💸 20 deductions you’re probably missing

Happy Thursday! Did you know that the average small business overpays on taxes every year? Not because they’re bad at math, but because they’re claiming 12 deductions when they qualify for 30. The tax code isn’t hiding these write-offs, but it’s not exactly handing them to you on a silver platter either.

This week’s lineup:

The Basics

🧾 Yes, you can write that off…if you prove it

There’s a moment in every new business owner’s life, usually sometime around their first quarter, when a wonderful thought crosses their mind: I can write this off!

The coffee. The laptop. The “business lunch” that was really just tacos with a friend who happens to work in the same industry. It feels like a superpower. And in a way, it is. Business deductions are one of the most powerful tools available to small business owners. They reduce your taxable income, which reduces your tax bill, which means more money stays in your pocket.

But here’s the part that nobody mentions during the honeymoon phase: not everything is deductible, the IRS has rules, and “I use it for work sometimes” is not one of them.

The Two-Word Test the IRS Actually Uses

The tax code doesn’t provide a checklist of approved deductions. Instead, it gives you a principle. Under 26 U.S. Code § 162, a business expense is deductible if it’s ordinary and necessary for your trade or business.

That sounds straightforward until you realize how much ambiguity lives inside those two words.

Ordinary means common and accepted in your industry. If you’re a freelance graphic designer, a Creative Cloud subscription is ordinary. A subscription to a commercial fishing newsletter is not, unless you have a very unusual niche.

Necessary means helpful and appropriate for your business. It doesn’t mean you’d go bankrupt without it. It means there’s a legitimate business reason for the expense. A second monitor for your home office? Necessary. A hot tub for your “creative thinking space”? You’d better have an extremely compelling explanation.

The IRS also cares that the expense is directly connected to your business activity. This is where a lot of new business owners get tripped up. That gym membership might make you more productive, but unless you’re a personal trainer or fitness professional, good luck defending it in an audit.

“Ordinary and necessary” sounds simple, until you’re staring at a receipt wondering which side of the line it falls on. Keep reading →

The Strategy

💸 20 deductions you’re probably missing

If you’ve been running a business for more than a year, you’ve probably settled into a rhythm with your deductions. Rent, software, maybe mileage. You know the big ones. Your bookkeeper knows the big ones. Everyone’s comfortable.

The problem with comfortable is that it’s expensive. The deductions most business owners miss aren’t exotic. They’re boring. They’re sitting in your bank statement right now, disguised as routine expenses that nobody thought to flag. Individually, they look like rounding errors. Collectively, they can add up to thousands of dollars in tax savings you’re just leaving on the sidewalk.

This isn’t a list of aggressive loopholes or creative interpretations. These are legitimate, well-established deductions that the IRS fully expects you to take, if you know they exist.

1. Home Office (the Real Calculation, Not the Shortcut)

You probably know the home office deduction exists. But most people default to the simplified method ($5 per square foot, capped at $1,500) because it’s easy. The regular method, based on the actual percentage of your home used for business, almost always yields a bigger deduction. It includes a proportional share of your rent or mortgage interest, utilities, insurance, repairs, and even depreciation. It takes more math, but math is what saves money here.

That’s 1 down, 19 to go, and some of them might surprise you. See the full list →

The Deep Dive

🍔 The business meal deduction – a survival guide

Of all the deductions available to small business owners, meals are the one everybody thinks they understand and almost nobody gets completely right.

It makes sense. Eating is universal. Business happens over food. And the rules seem simple enough on the surface: take a client to lunch, write it off. What’s complicated about that?

As it turns out, quite a lot. The meal deduction has been rewritten, expanded, shrunk, temporarily doubled, and then shrunk again, all within the last decade. If you learned the rules in 2021, they changed. If you learned them in 2023, they changed again. And if you’re going off what your friend told you at a dinner that he was almost certainly deducting incorrectly, it’s time for a reset.

A Brief and Mildly Exhausting History

The meal deduction has been on a rollercoaster. For years, business meals were 50% deductible. Then, in late 2020, Congress passed the Consolidated Appropriations Act, which temporarily bumped restaurant meals to 100 percent deductible for 2021 and 2022. The goal was to help the restaurant industry recover from the pandemic, and for two glorious years, every legitimate business dinner was a full write-off.

That provision expired at the end of 2022. Starting in 2023, we went back to the standard: 50% for qualifying business meals. That’s where we are now, and barring new legislation, that’s where we’ll stay.

The problem is that a lot of business owners either didn’t notice the change or are still operating on muscle memory from the 100% days. If you’ve been deducting meals at the full amount on your 2023, 2024, or 2025 returns, that’s an error, and exactly the kind of error the IRS looks for.

What Actually Qualifies as a “Business Meal”

The IRS has a surprisingly specific framework for what makes a meal deductible. It’s not enough for food to be present while business also happens to be occurring. The meal needs to meet a few conditions.

The business discussion can happen before, during, or after the meal. You don’t have to talk shop while chewing. A meal immediately before or after a substantive business meeting qualifies.

The meal deduction has five documentation rules. Miss one and the whole write-off disappears. Here’s how to get it right →

The Freebie

📋 The overlooked deductions audit checklist

You just read about 20 deductions you might be missing. Now find out for sure. This printable checklist walks you through the most commonly overlooked write-offs, claim by claim, so you can cross-reference against your actual expenses. Grab your bank statements, a cup of coffee, and about 15 minutes.

This checklist is for self-audit purposes only. It is not tax advice, and your CPA will still want to hear from you.

Download the Checklist (PDF) →

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