Tax Deductions

Keep your taxes low

Steph

6/4/20252 min read

2025 Tax Deductions Every Small Business Owner Should Know

Being a small business owner comes with its challenges, but paying more taxes than you should isn’t one of them.

At Flat Rate Bookkeeping and Taxes, Inc., we believe in helping business owners understand what they can deduct, why it matters, and how it all adds up to real savings. Here's your no-fluff guide to the most important deductions for tax year 2025.

1. Self-Employed Health Insurance Deduction

If you buy your own health insurance and aren't eligible for coverage through an employer or spouse, you may be able to deduct your premiums. This includes coverage for you, your spouse, and dependents — up to the amount of your business’s net income.

2. Business Startup Costs

If your startup costs totaled $50,000 or less, you can deduct up to $5,000 in startup and $5,000 in organizational costs. Over $50k? You can amortize the rest over 15 years. Don’t forget loan fees, business cards, and other setup costs.

3. Internet and Service Fees

Your internet bill, antivirus software, subscriptions, and other tech tools you use to run your business? Deductible.

4. Phone Service

Separate phone for business? Deduct it 100%. Shared phone? Deduct the business-use percentage. Pro tip: keep an itemized phone bill as backup.

5. Bonus Depreciation (First-Year Deductions)

For 2024, you can deduct 60% of qualifying business equipment upfront instead of spreading it out over years. Bonus depreciation applies to both new and used items that are new to you.

6. Section 179 Deduction

Allows you to deduct the full cost (up to $1,220,000 in 2024) of eligible business equipment. Unlike bonus depreciation, this cannot create a loss.

7. Ongoing Depreciation

Still depreciating older purchases? Don’t forget to claim your yearly deduction.

8. Professional Dues & Subscriptions

Trade journals, industry memberships, and licenses are all fair game — just not social clubs.

9. Cost of Goods Sold (COGS)

If you sell products, track beginning inventory, purchases, and ending inventory to calculate deductible COGS. Include materials, labor, and manufacturing-related costs.

10. Bad Debts

Using the accrual method and didn’t get paid? You may be able to deduct that uncollected revenue. (Cash method users, this won’t apply unless you made actual loans.)

11. Car Expenses & Mileage

You can deduct either 70 cents per mile (2024) or actual car expenses. Track business miles and hold onto your gas, insurance, and maintenance records.

12. Employee Benefits

You can deduct costs for qualified plans like group health, dependent care, life insurance, education assistance, and more.

13. Taxes

State business taxes, payroll taxes, real estate taxes on business property, and excise taxes are all deductible. Federal income tax is not.

14. Home Office Deduction

Use part of your home exclusively for business? You may deduct related expenses based on square footage or take the simplified option of $5 per square foot (max 300 sq. ft.).

15. Retirement Contributions

Contribute to your future while lowering your tax bill. A SEP IRA allows up to 25% of compensation, maxing out at $69,000 for 2024.

16. Contract Labor

Paying independent contractors or freelancers over $600? Deduct it — and remember to file 1099-NEC forms where required.

17. One-Half of Self-Employment Tax

Self-employed? You pay both halves of Social Security and Medicare, but you can deduct 50% of it from your income.

18. Your physical business location

Bottom Line Taxes don’t have to be scary, but ignoring deductions? That’s just leaving money on the table.

Flat Rate Bookkeeping and Taxes is here to help you stay compliant, lower your tax burden, and understand where every dollar is going. We don’t guess, we get it right.