22 Small Business Tax Deductions Checklist For Your Return In 2023

There are a number of business tax deductions that can help you save money. Learn about which deductions your small business could be eligible for this year.

1. Home office

Over the last few years there's been a shift to remote work and hybrid work environments. If you operate your business out of a home office, you are allowed to deduct the cost per square foot of your dedicated office space.

According to the IRS, taxpayers who work from home can deduct $5 per square foot of space that is used as a home office, up to 300 square feet. That equals a maximum deduction of $1,500.

The home office deduction includes the cost of utilities, such as heat, electricity, and Wi-Fi, so those expenses can’t be deducted separately.

To qualify for the home office deduction in 2022, your workspace must meet the following three requirements:

The workspace has clearly defined boundaries. It should be a separate room or portion of a room. That means working from your bedroom doesn't count.
It must be the regular, or normal, place where you work. If you typically work at a nearby co-working space, but you work from your kitchen table occasionally, you probably couldn't claim the deduction.
You must engage in regular and important business from your home office. For example, if you are a medical provider who sees patients in a hospital, but you do paperwork and billing at home, that likely would not qualify.

2. Office supplies

Whether you work from home or in an office, you need certain items to keep your business running. That’s why the IRS allows small business owners to write off the cost of office supplies from their taxes.

Examples of office supplies that qualify as deductible business expenses include:

Printer paper
Markers, pencils, and other writing utensils
Computer software that is essential to your business

3. Business insurance premiums

Having the correct small business insurance is key to maintaining the financial health of your company. Some types of business insurance are required if you want to sign a lease on office space or obtain a business license. Fortunately, business insurance premiums are tax-deductible.

Here are some of the policies that usually qualify for a tax deduction:

General liability insurance
Professional liability insurance
Commercial property insurance
Business interruption insurance
Cyber insurance
Workers’ compensation insurance
Commercial auto insurance
Unemployment insurance
Health and life insurance

Find small business insurance quotes

4. Office rent

Small business owners who rent office space can deduct the monthly payment from their taxable income. In addition to the cost of rent for the physical building space, you are also allowed to deduct the cost of rent for a business parking garage.

One important note is that the rent deduction is different from the home office deduction. This deduction only applies to a business owner who pays rent on a physical space that is outside of their home.

If you pay rent on your home or apartment, and you work from home full-time, you should claim the home office deduction instead.

5. Relocation expenses

Twenty-seven million Americans moved in 2022. Whether it was across the state or the country, if you moved your small business, you can recoup some or all of those costs.

For 2022, deducting relocation expenses comes down to the type of small business you own. As a corporation or limited liability company, you can deduct the full expense of the move from company taxes, including transport, packing, loading, surveys, and even brokerage commissions. If you operate as a sole proprietorship or partnership, you can deduct the expenses if you meet two criteria: you must move at least 50 miles and have worked at least 39 weeks at the new location in the 12 months following the relocation.

However, keep in mind that the relocation expense deduction does not apply to home offices. So, if you run your business out of your home and you move into a new house, you would not be able to claim this tax credit.

6. Internet and phone bills

The IRS will allow you to deduct the cost of your internet and cellphone plan from your 2022 federal income taxes. The only qualification is that your phone and internet use must be essential to your business’s ability to operate every day.

In addition, you can write off the cost of Wi-Fi that you have to purchase for work purposes, such as while traveling on a plane or staying at a hotel.

7. Continuing education

If you took a continuing education course in 2022, you might be able to deduct the cost from your taxes. Work-related educational expenses are tax-deductible for self-employed business owners if they meet these qualifications:

The program maintains or improves the skills necessary for your current job
You must legally take the course to keep your salary or job
The program can't be used to help you learn skills for a new trade or business

Some examples of continuing education costs that are tax-deductible include:

Classes and workshops (online or in-person) in your field
Subscriptions to professional publications relevant to your business
Seminars and webinars that apply to your business

8. Marketing and advertising

The cost of marketing and advertising your business can be written off as a 2022 tax deduction. It doesn’t matter how big or small your campaign is.

You can write off 100% of your marketing and ad spend for the taxable year, up to the maximum of $5,000. Examples of expenses that would qualify for this deduction include:

Printing a batch of business cards or fliers
Hiring a social media marketer
Running Facebook or Google ads
Marketing software subscriptions
Website hosting
Working with an SEO consultant

9. Business vehicles

Business vehicles are a tax write-off. If your business vehicle doubles as your personal vehicle, calculating the deduction can be tricky.

For instance, self-employed individuals who drive their personal cars for business purposes may be looking to write off expenses from their hired and non-owned auto insurance policy (HNOA). In this case, the deduction should be based on the amount of time you use the car for business purposes. Track each business-related trip you make and submit that mileage cost as your deduction. Another option is to use the standard mileage rate, which is $0.585 per mile from Jan. 1, 2022, to June 30, 2022, and $0.625 per mile from July 1, 2022, to Dec. 31, 2022.

If the vehicle is used solely for business purposes and never used for personal travel, such as a work van, you can deduct 100% of the cost of operating and maintaining the vehicle.

Almost every car expense you can think of qualifies for the deduction, including:

Gas
Maintenance and repairs
Car insurance
Registration fees
Lease payments
Tolls
Parking fees
License fees

10. Business meals

Are you the kind of business owner who likes to wine and dine your clients? Or maybe you like to take your staff out for occasional work lunches at the local watering hole.

For 2022, meal deductions were cut back to 50% from the 100% we saw the last couple years.

The caveat with this tax deduction is that the meal needs to be work-related. So, for example, if you and an employee get a drink before a sporting event, and you have no intention of discussing business, the cost is not deductible.

If you want to claim the business dining tax deduction, it’s important to keep a log of:

The price of the meal
The date and location
The business relationship of the people who were there

11. Business travel

As we enter the era of corporate digital nomads and bleisure—business and leisure—travel, it's likely you or your employees went on business trips this last year. Whether it was strictly business, or a combination of business with a few vacation days tacked on, the business expenses of the trip are tax deductible.

Like many other business tax deductions, the IRS has strict rules for who can claim this deduction. In order to write off your business travel expenses, your trip must meet the following criteria:

The trip must be overnight
You must travel at least 100 miles from home
The expenses must be ordinary and necessary

To claim this deduction, make sure to keep a record of all associated expenses from your trip. The receipts will be essential when it comes time to file your taxes. Some of the covered costs include:

Airfare
Train tickets
Hotel and Airbnb costs
Taxis and rideshare services
Dry cleaning
Shipping items, such as to a tradeshow

If you are a consultant who travels for clients, deducting taxes is just one of a few opportunities available to help you manage you travel expenses. Learn more about great tips for consultants who travel for clients.

12. Employee salaries and benefits

One of the biggest tax deductions for small business owners is the cost of employee wages and employee benefits. However, you can only claim this deduction if you employ someone other than yourself. It doesn’t apply to sole proprietors, partners, or LLC members.

In addition to employee salaries, you are also allowed to deduct an employee’s paid time off and commission or bonuses, as well as employment taxes related to payroll.

13. Business credit card and loan interest

Interest paid on business credit cards or a business loan can be deducted from your federal taxes. For the 2022 tax year, you can only deduct interest paid that equals 30% or less than your taxable income.

The IRS has the following rules for business owners who want to claim this deduction:

You must be legally liable for the debt.
Both you and your lender must expect the debt to get repaid.
You and the lender have a true debtor/creditor relationship.

14. Independent contractors

Do you rely on contractors or freelancers to provide services for your business? If so, the money you pay them can be written off your taxes. The only rules for this deduction are:

15. Business bank fees

A business bank account is a smart investment for all small business owners. And if your bank charges monthly service fees, overdraft fees, or wire transfer fees, you’re allowed to deduct those costs from your taxes.

In addition, if your business sells products and uses a third-party payment vendor, like PayPal or Square, you can deduct those fees, too.

With this small business tax deduction, the only caveat is that it doesn’t apply to fees related to your personal bank account. That means if your business profits get deposited into your personal checking account, you aren’t eligible for the deduction.

16. Startup business expenses

Launched a business in 2022? The IRS will allow you to deduct 100% of your startup expenses, up to $5,000.

