Maximizing your tax deductions is one of the most impactful things you can do as a small business owner. Every dollar you deduct reduces your taxable income — and your tax bill. Here’s every deduction available to small businesses in 2026.
Quick answer: Key 2026 deductions: home office ($1,500 simplified), mileage (72.5¢/mile Jan-Jun, 76¢/mile Jul-Dec), Section 179 (up to $2,500,000), bonus depreciation (100%, restored permanently by the OBBBA), startup costs ($5,000), self-employed health insurance (100% of premiums).
Home Office Deduction
Two Methods to Calculate
Method
How It Works
Max Deduction
Best For
Simplified method
$5 per square foot of home office
$1,500 (300 sq ft max)
Easy calculation, small offices
Regular method
Actual expenses × business use percentage
No cap (based on actual costs)
Larger offices, high mortgage/rent
Regular Method Example
Expense
Annual Amount
Business Use % (15%)
Deductible Amount
Mortgage interest or rent
$18,000
15%
$2,700
Property taxes
$4,000
15%
$600
Homeowners insurance
$1,500
15%
$225
Utilities (electric, gas, water)
$3,600
15%
$540
Internet
$1,200
15%
$180
Home repairs/maintenance
$2,000
15%
$300
Total home office deduction
$4,545
Business use percentage = office square footage ÷ total home square footage
The IRS increased the mileage rate mid-year in 2026 (Announcement 2026-11) due to rising fuel costs — track which half of the year each trip occurred in.
Standard Mileage Deduction Examples
Annual Business Miles
Deduction at 72.5¢/mile (H1 rate)
Deduction at 76¢/mile (H2 rate)
5,000 miles
$3,625
$3,800
10,000 miles
$7,250
$7,600
15,000 miles
$10,875
$11,400
20,000 miles
$14,500
$15,200
30,000 miles
$21,750
$22,800
If your mileage is split between the two halves of the year, calculate each period separately using the applicable rate, then add them together.
What Counts as Business Mileage
Deductible
Not Deductible
Driving to client meetings
Your regular home-to-office commute
Trips to the bank, post office, supply store
Personal errands combined with business trips
Visiting job sites or properties
Commuting to a co-working space (if it’s your regular office)
Travel between two business locations
Driving to lunch (unless a business meal)
Driving to networking events
Weekend drives that aren’t business-related
Office Supplies and Equipment
Section 179 and Bonus Depreciation
Deduction Type
2026 Limit
What It Does
Section 179
$2,500,000 (permanent under OBBBA; phase-out begins once qualifying purchases exceed $4,000,000)
Deduct the full cost of qualifying equipment in year one, up to your business’s taxable income
Bonus depreciation
100% (restored permanently by the OBBBA, for property acquired after January 19, 2025)
Deduct 100% of qualifying property’s cost in year one — no taxable-income limit, can create a loss
De minimis safe harbor
$2,500 per item
Expense items costing $2,500 or less without capitalizing
Common Equipment Deductions
Item
Typical Cost
Deduction Method
Computer/laptop
$1,000-$3,000
Section 179 or de minimis
Monitor(s)
$200-$800
De minimis
Office furniture (desk, chair)
$300-$2,000
De minimis or Section 179
Printer/scanner
$100-$500
De minimis
Phone
$800-$1,400
De minimis (% business use)
Software subscriptions
$50-$500/month
Currently deductible expense
Tools and equipment
Varies
Section 179
Vehicle (business use only)
$30,000-$80,000
Section 179 (separate, lower caps apply to passenger vehicles; heavy SUVs/trucks have a different sub-limit)
Operating Expense Deductions
Fully Deductible Business Expenses
Expense Category
Examples
Notes
Advertising and marketing
Google Ads, Facebook Ads, print materials, website costs
100% deductible
Professional services
Accounting, legal, consulting, bookkeeping
100% deductible
Insurance premiums
General liability, E&O, property, cyber
100% deductible
Office supplies
Paper, ink, postage, pens, cleaning supplies
100% deductible
Software and subscriptions
QuickBooks, Adobe, Slack, Zoom, Canva
100% deductible
Bank and merchant fees
Credit card processing, bank account fees
100% deductible
Rent (office/retail space)
Monthly lease payments
100% deductible
Utilities (business location)
Electric, water, gas, internet, phone
100% deductible
Business travel
Flights, hotels, rental cars for business trips
100% deductible
Education and training
Courses, conferences, books, certifications
Must relate to current business
Licenses and permits
Business license, professional certifications
100% deductible
Shipping and postage
Mailing products, shipping supplies
100% deductible
Repairs and maintenance
Equipment, vehicle, office repairs
100% deductible
Contract labor
Freelancers, independent contractors (1099)
100% deductible
Meals and Entertainment
What’s Deductible in 2026
Expense
Deductible?
