn’t allowed! Only a portion of your home expenses, relative to the size of the home office, can be deducted.
Fees & Penalties
Many business owners mistakenly believe that fines, penalties, or legal settlements can be deducted as business expenses. This isn’t actually the case.
Fines or penalties paid to the government for legal violations, such as late payment penalties, parking tickets, or OSHA violations are NOT deductible. However, legal fees for running your business, such as disputes over contracts or protection of intellectual property, are deductible, but only if they’re directly tied to the operation of your business.

In Summary
Deductions are crucial to lowering your taxable income and saving your business money. So I’ll leave you with these three tips regardless of which deductions work for your business:
Documentation is key! So keep detailed records, receipts, and proof that the expenses were directly related to your business activity. Second, be careful because the IRS watches deductions closely, so be sure you can prove that the expenses were exclusively business-related and not for personal benefit. And finally, consult a Tax Professional! Find out if your situation qualifies and have a tax advisor help ensure compliance and proper expense management. Also, even financial guidance from a tax professional can be deductible, so yes, you can even write that off!