Tax Deduction Cheat Sheet For Small Business 2026

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Every small business needs a tax deduction cheat sheet to keep tax bills under control and revenue moving in the right direction.

People literally search “how to avoid paying taxes” thousands of times a month, which shows how common it is for entrepreneurs to look for loopholes.

But trying to dodge taxes altogether isn’t realistic, and it’s a quick way to land in trouble with the IRS.

If you’re serious about building a business that lasts, the smarter move is to use the legal tools the tax code already gives you: deductions, credits, and smart timing.

In this article, we’ll walk through:

The small business tax rate
2026 Income Tax Brackets
Tax write offs
How do tax write offs work?
The small business tax deduction cheat sheet

(Note: You can click on the texts above to jump to the section of this article that best satisfies your interest.)

By the end, the goal is simple: help you lower your income tax bill and speed up your tax filing process for the 2026 tax year (returns filed in 2027).

The Small Business Tax Rate

In the US, how much tax your small business pays to the federal government depends on your income level and how the business is structured.

If your business is a C corporation, you’re generally subject to a flat 21% corporate tax rate on net income. That rate was introduced by the Tax Cuts and Jobs Act (TCJA) and has now been made effectively permanent by the One Big Beautiful Bill Act (OBBBA).

C corporations can also deduct ordinary and necessary business expenses (like payroll, rent, and equipment) from their taxable income, which reduces the overall tax bill.

If you pay yourself a salary as an owner-employee, that salary is a deductible business expense for the company. You’ll then pay individual income tax on that salary at your personal tax rate.

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For pass-through entities such as sole proprietorships, partnerships, LLCs, and S corporations, business income “passes through” to the owners’ personal tax returns. That income is taxed at individual rates ranging from 10% to 37%, depending on your taxable income.

Many pass-through owners can also claim the Qualified Business Income (QBI) deduction, which lets eligible taxpayers deduct up to 20% of their qualified business income.

OBBBA has now made this deduction permanent from 2026 onward, giving small business owners more long-term certainty. The higher your taxable income, the higher the marginal rate you’ll pay on that last dollar of income.

2026 Income Tax Brackets

Here are the federal income tax brackets for 2026 (the taxes you’ll file in 2027), based on the latest IRS inflation adjustments.

These apply to taxable income (after deductions):

Rate	Single filers	Married filing jointly	Head of household
10%	$0 – $12,400	$0 – $24,800	$0 – $17,700
12%	$12,401 – $50,400	$24,801 – $100,800	$17,701 – $67,450
22%	$50,401 – $105,700	$100,801 – $211,400	$67,451 – $105,700
24%	$105,701 – $201,775	$211,401 – $403,550	$105,701 – $201,775
32%	$201,776 – $256,225	$403,551 – $512,450	$201,776 – $256,200
35%	$256,226 – $640,600	$512,451 – $768,700	$256,201 – $640,600
37%	$640,601+	$768,701+	$640,601+

For 2026, the standard deduction is:

$16,100 – Single or Married Filing Separately
$32,200 – Married Filing Jointly
$23,950 – Head of Household

These amounts matter because you’ll compare them to your potential itemized deductions to decide which route saves you more tax.

What is a tax write off?

A tax write-off (tax deduction) is a legitimate business expense you subtract from your taxable income when filing your tax return.

Less taxable income → lower tax bill.

The tricky part for many small business owners is knowing which expenses are actually deductible and which ones are not.

The IRS has a simple test: “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.”

If it’s both ordinary in your line of work and necessary to run the business, there’s a good chance it’s deductible.

How do tax write offs work?

The whole point of tax write-offs is to reduce the income that’s actually taxed.

You have two broad paths when filing your individual return:

1. Standard deduction
- A fixed amount based on filing status (see the 2026 amounts above).
- Quick and simple. No need to list every deduction.
2. Itemized deductions
- You list eligible expenses individually: mortgage interest, state and local taxes (subject to caps), certain medical expenses, charitable giving, etc.
- More work, but if your itemized total is higher than the standard deduction, you save more.

For small business owners, business deductions (like rent, payroll, software, travel) generally reduce your business income before it ever reaches your individual return. Then your standard vs. itemized decision kicks in on what’s left.

Itemizing usually requires:

– Receipts and invoices
– Proof of payment
– Clear separation of business vs personal spending

If the IRS ever audits you, those documents become your defense.

