Maximizing Tax Deductions for Small Businesses in 2024 

1. Advertising and Promotion

You can deduct the cost of advertising and promotion.

For instance, hiring a logo designer, printing brochures, buying advertising space, sending cards to clients, creating a website, managing a social media campaign, or supporting an event. But you can't deduct payments for political campaigns, events, or lobbying.

2. Business Meals

In most cases, you can deduct half of your food and drink costs in the business. To qualify for the deduction, you need to make sure that the cost is a necessary part of running your business, the meal is not lavished and either the business owner or an employee must be present.

Thus, you can deduct all expenses for providing meals to employees, such as ordering pizza for dinner during late work hours. Also, meals at picnics and office parties are fully deductible.

Keep records of the outing including date, location, expenses, and business relationship. Note the purpose of the meal and discussion on the back of the receipt. And at the time of tax filing, your business meal will be deductible.

3. Business Insurance

You can deduct the premiums for business insurance. This may cover property insurance, risk inclusion, employee health and dental insurance, workers' compensation, business auto insurance, and more.

If the business or its owner is not named as a beneficiary, employees can be covered by life insurance. Even business interruption protection can be included.

4. Business Interest and Bank Fees

It is the best decision to have separate accounts and credit cards for your business. You can deduct overdraft fees, transfer fees, and service fees from your bank or credit card company.

You can also deduct merchant fees paid to third-party processors like PayPal or Stripe. However, personal account and credit card fees are not deductible.

5. Business Use of Your Car

If you use your vehicle for business purposes only, you can deduct all operating expenses. If you use it for both business and personal trips, you can deduct expenses related to business use. You can deduct vehicle expenses in two ways and choose the one that saves you the most on taxes.

The standard mileage rate is $0.66 per mile in 2024. The actual cost method involves tracking all operating expenses for the year and dividing them by the proportion of business miles driven. You cannot switch between the two methods for the same vehicle.

Keep a detailed log of your business miles, and use an app, or other documents to track your trips. Remember, you can't deduct commuting expenses between your home and regular workplace.

6. Contract Labor

If you pay a freelancer $600 or more in a year, then you can send them a Form 1099-NEC by January 31st of the following year and deduct their fees from your business expenses as contract labor.

7. Depreciation

Depreciation rules require spreading the costs of business assets over the number of years you'll use them, rather than deducting the full cost at once. The quicker tax benefit makes it more appealing to expense these items upfront.

Fortunately, the IRS provides business owners with several options for deducting the entire cost within a single year. Businesses can also deduct up to $1,080,000 in property put into service during the tax year thanks to the Section 179 deduction.

Bonus depreciation allows businesses to deduct 100% of the cost of furniture, computers, machinery, and equipment. If you do not claim bonus depreciation in the first year, you can only deduct $10,100 in depreciation.

8. Education

Education expenses that increase your skills and benefit your company can be fully deducted. The IRS will assess if the expense improves skills needed for your current business to determine eligibility.

Legitimate business education expenses include classes, webinars, professional publications, field-specific books, workshops, and transportation costs to and from classes. But expenses for education that would qualify you for a different job or schooling unrelated to your business are not eligible for deductions.

9. Home Office Expenses

You can deduct some housing costs from your business income if you have a home office. There are two ways to deduct workspace costs.

For a simplified approach, you can deduct $5 per square foot up to 300 square feet (27.87 m²) used for business. For the standard approach, keep track of all actual costs related to upkeep, like rent, utilities, and repairs.

Make sure you meet the requirements for the deduction, including exclusive and regular use. Your home office must be used solely for business purposes. It doesn't have to be a whole room, but it should have clear boundaries.

If the IRS audits you, include photos of your home office with your tax documents. Your home office should be your main place of business. If you use the standard approach, submit Form 8829 with your Schedule C.

10. Interest

If you pay for business expenses with a credit card or a loan and meet certain conditions for deduction, you can subtract the interest you pay to your lender. The obligation must be legitimate, both you and the lender intend to repay the debt, and there must be a genuine debtor-creditor relationship between you.

Keep in mind that if a loan is used for both business and personal purposes, the interest must be split between the personal and business uses.

11. Legal and Professional Fees

Deductible business expenses include fees for lawyers, accountants, bookkeepers, tax preparers, and online bookkeeping services. However, only the portion of the fee that is directly related to the business can be deducted. If the fees also cover personal work, such as making a will, that portion cannot be deducted.

12. Moving Expenses

The Tax Cuts and Jobs Act of 2017 has removed the deduction for moving expenses for nonmilitary people, but companies can still deduct the cost of moving business equipment, supplies, and inventory between business locations. Keep detailed records to support all expenses related to your business relocation.

13. Rent Expense

You can subtract rental payments as a business cost if you rent equipment or a business location. If you work from home, do not subtract the rent you pay on your home as a business cost. That rent can be subtracted from the expenses of running a home office.

14. Salaries and Benefits

If they meet certain conditions, employee wages, benefits, and vacation time can usually be deducted from taxes. The term ‘employee’ doesn't include partners, LLC members, or sole proprietors. The pay is reasonable, customary, and essential. The services were indeed provided.

15. Taxes and Licenses

Various taxes and licenses related to business expenses can be subtracted. This may cover state fees, payroll taxes, property taxes, sales taxes, fuel fees, and business permits.

16. Telephone and Internet Expenses

Phone and internet expenses for your business can be deducted, but only if they are used exclusively for business purposes. For instance, a second landline dedicated to your business is deductible, while the cost of your primary line is not. Remember to keep detailed records in case of an audit to prove the business use of these services.

17. Travel Expenses

To qualify as business travel, a trip must be ordinary, necessary, and away from your tax home. Your tax home is the entire city or region where you conduct business, regardless of where you live. You must also sleep or rest away from your tax home for a period longer than a typical workday.

The IRS allows deductions for business travel expenses such as transportation, parking and toll fees, taxis, meals and lodging, tips, dry cleaning, business calls, and other essential costs. If you use your vehicle, keep a mileage log and record the business purpose, dates, and expenses.