Common deductions small business owners miss

Most small business owners leave money on the table every year, not because they're careless, but because nobody ever walked them through what's deductible. Your bookkeeper can only deduct what shows up in your books, and your books can only reflect what you tell them.

Here are six areas where we see it happen most, and what to do about each one.

Home office

If you use part of your home regularly and exclusively for business, you have two ways to claim it. The simplified method lets you deduct $5 per square foot of office space, up to 300 square feet, for a maximum deduction of $1,500. No records of actual expenses required, just the square footage.

The actual expense method takes more tracking but can be worth more. You calculate the percentage of your home used for business, then apply that percentage to your mortgage interest or rent, utilities, insurance, and repairs. A 200-square-foot office in a 2,000-square-foot home is 10% of the space, which means 10% of those costs become deductible.

The word "exclusively" matters here. A desk in the corner of your living room that doubles as the kids' homework spot doesn't qualify. A spare room used only for work does.

Vehicle use

Business owners drive to client meetings, supply runs, the bank, and job sites, and a lot of those miles never make it into a mileage log. For 2026, the standard mileage rate is 72.5 cents per mile. Drive 5,000 business miles in a year and that's a $3,625 deduction, assuming you have the log to back it up.

The log needs the date, destination, business purpose, and miles driven for every trip. An app like MileIQ or Everlance handles this automatically; a notebook in the glove box works too (as long as you use it). What doesn't count: your regular commute from home to a fixed office. What does count: anywhere you drive for a business reason once you're already working.

If you'd rather deduct actual vehicle costs (gas, insurance, repairs, depreciation) instead of the standard rate, you can, but you have to choose that method in the vehicle's first year of business use and stick with a consistent approach after that.

Health insurance premiums

Self-employed business owners can generally deduct 100% of their health insurance premiums for themselves, their spouse, and their dependents, directly against their income, not as an itemized deduction. This applies to sole proprietors, partners, and S Corp owner-employees alike, though the mechanics differ slightly by entity type. It also covers dental and qualifying long-term care premiums.

The catch: you can't claim this deduction for any month you were eligible to participate in a subsidized health plan through a spouse's employer, even if you didn't enroll. And the deduction can't exceed your net business income for the year. Beyond that, it's one of the most consistently missed deductions we see, mostly because owners assume health insurance only counts as a personal expense.

Retirement contributions

Contributing to a retirement plan does two things at once: it builds your future and it lowers this year's taxable income. A SEP-IRA lets you contribute up to 25% of compensation or $72,000 for 2026, whichever is less. A Solo 401(k) can let you put away even more if you're the only employee. Which one fits depends on your income, whether you have employees, and how much you want to contribute in a given year.

We cover the full side-by-side comparison, including SIMPLE IRAs and defined benefit plans, in a separate post linked below. The short version: if you're profitable and not already contributing to a retirement plan, you're paying more in taxes than you need to.

Professional development and education

Courses, certifications, conferences, industry memberships, subscriptions to trade publications, and books directly related to your business or your skills in it are deductible. This includes travel and lodging to attend a relevant conference, as long as the primary purpose of the trip is business.

The line is whether the education maintains or improves skills you already use in your business, versus training you for a new trade or business entirely. A bookkeeper taking an advanced QuickBooks course: deductible. A bookkeeper getting a law degree to switch careers: not deductible, at least not through the business.

Section 179 and equipment purchases

If you bought equipment, machinery, computers, or certain vehicles for the business this year, you may be able to deduct the full purchase price in the year you bought it instead of depreciating it over several years. For 2026, the Section 179 limit is $2,560,000, with the deduction beginning to phase out once total equipment purchases exceed $4,090,000. Most small businesses never get close to that ceiling.

This matters most in a year where you made a real capital investment, a new work vehicle, a piece of production equipment, an office buildout, and want that cost to offset income now rather than spread thin over five or seven years.

How these deductions are missed

Every deduction above depends on documentation that has to exist before tax time, not get reconstructed after. The mileage log, the square footage calculation, the receipt for the conference registration. None of it is complicated. It just has to happen consistently, which is exactly the kind of thing that falls through the cracks when bookkeeping and tax prep are handled by two people who never talk to each other.

Pair this list with a deductions checklist you can keep on your desk, so tracking these categories becomes part of your routine instead of a scramble every April.

Want a second set of eyes on your deductions?

A Vibe Check is a free, no-pressure conversation where we look at what you're already tracking and tell you plainly what you might be missing. Schedule yours here.

Keep reading

These posts round out the picture on getting the most out of what you're already spending:

• Fringe benefits by entity type: how your business structure affects which benefits, including health insurance, you can deduct and how.
• Bookkeeping basics: what you need to track: the recordkeeping habits that make every deduction on this list defensible.
• Retirement plan options for small business owners: a full side-by-side comparison of SEP-IRA, Solo 401(k), SIMPLE IRA, and defined benefit plans.

This post is general information, not advice for your specific situation. Which deductions apply to you depends on your entity type, your income, and your records. Talk to a tax professional before you file. That's what we're here for.