12 Overlooked Tax Deductions Many Business Owners Miss During Tax Season

Home office deductions

“The home office deduction is also commonly overlooked,” explains Sergio Salinas, Director of Tax at Acuity, powered by Sorren.

“You may be able to deduct a portion of expenses such as utilities, electricity, cellphone bills, and even mortgage interest or rent based on the percentage of the home used for work.”

Salinas also notes that there is a simplified method available.

“There’s also a simplified method that allows a deduction of $5 per square foot for up to 300 square feet of office space, capping the deduction at $1,500.”

Vehicle-related expenses

Mileage is one of the most well-known vehicle deductions, but it is frequently missed because it requires proper tracking.

“Mileage requires a log or tracking app to document business travel, so if that record isn’t kept throughout the year, the deduction is often lost,” Salinas says.

Other travel-related costs may also qualify.

“Mileage is the vehicle deduction most business owners are familiar with, but related expenses like parking fees and tolls are also often deductible when the travel is business-related.”

For certain vehicles assembled in the United States and purchased after 2024, additional deductions may also apply.

“For certain vehicles assembled in the United States and purchased after 2024, up to $10,000 of interest on the loan may be deductible,” Salinas says.

“In some situations, if the business owns the vehicle or is financing it, a portion of expenses like vehicle loan interest or insurance may be deductible, too.”

Startup costs

For new businesses, early expenses can often be deducted.

“In many cases, businesses can deduct up to $5,000 in startup costs in the first year, with the remaining costs capitalized and amortized over 15 years,” explains Salinas.

Expenses such as legal fees to establish the company, market research, early advertising, training and other setup costs may qualify.

“In some cases, expenses that might seem personal can qualify as business deductions depending on the type of business. For example, professional hair and makeup for brand photoshoots, clothing, or even gym memberships may qualify if they’re directly tied to the work being done.”

Health insurance premiums

Health insurance can also affect how deductions are handled.

“If you’re a single-member LLC or sole proprietor, you typically can’t deduct health insurance directly as a business expense, but you may still be able to deduct those premiums on your personal tax return as an adjustment to income,” Salinas explains.

“For businesses structured as S corporations or C corporations, the tax treatment may require the owner to receive compensation through payroll in order for the expense to be deductible.”

Education and professional training

Education expenses that improve or maintain skills relevant to your business can also be deductible.

“Education expenses that maintain or improve skills related to your current business are generally deductible,” says Salinas.

“That includes professional training, certifications, conferences, books, and industry subscriptions.”

Bank and payment processing fees

Many businesses overlook smaller administrative expenses that accumulate over time.

“Bank fees and payment processing fees are deductible business expenses,” Salinas says.

“That includes monthly bank charges, merchant fees from payment processors, and credit card processing fees. These expenses usually show up clearly in the company’s profit and loss statement.”

Technology and software tools

Technology is essential for running modern businesses, and many of these tools qualify as deductible expenses.

“Most technology tools used to run a business are deductible,” Salinas explains.

“That includes things like cloud storage, cybersecurity software, AI tools, project management platforms, and CRM systems. Whether it’s a subscription or a one-time purchase, if the technology is being used for business operations, it generally qualifies as a business expense.”

Retirement contributions

Retirement savings can also have tax advantages.

“For smaller or self-employed businesses, contributions to accounts like a traditional IRA may reduce taxable income on the owner’s personal tax return,” Salinas says.

“For more established businesses that offer plans like a 401(K), company contributions toward those plans are typically treated as a deductible business expense.”

Bad debts and unpaid invoices

Some businesses may also be able to claim deductions for unpaid invoices.

“Bad debt deductions generally apply to businesses using the accrual method of accounting,” Salinas explains.

“In those cases, revenue may have been recorded before payment is received, so if the payment ultimately never comes in, the unpaid amount can potentially be written off as bad debt.”

“For businesses using the cash method, which is common for early startups and freelancers, income is only recognized when cash is received, meaning unpaid invoices wouldn’t be taxed in the first place.”