To qualify as a startup expense, the cost must be a normal deduction for an established business. But in this case, it’s a cost that you incurred before the business officially started operating.

There are many startup expenses that may qualify for this deduction, such as:

Working with a business consultant
Traveling to conferences
Attending training events in the industry
Launching a marketing campaign
Building a website

17. Business losses

If your business lost money during the taxable year, the IRS allows you to write off the loss. For sole proprietors and LLC owners, you can write off the losses in full from your personal tax return.

There is no limit to the amount of money you can write off. And if your business experiences losses for several consecutive years, you won’t get penalized.

18. Legal and professional fees

The cost of working with professionals, such as a lawyer, accountant, or bookkeeper, is a small business tax write-off. As long as the professional provided services that were necessary and relevant to your business, it counts.

19. Charitable contributions

2022 was an inspired year for giving. From national to worldwide headlines, businesses responded with generosity for those in need. If your business donated money to a charitable organization during the last taxable year, you can use it to lower your tax liability.

For this tax year, you can write off 60% of your donations if they benefit a qualifying charity and you made a cash contribution.

If your business is structured as a sole proprietorship or LLC, the IRS recommends writing off charitable donations on your personal taxes. However, if your business is set up as an S corporation, you should take the deduction on your business tax return.

20. Retirement plan contributions

If you’re like many small business owners, you probably make 100% of your own retirement plan contributions. The IRS recognizes this and allows you to deduct your contributions from your income taxes if you have one of the following retirement accounts:

Roth IRA
Traditional IRA
Keogh plan
Solo 401(k)

21. Depreciation

If you own assets that are essential to your business operation, you might be able to write off the depreciation from your income taxes. Examples of depreciating business assets include:

Real estate (i.e. your office, if you own a commercial building)
Computers and electronic equipment
Machinery
Business use vehicles
Office furniture and appliances

For the 2022 tax year, small business owners can deduct a maximum of $1,080,000 in depreciation for qualifying assets. If you want to claim a depreciation tax deduction, you must file Form 4562 with your tax return.

When it comes to deducting depreciation, however, there are some restrictions. For example, you can only write off the depreciation for computers and cars over a five-year period. For furniture and appliances, you can write off the depreciation over a seven-year period.

If you are planning to take the depreciation tax deduction, consider talking to a tax professional or your personal tax preparer. They can help you understand what assets qualify for this tax credit, how much you can write off based on the tax laws, and what tax forms you need.

22. Health insurance premiums

Small business owners who are sole proprietors typically pay for their own health insurance benefits. Fortunately, you are allowed to deduct the cost of your health insurance premiums from your tax bill.

In addition, LLC members, partners in partnerships, and S corporation shareholders can also take advantage of this deduction. There's no limit to the amount of money you can deduct from your tax bill.

Adding it up

To claim small business tax deductions, it’s important to track and log your expenses throughout the tax year. When you keep meticulous records, it makes your life easier during tax time, and if you were ever audited, you would have proof of those expenses.

When you go through the small business tax deduction checklist and file your business taxes, it’s a good time to take inventory of your business insurance coverage. An annual review will ensure you have the appropriate policies and the right amount of coverage for your business's needs in 2023.

Whether the last year was one of growth, loss, or simply staying the course, you might be able to find additional insurance savings. For example, if you moved to a new state or downsized your business, make sure to get new insurance quotes to see if you can get a lower premium.

As an expert in business taxation and finance, I have extensive knowledge of the concepts discussed in the article. My expertise is grounded in years of studying tax laws, practical application in various business scenarios, and staying abreast of the latest regulations. Let me break down the key concepts covered in the article:

