Running a small business means keeping a lot of plates spinning—from hiring and operations to marketing, client work, and cash flow. But when tax season rolls around, all that hustle can either help or hurt you—depending on how well you’ve planned for deductions.

The good news? The U.S. tax code actually favors small businesses in a lot of ways. No matter if you’re driving to client meetings, working from a home office, or investing in new equipment, there are smart ways to deduct those expenses and lower your taxable income. And in 2025, a few important changes—including the return of 100% bonus depreciation and increased Section 179 limits—make now a smart time to get ahead.

This checklist walks through 13 of the most valuable small business tax deductions you can take advantage of this year. We’ve included real thresholds, IRS form links, and best practices—so you can stop guessing and keep more of what you’ve built.

Table of Contents

  1. How to use this 2025 small business deductions checklist
  2. What to prioritize—and where to get support

How to use this 2025 small business deductions checklist

Before diving into the full list, take a few minutes to scan this guide and identify which deductions apply to your business structure, expenses, and goals. Whether you’re a sole proprietor or running a growing team, this checklist is designed to help you track eligible write-offs, avoid common mistakes, and make informed year-end decisions. Bookmark it, share it with your bookkeeper or CPA, and revisit it before each quarterly filing.

1. Home office deduction

If you run your business from home—even part-time—you may be eligible to deduct a portion of your housing costs. To qualify, the space must be used exclusively and regularly for business purposes. That includes costs like mortgage interest, rent, utilities, repairs, and homeowners insurance.

There are two calculation methods for 2025:

While the rules haven’t changed this year, the IRS maintains strict definitions around what qualifies as a “home office.” Business use must be clearly delineated—shared spaces generally don’t qualify. You can review IRS guidance here.

For S corp owners, this deduction must be structured differently, often through an accountable plan. If you’re unsure what applies to your setup, a Harness advisor can help you journey through the nuances.

2. Self-employment tax deduction

When you’re self-employed, you’re responsible for paying both the employer and employee portions of Social Security and Medicare taxes—commonly known as self-employment tax, which totals 15.3%.

The best part is that you can deduct half of that tax (the employer-equivalent portion) on your personal tax return as an above-the-line deduction. This reduces your adjusted gross income (AGI), regardless of whether you itemize.

For 2025, thresholds for Social Security taxation and Medicare surtaxes are higher due to inflation adjustments. You can find updated information on income limits and tax rates in IRS Publication 334.

This deduction is often overlooked by new business owners—but it can make a significant difference in your tax liability.

3. Business mileage and vehicle expenses

If you use a car, truck, or van in your business, you can deduct expenses associated with that use. For 2025, the standard mileage rate is $0.70 per business mile.

You have two options for calculating this deduction:

Regardless of method, accurate mileage logs are essential. Apps can help, but handwritten logs are still acceptable if they’re complete. You’ll need to track business purpose, dates, and total miles driven.

Keep in mind that commuting between home and a regular office is not deductible—only trips directly related to business (like meeting clients or driving to job sites) count. 

4. Section 179 expensing

Thanks to expanded thresholds under the Tax Cuts and Jobs Act, Section 179 continues to be one of the most powerful tax tools for small businesses in 2025. It allows you to deduct the full purchase price of qualifying equipment—including computers, software, office furniture, and vehicles—in the year it’s placed in service.

For tax year 2025:

Eligible property must be used more than 50% for business, and the deduction is limited to your business’s taxable income. You can review details in IRS Publication 946.

If you’re making large investments this year—like upgrading your tech stack or vehicle fleet—Section 179 could substantially reduce your tax burden. Consider timing purchases before year-end to ensure eligibility.

5. Bonus depreciation

In addition to Section 179, bonus depreciation is another powerful way to accelerate deductions for capital purchases. Under the One Big Beautiful Bill (OBBB), 100% bonus depreciation has been permanently restored starting in 2025.

Eligible assets include:

Unlike Section 179, bonus depreciation is not limited by taxable income and can create or increase a net operating loss, making it particularly valuable for growth-focused businesses. The acquisition date rule is important—assets purchased under a binding contract before Jan. 20, 2025, won’t qualify for the 100% rate even if installed later.

Section 179 and bonus depreciation can be used together strategically, but the new timing rules under OBBB add complexity. 

6. Retirement contributions

An older couple sitting peacefully on a bench by the ocean—symbolizing the long-term financial benefits of maximizing small business retirement contributions and securing future income.

