Top Tax Deductions Every Small Business Should Know About

For small business owners, every dollar counts — and smart tax planning can make a big difference at the end of the year. Understanding which deductions you qualify for can reduce your taxable income, improve cash flow, and help you reinvest more into your company's growth.

At Luna CPA, LLC, we help businesses in Laredo, TX identify all available deductions and implement proactive tax strategies that maximize savings. Here are some of the most valuable tax deductions every small business should know about.

1. Home Office Deduction
   If you use part of your home exclusively for business, you may qualify for the home office deduction. This includes a percentage of rent, mortgage interest, utilities, and maintenance costs.
   
   The IRS offers two ways to calculate it:

• Simplified Method: $5 per square foot (up to 300 sq. ft.).
• Actual Expense Method: Based on the percentage of your home used for business.
  
  To qualify, the space must be used regularly and exclusively for business purposes.
  

2. Vehicle and Mileage Expenses
   If you use your vehicle for business, you can deduct either actual vehicle expenses (gas, maintenance, depreciation) or use the standard mileage rate — which for 2025 is 67 cents per mile.
   
   Keep a detailed mileage log to substantiate your claim. A CPA can help determine which method saves you the most in taxes.
   
3. Office Supplies and Equipment
   Everyday business expenses such as computers, printers, paper, and software are fully deductible. Larger purchases like office furniture and technology may qualify for Section 179 expensing or bonus depreciation, allowing you to deduct the full cost in the year of purchase.
   
4. Business Meals and Travel
   You can deduct 50% of business meal expenses when they are directly related to your trade or business — for example, a lunch meeting with a client or travel-related meal.
   
   Travel expenses such as airfare, lodging, and rental cars are also deductible when primarily for business purposes. Always keep itemized receipts and notes describing the business purpose.
   
5. Employee Wages and Benefits
   Compensation paid to employees — including salaries, bonuses, and benefits like health insurance — is tax-deductible.
   
   If you contribute to employee retirement plans (like a SEP IRA or SIMPLE IRA), those contributions are also deductible.
   
6. Contract Labor (1099 Workers)
   Payments made to independent contractors are deductible as business expenses. Be sure to issue Form 1099-NEC to each contractor earning $600 or more per year to remain compliant with IRS reporting rules.
   
7. Rent and Utilities
   If you lease office or warehouse space, your rent payments are fully deductible. The same applies to utilities like electricity, water, and internet service that support your business operations.
   
8. Marketing and Advertising
   Expenses for promoting your business — including website design, digital ads, business cards, and branding materials — are 100% deductible.
   
   At Luna CPA, LLC, we often help clients track these costs accurately through bookkeeping systems like QuickBooks Online, ensuring nothing is missed at year-end.
   
9. Professional Fees
   Hiring professionals such as attorneys, consultants, and Certified Public Accountants (CPAs) is deductible as a business expense.
   
   These services are considered essential for compliance, growth, and decision-making — and the IRS fully allows these deductions.
   
10. Depreciation
    For assets that last more than one year (like vehicles, equipment, or property), depreciation allows you to recover costs over time.
    
    A CPA can help determine whether accelerated depreciation, bonus depreciation, or Section 179 expensing offers the best savings for your business.
    
    Bonus: Health Insurance Premiums
    If you're self-employed, you can often deduct the cost of health insurance premiums for yourself, your spouse, and dependents — even if you don't itemize deductions.
    
    Final Thoughts
    Tax deductions can save your business thousands each year — but only if they're claimed correctly. Keeping detailed records and working with a CPA ensures you take advantage of every available opportunity while staying compliant with IRS regulations.
    
    At Luna CPA, LLC, we help small businesses in Laredo, TX navigate complex tax rules with confidence. From identifying deductions to preparing returns, our goal is to help you pay less and keep more of what you earn.
    
    Luna CPA, LLC
    Certified Public Accountants in Laredo, Texas — helping small businesses grow through smart tax strategies and financial expertise.