Key takeaways
What this article covers, in order:
- Where the IRS rules now live
- Common deductible business expenses
- Expenses with special rules
- What you cannot write off
- Worked example: a design studio's 2026 deductions
- How to write off business expenses, step by step
You can write off a business expense if it is both ordinary and necessary for your trade or business. The IRS defines an ordinary expense as one that is common and accepted in your field, and a necessary expense as one that is helpful and appropriate for your business. Writing it off means deducting it from your business income, usually on Schedule C if you are a sole proprietor or single-member LLC, which lowers the income you pay tax on.
Below are the main categories you can deduct, the special limits that catch people out (meals, vehicles, equipment, home office and moving), what you cannot deduct, and a worked example for tax year 2026.
Where the IRS rules now live
For years, IRS Publication 535, Business Expenses, was the standard reference. The IRS has discontinued it; the last revision was for 2022. Its topics now sit in other publications:
- Publication 334, Tax Guide for Small Business: general business expenses, pay, rent, interest, taxes, insurance and bad debts
- Publication 463: travel, gift and car expenses, including meals
- Publication 946 and Form 4562: depreciation and section 179
- Publication 587: business use of your home
- Form 7206: the self-employed health insurance deduction
If an older article sends you to Publication 535, use these instead.
Common deductible business expenses
- Cost of goods sold: materials and inventory you sell, deducted as they are sold rather than when bought.
- Pay to employees and contractors: wages, plus payments to independent contractors. For payments made after December 31, 2025, the threshold for issuing Forms 1099-NEC and 1099-MISC rose from $600 to $2,000.
- Rent, utilities and insurance for business premises and business policies.
- Software, subscriptions, phone and internet, for the business-use share.
- Advertising, professional fees and bank fees.
- Interest on business loans and business credit cards.
- Licenses, permits and business taxes (but not federal income tax).
- Retirement plan contributions for employees, and self-employed health insurance through Form 7206 if you qualify.
Expenses with special rules
Meals and entertainment
Business meals are generally 50% deductible when you or an employee are present, the meal is not lavish, and it is with a current or prospective client, customer or similar business contact. Entertainment, such as event tickets, is generally not deductible at all. If food is bought separately from the entertainment, or itemised separately on the bill, the food can still be 50% deductible.
Vehicle expenses
You can deduct actual costs (fuel, repairs, insurance, depreciation) for the business share, or use the standard mileage rate. For 2026, the IRS set the business rate at 72.5 cents per mile for January through June, then raised it to 76 cents per mile for business miles driven from July 1, 2026, citing fuel prices. Commuting between home and your regular workplace is never deductible. Keep a contemporaneous mileage log with date, purpose and miles.
Equipment and other long-lived assets
- De minimis safe harbor: if you do not have audited financial statements, you can elect to expense items costing up to $2,500 per invoice or item.
- Section 179: the 2025 tax law raised the expensing limit to $2.5 million, reduced once qualifying property placed in service exceeds $4 million, with both figures indexed for inflation after 2025.
- Bonus depreciation: the same law made 100% first-year bonus depreciation permanent for qualified property acquired after January 19, 2025.
Ask your CPA which method suits you; expensing everything now leaves nothing to depreciate in future, higher-income years.
Home office
If part of your home is used regularly and exclusively for business, you can deduct it. The simplified method allows $5 per square foot for up to 300 square feet, a maximum of $1,500. The regular method uses actual expenses (mortgage interest or rent, utilities, insurance, repairs, depreciation) multiplied by your business-use percentage, filed on Form 8829.
Moving expenses: deductible only for the military
Many people still search for the moving expenses tax deduction, so here is the current law. The 2017 tax law suspended it for 2018 through 2025, and the 2025 tax law made that suspension permanent. Today you can deduct unreimbursed moving expenses only if you are an active-duty member of the Armed Forces moving under military orders for a permanent change of station. Starting with moves in 2026, certain employees and new appointees of the intelligence community can be treated the same way. For everyone else, including business owners relocating their own company, personal moving costs are not deductible. The military claim goes on Form 3903, and the 2026 mileage rate for medical and military moving is 20.5 cents for January to June and 23.5 cents from July 1.
What you cannot write off
- Personal, living or family expenses, or the personal share of mixed-use items
- Commuting costs
- Fines and penalties paid to a government for breaking the law
- Political contributions
- Your own draws or salary as a sole proprietor
- Federal income tax
- Entertainment, as above
Worked example: a design studio's 2026 deductions
Rivera Design Co. is a single-member LLC graphic design business in Phoenix with $120,000 of 2026 gross receipts. Here is how its main expenses work out:
- Software subscriptions: $2,400, fully deductible.
- New laptop: $1,900 on one invoice, expensed under the de minimis safe harbor: $1,900.
- Home office: 250 square feet used exclusively for work, simplified method: 250 x $5 = $1,250.
- Business driving: 3,000 miles January to June at 72.5 cents = $2,175, plus 2,000 miles July to December at 76 cents = $1,520. Total: $3,695.
- Client meals: $1,200 spent, 50% deductible: $600.
- Freelance illustrator: $6,000, fully deductible. Because it is over $2,000, the studio issues a Form 1099-NEC.
- Basketball tickets for a client: $500, entertainment, not deductible: $0.
- Parking ticket: $90, a government fine, not deductible: $0.
Total deductions: $2,400 + $1,900 + $1,250 + $3,695 + $600 + $6,000 = $15,845. Net profit on Schedule C: $120,000 - $15,845 = $104,155, which is also the starting point for self-employment tax.
A deduction is not a dollar-for-dollar refund. If the owner's marginal income tax rate is 22%, a $1,000 deduction saves about $220 of income tax, plus some self-employment tax.
How to write off business expenses, step by step
- Use a separate business bank account and card so business spending is easy to identify.
- Keep the evidence: receipts, invoices and, for meals and travel, who you met and the business purpose.
- Categorise each transaction to an expense account that maps to your tax return lines.
- Split mixed-use costs such as phone and internet by a reasonable business percentage.
- Capitalise or expense assets deliberately, using the safe harbor, section 179 or depreciation.
- Report the totals on Schedule C (or your entity's return) and keep the records for as long as the IRS can examine the return.
Common mistakes
- Deducting 100% of meals or any entertainment
- Claiming commuting miles, or having no mileage log
- Following outdated Publication 535 guidance or old moving expense rules
- Forgetting the new $2,000 1099 threshold for 2026 payments, or issuing forms you no longer need
- Paying business costs from a personal account with no record of the business purpose
hellobooks< / a > -helps-you-claim-what-you-are-owed">How HelloBooks helps you claim what you are owed
HelloBooks pulls transactions in through bank feeds and uses AI auto-categorisation to suggest the right expense account, which you approve. Snap or upload receipts and AI document extraction reads the vendor, amount and tax, then matches the receipt to the bank line. The built-in mileage tracker keeps an IRS-compliant log, expense claims with receipt OCR handle staff spending, and 1099 reporting tracks contractor totals through the year. The fixed assets register handles depreciation for larger purchases, and your profit and loss report gives your CPA clean figures for Schedule C.
This is general information as of November 2026, not tax advice. Check the IRS publications cited or a qualified CPA for your situation.
