Top Tax Deductions for Small Business Owners in 2025

As a small business owner, every deduction you can claim translates into real cash savings. The 2025 tax year looks different from years past because of significant legislative changes that affect how you plan, invest, and deduct business expenses. The One Big Beautiful Bill Act, signed into law in 2025, made a number of these changes permanent and introduced powerful incentives that weren’t on the books for 2024.

Start by understanding that deductions reduce your taxable income, which can lower your overall tax bill. To make the most of tax season in 2026, it’s important to track expenses throughout the year and work with a tax professional to apply the rules correctly.

Qualified Business Income (QBI) Deduction

One of the biggest ongoing benefits for owners of pass-through entities like S corporations, partnerships, and sole proprietorships is the Qualified Business Income deduction. This allows eligible taxpayers to deduct up to 20% of their qualified business income on their federal return. The deduction was at risk of expiring but has now been made permanent under recent law, giving small business owners certainty for planning and growth.

First-Year Bonus Depreciation and Section 179 Expensing

Capital investments count. Under the 2025 tax law changes, 100% first-year bonus depreciation is now available permanently for qualified property placed in service after January 19, 2025, including used assets. That means you can write off the full cost of equipment, machinery, and other eligible qualifying property in the year you place it in service instead of spreading it over many years.

Alongside bonus depreciation, Section 179 expensing limits increased significantly. Small businesses can immediately expense up to $2.5 million of qualifying assets, with a phase-out threshold at $4 million. These thresholds will adjust for inflation beginning in 2026.

Research and Experimental (R&E) Expenses

Where past law required you to capitalize and amortize research costs over several years, the law now lets you fully deduct eligible domestic research and experimental expenses immediately for tax years beginning after 2024. This is huge for businesses that innovate, develop products, or improve processess.

Home Office Expenses

If you operate your business from home, you can still claim the home office deduction. You may use the simplified method or calculate actual expenses for a portion of your home used exclusively for business. This makes sure you’re deducting a fair share of utilities, rent, or mortgage interest tied to your business space.

Vehicle and Travel Expenses

Business vehicle use remains deductible. You can choose between the standard mileage rate or actual auto expenses when a vehicle is used for business. Travel costs — transportation, lodging, and half of the meal costs tied to business trips — continue to be legitimate deductions as long as they’re ordinary and necessary for your trade.

Employee Compensation and Benefits

Wages and benefits you provide to employees are generally deductible. This includes salaries, bonuses, health insurance premiums, retirement plan contributions, and other employee benefits. Be sure that all payments are properly documented and reported, especially if you work with contractors who require 1099 filings.

Office Supplies and Professional Services

Everyday tools and expenses you need to run your business, from computers and software to office supplies, are deductible when directly related to operations. Fees paid to professionals such as accountants, attorneys, and consultants are also tax-deductible business expenses.

Marketing, Advertising, and Client Development

Growing your business means spending on marketing and client development. Website costs, online advertising, business card printing, and event sponsorships are all deductible. Track spending carefully and link each expense to business objectives to avoid IRS scrutiny.

Retirement Contributions

Saving for retirement lowers your taxable income today. Contributions made to retirement plans like a SEP IRA, SIMPLE IRA, or solo 401(k) remain great ways to reduce your tax burden while funding your future. Higher limits and flexible options make these plans especially attractive for self-employed owners.

Keep Excellent Records

Good records aren’t just bookkeeping — they’re tax planning. Save receipts, use reliable accounting software, and categorize expenses correctly all year long. Changes under the OBBB and other tax provisions may require additional documentation or new forms; staying organized makes tax time less painful and ensures you don’t miss deductions you deserve.

Maximizing deductions effectively takes more than knowing the list — it requires planning, documentation, and review throughout the year. Tax laws continue to evolve, and small business owners who stay informed and proactive can keep more money working in their business instead of handing it over in taxes.

If you want help staying on top of the details or applying these rules to your unique situation, reach out for a consultation and get personalized support.