Home Office Deduction:
- Eligibility: The home office must have clearly defined boundaries, be the regular place of work, and used for regular and important business activities.
- Deductible Expenses: $5 per square foot up to 300 square feet, covering utilities like heat, electricity, and Wi-Fi.
Office Supplies Deduction:
- Eligibility: Small business owners, whether working from home or an office, can deduct the cost of essential supplies.
- Deductible Expenses: Includes printer paper, writing utensils, and essential computer software.
Business Insurance Premiums:
- Eligibility: Necessary for leasing office space or obtaining a business license.
- Deductible Expenses: General liability, professional liability, commercial property, business interruption, cyber, workers' compensation, commercial auto, unemployment, health, and life insurance.
Office Rent Deduction:
- Eligibility: Applicable to business owners renting physical space outside their home.
- Deductible Expenses: Monthly rent for physical building space and business parking garage.
Relocation Expenses Deduction:
- Eligibility: Applicable to corporations or LLCs moving, with specific criteria for sole proprietorships or partnerships.
- Deductible Expenses: Moving expenses, including transport, packing, loading, surveys, and brokerage commissions.
Internet and Phone Bills Deduction:
- Eligibility: Costs must be essential to daily business operations.
- Deductible Expenses: Internet, cellphone plans, and Wi-Fi used for work purposes.
Continuing Education Deduction:
- Eligibility: Work-related courses maintaining or improving skills necessary for the current job.
- Deductible Expenses: Classes, workshops, subscriptions, seminars, and webinars relevant to the business.
Marketing and Advertising Deduction:
- Eligibility: Applies to all business sizes, covering various marketing expenses.
- Deductible Expenses: Business cards, fliers, social media marketing, online ads, marketing software, website hosting, and SEO consulting.
Business Vehicles Deduction:
- Eligibility: Depends on business use; deductions based on business-related mileage.
- Deductible Expenses: Gas, maintenance, repairs, insurance, registration, lease payments, tolls, parking fees, license fees.
Business Meals Deduction:
- Eligibility: 50% deduction for work-related meals.
- Deductible Expenses: Must be work-related, with a log of meal price, date, location, and business relationship.
Business Travel Deduction:
- Eligibility: Applies to overnight trips at least 100 miles from home with ordinary and necessary expenses.
- Deductible Expenses: Airfare, train tickets, accommodation, transportation, dry cleaning, and shipping.
Employee Salaries and Benefits Deduction:
- Eligibility: Applicable to businesses with employees.
- Deductible Expenses: Wages, benefits, paid time off, commissions, and employment taxes.
Business Credit Card and Loan Interest Deduction:
- Eligibility: Legally liable for the debt with a true debtor/creditor relationship.
- Deductible Expenses: Interest paid on business credit cards or loans up to 30% of taxable income.
Independent Contractors Deduction:
- Eligibility: Payment to contractors providing services for the business.
- Deductible Expenses: Money paid to contractors for business services.
Business Bank Fees Deduction:
- Eligibility: Applicable to business bank account fees and fees from third-party payment vendors.
- Deductible Expenses: Monthly service fees, overdraft fees, wire transfer fees, and third-party payment fees.
Startup Business Expenses Deduction:
- Eligibility: Deducting up to $5,000 in startup expenses incurred before the business officially started.
- Deductible Expenses: Business consulting, travel, training events, marketing campaigns, and website building.
Business Losses Deduction:
- Eligibility: Applicable to sole proprietors and LLC owners experiencing business losses.
- Deductible Expenses: Full write-off of business losses from personal tax return.
Legal and Professional Fees Deduction:
- Eligibility: Deductible if the services are necessary and relevant to the business.
- Deductible Expenses: Fees for lawyers, accountants, and bookkeepers.
Charitable Contributions Deduction:
- Eligibility: Deductible for cash contributions to qualifying charities.
- Deductible Expenses: 60% write-off for charitable donations.
Retirement Plan Contributions Deduction:
- Eligibility: Applicable to small business owners making contributions to Roth IRA, Traditional IRA, Keogh plan, or Solo 401(k).
Depreciation Deduction:
- Eligibility: Applicable to essential business assets with specific rules for depreciation periods.
- Deductible Expenses: Real estate, computers, machinery, vehicles, office furniture, and appliances.
Health Insurance Premiums Deduction:
- Eligibility: Deductible for sole proprietors, LLC members, partners, and S corporation shareholders.
- Deductible Expenses: Health insurance premiums with no limit on the deduction amount.

In conclusion, understanding and leveraging these tax deductions can significantly benefit small businesses, providing opportunities to optimize financial management and reduce tax liabilities.

22 Small Business Tax Deductions Checklist For Your Return In 2023 | Insureon (2024)