Percentage
Business meals with clients/prospects
Yes
50%
Meals while traveling for business
Yes
50%
Office snacks and coffee for employees
Yes
50%
Team meals (on-site, not entertainment)
Yes
50%
Holiday party for all employees
Yes
100%
Company picnic/outing (all employees invited)
Yes
100%
Entertainment (sporting events, concerts)
No
0% (not deductible since 2018)
Golf with clients
No (entertainment)
0%
Meals at entertainment events (separately stated)
Yes
50%
Retirement Contributions
Retirement Plan Deduction Limits (2026)
Plan Type
Max Contribution
Best For
SEP IRA
25% of net self-employment income (up to $72,000)
Solo business owners wanting simplicity
Solo 401(k)
$24,500 employee + employer contributions (up to $72,000 combined; $80,000 with 50+ catch-up)
Solo owners wanting maximum contributions
SIMPLE IRA
$17,000 employee + up to 3% match
Small businesses with a few employees
Traditional or Roth IRA
$7,500 ($8,600 if 50+)
Additional savings on top of other plans
Tax Savings from Retirement Contributions
Illustrative estimates at various marginal brackets — actual savings depend on your full tax picture.
Contribution
Tax Bracket
Illustrative Tax Savings
$7,500 (IRA)
22%
$1,650
$24,500 (Solo 401k employee)
24%
$5,880
$50,000 (Solo 401k total)
32%
$16,000
$72,000 (SEP IRA or Solo 401k max)
35%
$25,200
Health Insurance Deduction
Self-Employed Health Insurance
Coverage Type
Average Annual Cost
Illustrative Tax Deduction (24% bracket)
Individual plan
$7,000-$10,000
$1,680-$2,400
Family plan
$18,000-$25,000
$4,320-$6,000
HSA contribution (individual, 2026 limit $4,400)
$4,400
$1,056
HSA contribution (family, 2026 limit $8,750)
$8,750
$2,100
Dental/vision premiums
$500-$2,000
$120-$480
Total possible health deduction
$25,000-$36,150
$6,000-$8,580
Self-employed individuals can deduct 100% of health insurance premiums as an adjustment to income (not an itemized deduction). Average premium costs vary by region, age, and plan design — figures above are illustrative ranges, not government-set amounts.
Interest and Loan Costs
Deductible Business Interest
Type of Interest
Deductible?
Notes
Business loan interest
Yes, 100%
SBA loans, term loans, lines of credit
Business credit card interest
Yes, 100%
Only the business portion
Mortgage on business property
Yes, 100%
Commercial real estate
Vehicle loan interest (business use)
Yes, business %
Must use actual expense method (not mileage)
Student loan interest
Separate deduction
Up to $2,500 personal deduction; not a business deduction
Organizational costs (legal fees, state filing, permits)
Up to $5,000
Amortize excess over 15 years
Total first-year deduction
Up to $10,000
The $5,000 deduction phases out dollar-for-dollar once total startup costs exceed $50,000
Tax Deduction Summary by Category
Estimated Annual Savings for a Solo Business Owner
Scenario: Sole proprietor, $100,000 net income, 24% marginal rate, home office. Illustrative estimate — actual savings depend on your specific numbers.
Deduction
Annual Amount
Illustrative Tax Savings (24%)
Home office (simplified, 300 sq ft)
$1,500
$360
Vehicle (10,000 business miles, blended 2026 rate)
~$7,425
$1,782
Health insurance (individual + HSA)
$11,400
$2,736
Retirement (Solo 401k)
$24,500
$5,880
Self-employment tax deduction (50%)
~$7,065
$1,696
Software subscriptions
$2,400
$576
Professional services (CPA, legal)
$3,000
$720
Business meals (50%)
$1,200
$288
Education/training
$1,500
$360
Advertising
$3,000
$720
Equipment (Section 179)
$2,500
$600
Other operating expenses
$3,000
$720
Total estimated deductions
~$68,490
~$16,438
Record-Keeping Requirements
IRS Documentation Standards
Expense Type
Required Records
Retention Period
Income
Invoices, bank deposits, 1099s
3-7 years
Expenses under $75
Bank/credit card statement
3 years
Expenses over $75
Original receipt with details
3 years
Vehicle (mileage)
Mileage log with date, destination, purpose
3 years
Meals
Receipt + notes (who, business purpose)
3 years
Home office
Floor plan, utility bills, mortgage/rent records
3 years
Equipment/depreciation
Purchase records, depreciation schedules
Life of asset + 3 years
Travel
Receipts, itinerary, business purpose documentation
3 years
Employee records
W-4s, payroll records, benefits
4 years after tax due/paid
The single largest deduction for most self-employed businesses is the QBI (Qualified Business Income) deduction, which can reduce taxable income by 20% without additional spending. Vehicle expenses qualify under the IRS standard mileage rate or the actual expense method — both are covered in detail at that article. If you work from home, the home office deduction adds either $5/sq ft (simplified) or the actual business-use percentage of home costs.
WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy
