If you own a business, almost everything you spend to run it can come off your taxable income. The catch is knowing which expenses count, how much of each one counts, and where it goes on the return. That last part changes depending on whether you file a Schedule C, a partnership return or an S corp return.
This is my working list of small business tax deductions for 2026, the year you'll file for in early 2027. It's written for owners of LLCs, S corps and sole proprietorships, with the actual 2026 limits, and I've flagged what the One Big Beautiful Bill Act (OBBBA) changed.
Most of the deduction rules carry over from 2025. These are the ones that moved:
| Deduction | 2025 | 2026 |
|---|---|---|
| Section 179 expensing limit | $2,500,000 | $2,560,000 (phase-out starts at $4,090,000) |
| Bonus depreciation | 100% for property acquired after Jan. 19, 2025 | 100%, now permanent |
| Standard mileage rate (business) | 70¢ a mile | 72.5¢ Jan. to June, 76¢ July to Dec. |
| Meals you provide employees at work for your convenience | 50% deductible | Not deductible (with narrow exceptions) |
| QBI deduction | 20%, set to expire after 2025 | 20%, permanent, with a new $400 minimum |
| 1099-NEC / 1099-MISC filing threshold | $600 | $2,000 |
| 401(k) employee deferral | $23,500 | $24,500 |
| Domestic research and development costs | Deductible in full (new for 2025) | Deductible in full |
A business deduction is an expense you subtract from your income before tax is figured. If your business brings in $300,000 and has $120,000 of deductible expenses, you pay tax on $180,000. A deduction is worth your tax rate times the expense, so a $10,000 deduction saves a business owner in the 32% bracket about $3,200 of income tax, plus self-employment tax in many cases.
To be deductible, an expense has to be ordinary and necessary for your business. Ordinary means common in your industry. Necessary means helpful and appropriate. It doesn't have to be indispensable. And it can't be personal: if something is part business and part personal, only the business part counts.
There's no standard deduction for businesses. The standard deduction is for individuals. Your business deducts its actual expenses, so the records you keep are the deduction.
Equipment is where the largest deductions are, and it's where OBBBA made its biggest changes for business owners.
Section 179 lets you deduct the full cost of equipment, machinery, computers, furniture and off-the-shelf software in the year you put it to use, instead of spreading it over five or seven years. For 2026 the limit is $2,560,000. It starts shrinking dollar for dollar once you buy more than $4,090,000 of equipment in the year, which is a ceiling most small businesses never get near. Section 179 can't create a loss, so it's limited to your business income. I go deeper on it in the Section 179 deduction limit for 2026.
For property acquired after January 19, 2025, bonus depreciation is back to 100%, and OBBBA removed the phase-down, so it doesn't expire. Unlike Section 179, bonus depreciation can create a loss, and it applies to used equipment you're buying for the first time. In practice we use the two together: Section 179 where you want control over the amount, bonus where you want everything. More on choosing between them in bonus depreciation as a tax strategy.
You don't need to depreciate every printer and chair. Under the de minimis safe harbor, you can elect to expense items that cost $2,500 or less per invoice or per item, as long as you treat them the same way in your books. You make the election each year with your return. It saves a lot of depreciation schedules nobody wants to maintain.
You can deduct a business vehicle one of two ways:
SUVs, pickups and vans with a gross vehicle weight rating over 6,000 pounds aren't subject to those caps. A heavy SUV is limited to $32,000 of Section 179 in 2026, but bonus depreciation can cover the rest of the cost if you use it more than 50% for business. Commuting from home to your regular office never counts as business driving. The details, including the trap when business use later drops, are in vehicle tax deductions under OBBBA.
If you use part of your home regularly and exclusively for business, you can deduct it. Exclusive is the word that trips people up: a desk in the guest room the kids also use doesn't qualify. Here's what actually passes the exclusive-use test.
If your business is an S corp, the home office rules are different. You're an employee of your own company, and employees can't deduct unreimbursed expenses. The fix is an accountable plan: the company reimburses you and deducts the payment, and you receive it tax-free. Here's how to set up an S corp accountable plan.
Meals with clients, prospects or business contacts are 50% deductible, as long as the meal isn't lavish, you or an employee is there, and you talk business. Entertainment, like concert tickets or a round of golf, hasn't been deductible since 2018, even with a client.
Some meals are still 100% deductible: a holiday party or picnic for all employees, food you sell to customers, and meals you report as taxable pay to the employee.
New for 2026: meals you provide employees at your workplace for your own convenience are no longer deductible at all. That includes meals from a company cafeteria and, for most offices, the break-room snacks and coffee. Restaurants and other businesses that sell food to customers have an exception. If you used to deduct catered lunches for your team, that changes on your 2026 return.
When you travel away from your tax home overnight for business, your airfare, hotel, rental car, baggage fees and tips are fully deductible. Meals on the trip are 50%. If you add vacation days, the travel to and from is still deductible as long as the trip is mostly business, but the vacation days' hotel and meals are on you.
Reasonable pay for work actually done is deductible, including payroll taxes you pay as the employer. If you pay independent contractors, the 1099-NEC filing threshold rises from $600 to $2,000 for payments made in 2026. You still deduct what you paid either way. For the filing side, here's what goes wrong with 1099-NEC reporting.
If you're an S corp owner, your own salary is a deduction for the company, and the IRS expects it to be reasonable. Set it too low and you invite an audit. Set it too high and you pay payroll tax you didn't need to. See S corp reasonable compensation.