If you’re unsure which route gives you the best result, it’s worth talking to a tax professional—especially now that 2026 has new rules for charitable deductions and information reporting under the OBBBA.

Small business tax deduction cheat sheet

Below is a list of items to help you with possible deductions when filing your taxes.

Business Travel Expenses
Business meals
Business interest
Contractor Labor
Advertising
Bad debt
Depreciation
Insurance
Legal fees
Charity
Salaries and Employee benefits
Utilities
Home office

Check out a list of 27 tax-deductible items

Business Travel Expenses

If you travel away from your tax home (your main place of business) and the trip is primarily for business, you can usually deduct:

– Flights, train, or bus fares
– Hotels and business lodging
– Taxis, rideshare (e.g., Uber, Lyft), and local transport
– Rental cars and related fuel/tolls
– Baggage fees and reasonable tips

Key conditions

– The trip must be ordinary and necessary for your trade or business.
– The primary purpose of the trip must be business (not a vacation with a meeting squeezed in).
– Travel outside your normal metro area generally qualifies more clearly.

What to track

– Dates of travel
– Destination
– Business purpose (meeting, conference, client visit, etc.)
– Receipts for transportation, lodging, and other major expenses

Business meals

Business-related meals are still deductible in 2026, but the rules are more nuanced than “everything is 100%.”

In general:

50% deductible
- Meals with clients, prospects, or business partners where you discuss business
- Your own meals while traveling for business
- Most day-to-day business meals
100% deductible (in many cases)
- Employer-wide social events (e.g., annual staff party)
- Certain de minimis fringe benefits (like occasional office snacks), subject to evolving IRS guidance

Not deductible

– Meals that are primarily social with no real business purpose
– Lavish or extravagant meals that go beyond what’s reasonable for your business context

What you should record

– Date and location of the meal
– Who attended
– Business purpose or topic discussed
– Total amount (keep receipts, especially for larger amounts)

Business interest

Interest you pay on business loans and lines of credit is generally deductible in 2026, subject to some limits.

This includes interest on:

– Business loans
– Business credit cards
– Business lines of credit
– Some equipment financing arrangements

For many small businesses, 100% of business interest remains deductible, but there is a cap for larger businesses: in most cases, the deduction is limited to 30% of adjusted taxable income, with exceptions and special rules.

To qualify, make sure:

– You have proper documentation (loan agreements, statements)
– The debt is genuine (real borrower–lender relationship, obligation to repay)
– Funds are used for business purposes, not personal spending

Contractor labor (Freelancers & Independent Contractors)

Payments to independent contractors (designers, developers, marketers, consultants, etc.) are typically fully deductible as long as the services are for your business.

What changes in 2026 is the reporting threshold for Form 1099-NEC:

– Before 2026: File Form 1099-NEC if you paid $600 or more to a contractor in a year.
– For payments made in 2026 and later: The threshold increases to $2,000, thanks to the One Big Beautiful Bill Act.

You still:

– Deduct the expense whether or not a 1099 is required.
– Need accurate records of payments to all contractors.
– Even if you’re no longer required to issue a 1099-NEC for smaller amounts, the contractor still has to report their income. And you still must treat the payment as a business expense, not something personal.

Read details about Form 1099-NEC for Independent Contractors

Advertising

Money spent promoting your business and attracting customers is generally fully deductible as an ordinary and necessary business expense.

This covers things like:

– Online ads (Google, Facebook, Instagram, etc.)
– Influencer partnerships
– Content marketing and SEO services
– Website design, hosting, and maintenance
– Printed materials (business cards, flyers, brochures)
– Brand-building campaigns and sponsorships aimed at promoting your business

The key is that the spending must be directed at promoting your business, and nothing relating to personal projects or purely personal branding disconnected from your business activity

Bad Debt

Bad debt generally means money your business was legitimately owed but can’t realistically collect anymore.

For example:

– A customer never paid an invoice and you’ve made reasonable efforts to collect
– A business loan you extended to a vendor or customer that has become worthless

Under US rules, you can typically deduct:

– Business bad debts (e.g., uncollectible accounts receivable) as an ordinary business deduction, once they are partially or wholly worthless.

You’ll need:

– Documentation that the debt was business-related, not personal
– Evidence that you made reasonable attempts to collect (emails, letters, records)

Depreciation

Assets you purchase for use in your business over multiple years, such as computers, machinery, vehicles, furniture, and certain buildings, are not typically deducted all at once. Instead, you recover the cost over time through depreciation.

