Tax season can feel overwhelming for small business owners. Between gathering receipts, reconciling accounts, and navigating IRS forms, it's easy to overlook deductions that could significantly reduce your tax liability.

Claiming all eligible small business tax deductions helps protect your cash flow, improve profitability, and strengthen long-term financial stability. Below are 12 commonly missed deductions every business owner should review before filing.

1. Home Office Deduction

If you use a dedicated space in your home exclusively and regularly for business, you may qualify for the home office deduction.

The IRS allows two calculation methods:

• Simplified method: $5 per square foot, up to 300 square feet.
• Actual expense method: Deduct a percentage of eligible expenses based on the portion of your home used for business.

Eligible expenses may include mortgage interest or rent, utilities, homeowners' insurance, property taxes, and repairs specific to the office space.

2. Startup Costs

The IRS allows new businesses to deduct up to $5,000 in startup costs and $5,000 in organizational costs in the first year, subject to a phase-out once total startup expenses exceed $50,000.

Remaining eligible costs may be amortized over 15 years.

3. Business Use of Your Vehicle

If you use your personal vehicle for business purposes, you may deduct related expenses using one of two IRS-approved methods:

• Standard mileage rate: The IRS publishes an annual rate; you deduct based on business miles driven.
• Actual expense method: Deduct actual costs for fuel, maintenance, repairs, insurance, and depreciation.

Whichever method you choose, maintain detailed records including the date, purpose, and miles driven for each business trip.

4. Continuing Education and Professional Development

Education expenses that maintain or improve skills required in your trade or business are generally deductible if directly related to your current operations.

5. Business Insurance Premiums

Insurance premiums for general liability, professional liability (E&O), product liability, property, and business interruption coverage are typically deductible as ordinary and necessary expenses.

6. Retirement Plan Contributions

Contributions to SEP IRAs, SIMPLE IRAs, and 401(k) plans are often tax-deductible and can reduce taxable income in the year contributed. Contribution limits and eligibility rules are adjusted periodically by the IRS.

7. Bad Debts

If you extend credit to customers who fail to pay and you've made reasonable efforts to collect, you may be able to deduct qualifying bad debts as a business loss.

This deduction is generally relevant for businesses that report income on an accrual basis. Maintain documentation showing that the debt is valid, that collection efforts were made, and that the amount became uncollectible.

8. Business Software and Subscriptions

Accounting software, CRM platforms, project management tools, cloud storage, and other essential digital tools are typically deductible if they are ordinary and necessary for operating your business.

9. Meals and Entertainment

Under current federal tax law, most business-related meals are deductible at 50% of the cost if:

• You or an employee is present
• The meal has a legitimate business purpose
• The expense is not extravagant

Business entertainment expenses are generally not deductible. Temporary 100% meal deductibility that applied in prior years has expired.

10. Section 179 and Bonus Depreciation

Section 179 allows businesses to deduct the full purchase price of qualifying equipment and certain vehicles used for business, as well as certain software, in the year placed into service, rather than depreciating it over time.

Bonus depreciation may also allow accelerated write-offs of eligible assets, though the percentage limits and phase-outs can vary by tax year.

These provisions can significantly improve cash flow for capital-intensive businesses.

11. Qualified Business Income (QBI) Deduction

The Qualified Business Income (QBI) deduction may allow eligible pass-through businesses — including sole proprietors, partnerships, and S corporations — to deduct up to 20% of qualified business income.

Eligibility depends on income thresholds, business type, wages paid, and asset levels. Certain service-based businesses may be subject to additional limitations.

Because QBI rules are complex and subject to change, professional guidance is strongly recommended.

12. State and Local Tax (SALT) Deduction

The federal SALT deduction allows taxpayers to deduct certain state and local taxes paid during the year and generally applies if you itemize deductions. Beginning in tax year 2025, the SALT cap increased to $40,000 for most individual taxpayers and $20,000 for married individuals filing separately. The expanded cap is scheduled to remain in effect through 2029 unless extended.

Note: Because Tennessee does not impose a state income tax, most Tennessee business owners focus on the deductible:

• Property taxes on business real estate or equipment
• Sales taxes paid on qualifying purchases (if itemized)

C corporations are generally not subject to the individual SALT limitation. Some states offer Pass-Through Entity Tax (PTET) elections that may allow entity-level deductions.

Strengthening Your Financial Foundation

Thoughtful tax planning is more than a once-a-year task. It's part of building a resilient, profitable business.

At i-bank, we believe strong businesses build strong communities. If you're reviewing your financial strategy this tax season, connect with your i-bank team to support your long-term goals.