Hiring your children is one of the cleanest moves available to a sole proprietor or a family-owned partnership. Wages are deductible to the business, and up to the standard deduction they're tax-free to the child. Here's how to hire your child the right way.
Retirement contributions are often the single largest deduction an owner controls. The 2026 limits:
A solo 401(k) usually beats a SEP for an owner with no employees, because you can contribute as both the employee and the employer. With employees, plan design matters; see safe harbor 401(k) plans for business owners.
Self-employed owners can deduct health insurance premiums for themselves and their family. If you own more than 2% of an S corp, the premiums have to run through your W-2 first, and getting that wrong costs the deduction twice. Here's how the S corp health insurance deduction works. Long-term care insurance has its own age-based limits; see the long-term care insurance deduction.
Other benefits your business can deduct: up to $5,250 a year of educational assistance per employee (which can include paying down student loans), and dependent care assistance, which rises to $7,500 a year starting in 2026.
These are smaller, but over a year they add up. Each is deductible when it's for the business:
A few come with their own limits. Business gifts are capped at $25 per person per year; here's how the $25 gift rule works. Start-up costs you incur before opening are deductible up to $5,000 in your first year, reduced once they pass $50,000, with the rest spread over 15 years. And charitable gifts from your business are usually personal deductions, unless the gift is really advertising. I explain the test in charitable donations as a business expense.
Since 2025, research and development costs you incur in the United States are deductible in full again, instead of being spread over five years. That covers more businesses than people think. Building software, testing a new product or developing an internal AI tool can qualify. See immediate R&D expensing and how to write off your AI investment.
If you own a pass-through business (a sole proprietorship, partnership, LLC or S corp), you may be able to deduct up to 20% of your qualified business income on your personal return. OBBBA made the deduction permanent. It also widened the income range where it phases out, and it added a $400 minimum deduction starting in 2026 for anyone with at least $1,000 of income from businesses they actively work in.
The deduction starts phasing down for some businesses once taxable income passes $201,750 (single) or $403,500 (married filing jointly) in 2026. Above that, your W-2 wages, your equipment and your type of business decide how much you keep. Service businesses like consulting, law and financial services can lose the deduction entirely. I walk through it in the QBI deduction series, and you can estimate yours with our QBI deduction estimator.
The same expense can land in a different place depending on how you're set up. That matters because some places reduce self-employment tax and some don't.
| Expense | Sole proprietor or single-member LLC | S corp owner |
|---|---|---|
| Home office | Schedule C, Form 8829 or simplified method | Reimbursed by the company through an accountable plan |
| Your car | Schedule C, mileage or actual expenses | Reimbursed through an accountable plan, or owned by the company |
| Health insurance | Self-employed health insurance deduction on Form 1040 | Paid by the company, added to your W-2, then deducted on Form 1040 |
| Retirement | Solo 401(k) or SEP based on net self-employment income | Based on your W-2 salary |
| Your own pay | Not deductible (you take draws) | Your salary is a company deduction |
If you're wondering whether an S corp would save you money, the answer depends on your profit, your salary and your state. See S corp tax planning for how we work through it.
These are the ones I see left on the table every filing season:
A deduction is only as good as the paperwork behind it. Keep receipts for lodging, and for any travel, meal or gift expense of $75 or more. Keep a mileage log written at the time, not reconstructed in April. And keep business and personal spending in separate accounts, because mixed accounts make every deduction harder to prove. If your books need work, start with the bookkeeping mistakes business owners make.
A list like this tells you what's possible. A tax plan tells you which of these apply to you, in what order, and what they're worth. That's what we do year-round as tax strategists for business owners. If you'd like to see what's available for your 2026 return, book a free strategy call.
Yes. A coffee machine for your office is business equipment. If it costs $2,500 or less and you make the de minimis election, you can deduct it in full in the year you buy it. The coffee is a different story starting in 2026: food and drinks you provide employees at your workplace are generally no longer deductible, unless your business sells food to customers.
An S corp deducts the same ordinary and necessary business expenses as any business, plus the owner's salary, payroll taxes, retirement contributions, and the health insurance premiums it pays for a more-than-2% shareholder. Personal expenses like a home office or car mileage need to run through an accountable plan to be deductible.
No. The standard deduction applies to individuals. A business deducts its actual expenses. Pass-through owners can also take the QBI deduction of up to 20% of qualified business income on their personal return.
For business driving in 2026, the IRS rate is 72.5 cents per mile from January 1 through June 30, and 76 cents per mile from July 1 through December 31. Parking and tolls are deductible separately.
Yes, for the business-use percentage. Passenger cars are limited to $20,300 of first-year depreciation with bonus depreciation. SUVs, trucks and vans over 6,000 pounds gross vehicle weight aren't subject to that cap and can qualify for 100% bonus depreciation if business use is over 50%.
Sometimes, but it's risky. The IRS requires receipts for all lodging and for travel, meal and gift expenses of $75 or more. For smaller expenses, a bank or card statement plus a note on the business purpose can be enough, but a receipt is always stronger.
For most owners it's one of three: equipment purchases through Section 179 or 100% bonus depreciation, retirement plan contributions, or the 20% QBI deduction. Which one wins for you mostly comes down to how much profit you have and whether you're buying equipment this year.
No. The temporary 100% deduction for restaurant meals applied only to 2021 and 2022. In 2026, client and business meals are 50% deductible, and meals provided to employees at work for the employer's convenience are generally not deductible at all.
Disclaimer: This article is for general educational purposes only and does not constitute tax, legal, or accounting advice. Figures are for the 2026 tax year as published by the IRS and may change. Consult a qualified professional about your specific situation.
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