You don’t want to wait until tax season is in full swing to plan ahead and take advantage of key business tax deductions. If you freelance or have your own business, there are so many valuable tax deductions that you can capitalize on that you may not have even been aware of. However, planning ahead is paramount for maximizing your tax deductions. 

Here’s how you can build a winning tax planning strategy and take advantage of business tax deductions so you won’t dread every April.

Understanding Business Deductions

Business tax deductions reduce your taxable business income, thus they also reduce your overall income. If you have to pay self-employment tax, business tax deductions are integral to owing less of it.

They are also a crucial element of a figure called adjusted gross income (AGI), which is used to determine your eligibility for a wide variety of tax benefits. The lower you can make your net profit for tax purposes, the lower your AGI.

For example, if you save money for retirement, you may be able to claim the Saver’s Credit. You’ll get an even bigger credit with a lower AGI. So, business tax deductions affect your personal taxes just as much as they affect your net profit.

Business deductions encompass a plethora of different expenses that you use to run your business and stay active in your profession. They include, but are not limited to:

• Phone and Internet
• Websites
• Business cards
• Instagram ads, email campaigns, and other advertising
• Business license and registration fees
• Accountants, attorneys, and other professionals
• Business insurance
• Booth rentals for events
• Office and storefront rent
• Supplies

Claim Home Office Deductions

If you have a home office or workspace, there’s a strong chance you can claim a deduction for it. However, it isn’t as simple as having a receipt for website expenses.

You can deduct a proportionate amount of your rent or mortgage payment plus utilities provided that you regularly and exclusively use the area for work purposes. The proportion can be calculated by square footage or the number of rooms in your home, and your workspace doesn’t have to be an entire room or even just one room: so long as you regularly and exclusively use the area for business, you should be eligible for the deduction.

There is also a simplified option for claiming home office expenses. It allows you to claim $5 per square foot with a 300 square foot limit, for a total of $1,500. While this relieves you from having to keep records and do calculations, you still need to prove regular and exclusive use. Hence, it’s more beneficial to keep track of your living expenses and get an accurate idea of your square footage to take advantage of this valuable deduction.

Deduct Business Vehicle Expenses

Most people use the same vehicle for business travel that they do for their personal transport. Therefore, keeping track of your mileage is crucial in order to maximize your business tax deductions. Manual mileage logs can back up your deduction, but mileage tracker apps are the best way to ensure a thorough and accurate picture of your total annual mileage. You need to tabulate both your total miles driven throughout the year and your business mileage to determine your business percentage and which deduction method is most beneficial.

The standard mileage method only requires your total business miles driven throughout the year. It is $0.70 per mile for the 2025 tax year.

Similarly to the home office deduction however, the more complicated actual cost method tends to be far more beneficial based on your actual car expenses. This includes gas and oil, license and registration, depreciation or lease payments, tires, and repairs. If you drove 20,000 miles during the year and 5,000 were for business, your business percentage is 25% of the above expenses.

Regardless of which method you pick, parking and tolls are always deductible in full.

Leverage Depreciation Deductions

Depreciation refers to the long-term deduction of a major asset over time, like equipment and vehicles. You can even depreciate smaller big-ticket items, like computers, printers, kiosks, and furniture.

Many taxpayers opt to deduct big-ticket purchases in full to get an immediate tax benefit. However, you may benefit from spreading a major purchase out over several years and Accounting Freedom can guide you as to which option is best.

Some depreciation methods give you a larger deduction upfront, like double-declining balance, while straight-line is more even over a number of years. If you expect unpredictable income, depreciation can be a surer bet for long-term planning. If you have a sudden windfall, expensing a big-ticket item could be preferable.

Optimize Travel and Meal Expenses

If you travel for conferences, workshops, markets, and other events, these expenses add up quickly. Even if the event isn’t successful upfront, you can take advantage of valuable business deductions.

Provided that you’re away for at least one night, you can deduct your meals and drinks away from home and even laundry and dry-cleaning. Lodging, airfare, public transit, and other ground transportation are powerful deductions that add up if you travel frequently for industry events.

Take Advantage of Employee-Related Deductions

If you have employees, most of the same expenses that you are eligible for are also eligible if you pay for them or reimburse your employees. They include health insurance premiums, travel expenses, tools and supplies used, and education and seminars.

Use Retirement Plans to Lower Taxable Income

Small business owners can open their own 401(k) plans, in addition to more robust accounts like SEPs (Simplified Employee Pension) that have very high contribution limits. You don’t need employees to open an account, and you can make more of your income pre-tax, similar to how it works when you contribute to these plans as an employee.

There is a host of business tax deductions you shouldn’t miss out on, especially ones that require legwork like home office and car expenses. Accounting Freedom is here to develop a personalized tax planning strategy that aligns with your business and objectives. Reach out to us today to schedule a consultation.