Small business tax deductions, the 2026 list
A small business can deduct ordinary and necessary costs of running the business. The biggest for most owners are the home office, vehicle use, equipment through Section 179 or bonus depreciation, health insurance, retirement contributions, software and contract labor. Meals are 50% deductible, and personal costs never are.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- The test. Ordinary and necessary for your business
- Meals. Business meals are 50% deductible
- Equipment. Section 179 up to $2,560,000 for 2026
What can a small business deduct?
| Deduction | The rule |
|---|---|
| Home office | Space used regularly and only for business. Simplified method: $5 a square foot, up to 300 square feet |
| Vehicle | Business miles at 72.5 cents through June 2026 and 76 cents from July 1, or actual costs times business use |
| Equipment and computers | Section 179 up to $2,560,000, or 100% bonus depreciation |
| Health insurance (self-employed) | Premiums for you and your family, if no employer plan is available to you |
| Retirement contributions | SEP IRA, solo 401(k) or SIMPLE contributions |
| Business meals | 50% when business is discussed and records show who and why |
| Travel | Airfare, lodging and 50% of meals on overnight business trips |
| Software and subscriptions | Accounting, design, email and other business tools |
| Contract labor | Payments to contractors, with 1099-NEC forms where required |
| Wages and payroll taxes | Employee pay, your share of payroll taxes and benefits |
| Rent and utilities | For business space, or the business share of your home |
| Advertising and marketing | Ads, website, printing and sponsorships |
| Professional fees | Accounting, legal and payroll services |
| Insurance | Liability, property, workers' comp and business auto |
| Interest | On business loans and business credit cards |
| Startup costs | Up to $5,000 in the first year, the rest over 15 years |
Which costs can't I deduct?
Personal expenses, commuting, clothing you could wear outside work, fines and penalties, political contributions, and most entertainment like concert or sports tickets. Federal income tax isn't deductible either.
How do S-Corp owners claim home office and mileage?
Through an accountable plan: the company reimburses you, deducts the cost and you receive it tax-free. Claiming them on your personal return doesn't work for S-Corp owners.
What records do I need?
Receipts or statements showing what, when and how much, plus a note of the business purpose for meals, travel and anything that could look personal. A mileage log for car use. Monthly bookkeeping keeps all of it in order, and the record retention schedule says how long to keep it.
Sources
General information, not tax advice for your situation.
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See our tax planning and CFO serviceWhat is the biggest tax deduction for small businesses?
For most, it's wages and contract labor, then equipment and vehicle costs. For one-person businesses, the home office, vehicle, health insurance and retirement contributions add up fastest.
Are business meals deductible in 2026?
Yes, at 50%, when the meal has a business purpose and you keep a record of who attended and why.
Can I deduct my phone and internet?
The business share, yes. If you use them half for business, deduct half.
Can I deduct startup costs?
Up to $5,000 in your first year, reduced if startup costs top $50,000, with the rest spread over 15 years.
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