Small Business Deductions Checklist: Home Office, Mileage, Health Insurance, Retirement

The basic rule: ordinary and necessary

The IRS generally lets you deduct business expenses that are ordinary (common and accepted in your line of work) and necessary (helpful and appropriate for your business). Personal expenses aren't deductible, and some costs, like equipment, may need to be depreciated over time rather than deducted all at once.

Heads up: IRS Publication 535 (Business Expenses) was discontinued; its last revision was for 2022. The IRS now points people to its Guide to business expense resources (opens in a new tab) and, for most sole proprietors, Publication 334, Tax Guide for Small Business.

Home office

If you use part of your home regularly and exclusively for business, you may qualify for the home office deduction. With the IRS simplified option, you deduct $5 per square foot, up to 300 square feet (a maximum of $1,500). The regular method uses your actual home expenses and the percentage of your home used for business, and it can include depreciation.

• Exclusive use matters: a guest room that's also your office usually won't qualify.
• You can pick either method each year, but the deduction can't exceed your business's gross income from that use, minus other business expenses.
• Employees can't claim a home office deduction for working from home for an employer.
• Details: IRS Publication 587, Business Use of Your Home.

Business mileage

For 2026, the IRS business standard mileage rate is 72.5 cents per mile for miles driven January 1 through June 30, and 76 cents per mile for miles driven July 1 through December 31. The IRS raised the rate mid-year because of higher fuel prices. Use the rate for the date of each trip.

Instead of the standard rate, you can deduct actual vehicle expenses (gas, repairs, insurance, depreciation and so on), times your business-use percentage. Commuting from home to a regular workplace generally isn't deductible.

• Keep a mileage log: date, destination, business purpose and miles. A notes app or paper log both work.
• Parking fees and tolls for business trips are generally deductible on top of the standard rate.
• Details: IRS Publication 463, Travel, Gift, and Car Expenses.

Self-employed health insurance

If you're self-employed and pay for your own medical, dental or qualifying long-term care insurance, you may be able to deduct the premiums, generally only for months when you weren't eligible for an employer-subsidized plan (including through a spouse's employer). The IRS now uses Form 7206 to figure this deduction (it replaced a worksheet that used to be in Pub 535). It's claimed on Schedule 1 of Form 1040, not on Schedule C.

Retirement: SEP-IRA or Solo 401(k)

Saving for retirement can also lower your taxes. A SEP-IRA is simple to set up, and the employer (you) makes the contributions, up to 25% of each employee's pay, subject to an annual limit. A one-participant (Solo) 401(k) covers a business owner with no employees (or the owner and spouse) and lets you contribute both as the "employee" and as the "employer," which can allow more savings at some income levels.

• For self-employed people, contribution math uses net earnings from self-employment, minus half of your self-employment tax and your own contributions. See IRS Publication 560.
• Limits change yearly; check the IRS contribution-limit pages instead of relying on old numbers.
• A Solo 401(k) generally has to file Form 5500-EZ once plan assets reach $250,000 or more at year-end.
• If you hire employees, the rules change. Talk to a plan provider or tax pro first.

Other common deductions to check

• Supplies, software, phone and internet (business-use share).
• Advertising, website and business insurance.
• Professional fees: tax preparation, legal and bookkeeping.
• Business meals: generally limited to 50%.
• Half of your self-employment tax is deductible when figuring adjusted gross income. The self-employment tax rate is 15.3%, and it generally applies if you have net earnings of $400 or more.

Recordkeeping that holds up

The IRS says you must keep records that support every item of income and deduction on your return. In many cases, that means keeping them at least 3 years from when you filed, and longer in some situations (for example, employment tax records, or if you underreported income).

• Save receipts, invoices, bank and card statements and your mileage log, digitally or on paper.
• Write the business purpose on receipts for meals and travel.
• Run all business money through a separate account. See our business banking checklist.
• Details: IRS Publication 583, Starting a Business and Keeping Records.