What is Tax Deductible for a Small Business?

Updated 9/29/2026

We all want to find ways to save money. If you're worried about a large business tax bill from the government, how do you cut it down?

One way to reduce what you owe in taxes is to take advantage of all of your tax deductions.

At CSI Accounting & Payroll, we’ve helped small business owners legally minimize their tax liability for 60 years. In this article, we'll answer some of the common questions we've heard about tax deductions, such as:

• What are tax deductions?
• What is tax-deductible?
• What is not tax-deductible?

What Are Tax Deductions?

Tax deductions reduce the amount of income that you need to pay taxes on. This important aspect of tax strategy helps reduce your tax liability, and therefore, save money.

How can you tell what is tax-deductible? At CSI, we always say: “Anything that is ordinary, reasonable, and necessary to generate income.” 

Our favorite tax-deductible things are the cost of preparing a tax return and the cost of monthly accounting! There will be more examples in the next section.

What is Tax-Deductible for a Small Business?

Deductions will vary greatly depending on your industry. Industries have many different needs for the following: 

• Supplies. Ex. Office supplies: computers, software, paper, and pens.
• Utilities. Ex. Internet, phone.
• Workspace. Ex. Renting an office building.
• Work-related travel. Ex. Flight tickets, rental cars, and hotels.
• Licensing requirements and education. Ex. Continuing education or attending a seminar.
• Salaries and benefits. Ex. The salary of an employee who is not a Sole Proprietor, a partner, or an LLC member.
• Insurance requirements. Ex. Business insurance.
• Depreciation. Ex. equipment usage over time.
  
• Business advertising. Ex. Getting a website designed.
  
• Professional services. Ex. The cost of monthly accounting.
  
• Loan or investment interest.
  
• … and much more.

Some things are tricky, too! Some famous examples are:

• 50% off food and drinks with a client or potential client. Be sure to note that it's only HALF!
• Work-related car mileage. Ex. Traveling from your workplace to a client’s location... NOT to be confused with commuting, which is non-deductible.
• The interest paid on a business loan. This part is deductible. The principal (amount of the loan) is NOT deductible.

What is Not Tax-Deductible for a Small Business?

It’s also important to include examples of what is not tax-deductible because some things are no longer deductible, and some have different parts that can be deductible or non-deductible.

Here are some items that are not tax-deductible but can be commonly mistaken to be:

• Entertainment. Ex. Taking clients to baseball games.
  
• Fines or penalties from local, state, or federal government. Ex. Penalties from the IRS.
• Personal insurances where the business is not the beneficiary. Ex. Disability and life insurance.
• Personal expenses. Ex. Doctor’s bills and a home mortgage payment.
  
• Loan or investment principal. Only the interest paid is deductible.
• Commuting between your home and your workplace. Only traveling for work, such as meeting a client somewhere, is deductible.

Maximize Your Tax Deductions

When you make the most out of your deductions, you save more money. You can do exactly that now that you know why tax deductions are important and have examples of deductible and non-deductible items!

If your accountant isn’t taking the time to go through all of the deductible categories listed in this article, then you’re not getting enough value out of the relationship. Working with an accountant is an investment, and this investment should include a minimized tax liability. Annual tax preparers fall short in this area, but it's where monthly accountants shine.

Ready to give monthly accounting a shot? Consider working with CSI Accounting & Payroll! Click the button below for a free consultation to see if we can be the right fit for your business.

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