What Business Expenses Can I Deduct?
Home office, mileage, equipment, meals, health insurance, retirement — what counts as ordinary and necessary, and what records to keep.
The IRS deducts expenses that are "ordinary and necessary"for your trade or business. "Ordinary" = common in your industry. "Necessary" = helpful, not strictly required. The rule is broader than most people think — but only if you can prove it with records.
The nine categories that cover most of your deductions
Rules + records to keep for each. Don't skip the records part.
Home office
Regular + exclusive use of a portion of your home. Simplified method: $5/sqft up to 300 sqft ($1,500 max). Actual method: % of home × actual home expenses.
Vehicle mileage
$0.67/mile in 2024 (standard rate). Or actual method: % business use × actual costs (gas, maintenance, insurance, depreciation). Pick one and stick with it.
Equipment and software
Section 179 expensing up to $1,160,000 (2024) — write off the full cost in year purchased. Or capitalize and depreciate. SaaS subscriptions are fully deductible.
Meals
50% deductible for business meals with a client/prospect/employee. 100% for meals provided to employees in your office for your convenience. Entertainment is 0% (no more deduction).
Health insurance
Self-employed health insurance deduction: 100% of premiums for you + spouse + dependents. Above-the-line, reduces AGI.
Retirement contributions
SEP IRA: up to 25% of net SE earnings ($69,000 max in 2024). Solo 401(k): $23,000 employee + 25% employer ($69,000 combined). Both reduce taxable income.
Education and training
Courses, books, conferences, certifications — deductible if they maintain or improve skills required by your current business. New-field training: usually NOT deductible.
Phone and internet
Business-use percentage. If your cell is 60% business, deduct 60% of the bill. A dedicated business line is 100%.
Marketing and advertising
Fully deductible: website hosting, ads (Google, Meta, LinkedIn), business cards, branded swag, sponsorships, content creation tools.
What records the IRS actually wants
- Receipts for anything $75+. Below $75, a credit card statement line is usually enough — but keep the receipt if you have it.
- A contemporaneous log for mileage. Reconstructed logs after the fact get challenged in audits.
- Bank and credit card statements from a business-only account — see our Separate Business Finances guide.
- Business purpose noted on each meal receipt: who was there + what was discussed.
- Retain records for 7 years. IRS statute is 3 years generally, 6 years for large under-reporting, indefinite for fraud. 7 years covers most scenarios.
Common misconceptions
"My new iPad is fully deductible because I'm self-employed."
Only the business-use percentage. If you use it 70% for work, you deduct 70% of the cost.
"The home office deduction is an audit red flag."
Not anymore — millions claim it post-pandemic. Just meet the regular + exclusive use test and keep records.
"I can deduct my commute to my home office."
No commuting expenses are deductible (commute = home to first work location). But if your home is your principal place of business, travel from home to a client site IS deductible.
"Entertaining clients is 50% deductible."
Entertainment was eliminated by TCJA in 2018. Meals with a clear business purpose are still 50%, but sports tickets, concerts, golf — gone.
"I can deduct expenses paid in cash without records."
No record = no deduction in an audit. The burden of proof is on you, not the IRS.
Commonly overlooked deductions
- Bank and credit card fees on business accounts
- Interest on business loans and business credit cards
- Professional fees: attorney, CPA, bookkeeper, consultant
- Subscriptions: trade publications, industry tools, professional memberships
- Travel: flights, hotels, rental cars, baggage fees, taxi/Uber for business trips. 100% deductible.
- Bad debts: unpaid invoices you can no longer collect (for accrual-basis taxpayers)
- Startup costs: up to $5,000 deductible in year 1, rest amortized over 15 years
Track every deduction automatically.
Pixelbase pulls your business bank and card transactions, categorizes them for tax time, attaches digital receipts, tracks mileage, and runs the home office calculation. April 15 stops being a forensic accounting project.