Contributing to a retirement plan is one of the most effective ways to reduce taxable income while building long-term wealth. Small business owners have multiple plan options in 2025, including:

Each plan comes with unique rules on eligibility, deadlines, and administration. Contributions made before the filing deadline (plus extensions) can often be applied to the previous tax year. 

Maximizing these contributions not only lowers your current tax bill—it helps protect your future income as well.

7. Health insurance premiums

Self-employed individuals can deduct 100% of their health insurance premiums for themselves, their spouse, and dependents—even if they don’t itemize.

This includes:

You must show a net profit on your Schedule C to take the deduction, and you can’t be eligible for coverage under an employer plan (such as a spouse’s).

Note: This is an above-the-line deduction, which means it reduces your AGI—potentially increasing your eligibility for other deductions and credits. Be sure to keep detailed records of your premiums and payments.

8. Business insurance

Business-related insurance premiums are fully deductible operating expenses. These may include:

Premiums paid in 2025 should be deducted in the same year, even if coverage extends beyond December. If you prepaid for a multi-year policy, only the portion applicable to 2025 is deductible.

As your business grows, your coverage needs evolve. Updating policies regularly—and deducting the associated costs—keeps both your operations and tax return in check.

9. Contract labor

Many small businesses rely on freelancers and independent contractors to fill skill gaps or scale up temporarily. Payments made to these non-employees are deductible as a business expense—so long as the worker is correctly classified.

You’re required to issue Form 1099-NEC for contractors paid $600 or more during the year. The IRS provides guidelines for determining whether a worker is truly independent (see IRS guidance on worker classification).

Misclassification can result in penalties, so be sure your agreements and payment records are in order.

10. Education and training

Investing in your skills—and those of your employees—can directly reduce your tax bill. Qualifying educational expenses include:

To qualify, the education must maintain or improve your current business—not prepare you for a new career. This distinction is key for deductibility.

Courses don’t have to be from accredited institutions, but they must relate to your current trade. Keeping receipts and course descriptions helps defend your deduction if audited.

11. Depreciation of business assets

When you purchase large assets for your business—like equipment, furniture, or vehicles—you may be able to depreciate the cost over time or deduct it immediately under Section 179 or bonus depreciation rules.

For 2025:

Eligible assets include computers, machinery, office furniture, and certain vehicles. You can review current thresholds and forms via IRS Publication 946.

A clear depreciation strategy not only reduces your taxable income this year—it also allows for smarter planning across your business’s lifecycle.

12. Vehicle use

A woman driving to a work-related destination—illustrating the importance of tracking mileage and vehicle expenses to take full advantage of the 2025 IRS mileage deduction.

If you use a vehicle for business, you can deduct the associated costs. In 2025, the IRS standard mileage rate is 70 cents per mile for business use.

There are two ways to deduct:

To qualify, the vehicle must be used primarily for business. Commuting between home and a regular office doesn’t count—but travel between work sites does.

Keeping a mileage log or using an app is critical. If you’re audited, the IRS may disallow your deduction without proper substantiation (see IRS mileage guidance).

13. Qualified Business Income (QBI) Deduction

Available through 2025 under current law, the Qualified Business Income deduction lets certain pass-through businesses deduct up to 20% of their net business income.

To qualify, your business must be a sole proprietorship, partnership, S corp, or LLC taxed as such. There are income thresholds for full eligibility—$191,950 for single filers and $383,900 for joint filers in 2025.

If your business is a “specified service trade or business” (like law, consulting, or medicine), the deduction begins to phase out after these thresholds.

The QBI deduction is complex, and your eligibility may depend on wages paid or asset ownership. IRS Publication 535has full details.

What to prioritize—and where to get support

Small business tax planning in 2025 is less about chasing every possible write-off and more about identifying the deductions that align with your business structure and day-to-day operations. If it’s leveraging the home office deduction, optimizing depreciation strategies, or tracking expenses like mileage and meals, each move you make can directly influence your bottom line.

Harness connects you with specialized, vetted tax professionals who understand the unique challenges of business ownership. No matter if you’re a solo consultant, S corp owner, or startup founder with a growing team, our platform helps you access tailored, on-demand support that fits your needs—and your budget.

Get started with Harness today and let’s make 2025 the year your tax strategy works as hard as you do.

Disclaimer

Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.

Content was prepared by a third-party provider and not the adviser. Content should not be regarded as a complete analysis of the subjects discussed. Although we believe the content is reliable, it is not guaranteed as to accuracy and does not purport to be complete nor is it intended to be the primary basis for financial or tax decisions.