Basic idea:

Annual Depreciation = Cost of the asset ÷ Useful life

In practice, the tax rules use specific schedules and methods, but the logic is the same: you spread the cost across the years the asset is used.

What changed for 2026

The OBBBA brought back and expanded a few powerful tools for small businesses:

– 100% bonus depreciation for eligible property placed in service in tax years beginning after Dec 31, 2024
– A higher Section 179 expensing limit, with the maximum deduction increased to around $2.5 million, indexed for inflation

In basic terms, many small businesses can still expense the full cost of qualifying equipment in the year it’s placed in service, instead of spreading it over 5, 7, or more years.

Good practice:

– Track purchase date, cost, and when the asset is placed in service
– Separate land (non-depreciable) from buildings/equipment (depreciable)

Insurance

Most business insurance premiums are deductible in 2026 as ordinary and necessary expenses.

This typically includes:

– General liability insurance
– Professional liability (errors & omissions)
– Commercial property insurance
– Business interruption insurance
– Some cyber liability and product liability policies
– Health insurance for employees, subject to IRS rules

To deduct:

– The policy must be primarily for business purposes
– Premiums should be paid by the business, not personally

Certain policies with a strong investment or personal benefit component may be treated differently (for example, some types of life insurance where the business is the beneficiary); therefore, it is worth checking with a tax professional.

Legal fees

Amounts you pay for professional services that are directly related to running your business are generally fully deductible. This includes:

– Lawyer fees (contracts, compliance, collections, etc.)
– Accountant or bookkeeper fees
– Tax preparation fees for your business return
– Fees for consultants or professional advisors engaged for business purposes

Non-deductible or limited cases include:

– Some transaction-related legal fees that must be capitalized (e.g., buying a building or acquiring another business)
– Fees related purely to personal matters (personal divorce, personal estate planning, etc.)

Charity

Charitable contributions are still deductible in 2026—but the OBBBA has changed how those deductions work.

For 2026 and later, Standard deduction filers can now deduct up to $1,000 (single) or $2,000 (married filing jointly) of cash donations to qualifying charities above the line, without itemizing.

Gifts to donor-advised funds and some private foundations do not qualify for this special non-itemizer deduction.

Itemizers (individuals):

– Cash gifts to public charities remain deductible up to 60% of AGI, and that 60% limit has been made permanent.
– New 0.5% AGI floor: only contributions above 0.5% of your AGI are deductible.
– For those in the 37% bracket, the tax benefit is capped at 35% per dollar donated, reducing the benefit at the very top end.

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For corporations:

– Corporate charitable deductions are still generally limited to 10% of taxable income
– But now there is also a 1% floor—the first 1% of corporate income given may not generate a deduction.

Practically, for a small business owner, the main action points are:

– Give to qualified charities (501(c)(3) public charities)
– Keep proper receipts and acknowledgments
– Understand that small, routine donations may no longer all be deductible once the 0.5% floor is applied

Salaries and Employee Benefits

Money you pay to your employees is typically fully deductible, including:

– Wages and salaries
– Commissions
– Bonuses
– Certain fringe benefits (health insurance, retirement contributions, and some education assistance)

To keep the deduction robust, the IRS expects that:

– The employee is not a sole proprietor, partner, or LLC member just taking a disguised “salary” instead of profit distributions.
– The compensation is reasonable for the work performed.
– The employee actually provides services to your business.
– Reasonable documentation (employment agreements, payroll records) goes a long way in supporting these deductions.

Utilities

The money you spend to keep your operations running—power, internet, and communications—is generally deductible, including:

– Electricity and gas
– Water and sewer
– Business internet
– Business phone lines and VOIP

If you use a single service (like a mobile phone or home internet) for both personal and business purposes, you can usually only deduct the business portion.

Rule of thumb:

– Estimate a reasonable percentage of business use
– Apply that percentage consistently
– Keep basic notes or records to justify your split if needed

Home office

If you run your business from home and use part of your home regularly and exclusively for business, you may qualify for the home office deduction in 2026.

The IRS still offers two main methods:

1. Simplified method
- Deduction of $5 per square foot, up to 300 square feet
- Maximum simplified deduction: $1,500
- Very straightforward—no need to track actual utilities or repairs for that space
2. Regular (actual expense) method
- Deduct a percentage of actual home expenses (rent or mortgage interest, utilities, insurance, repairs, property taxes) based on the percentage of your home used for business

Key conditions:

– The area must be used exclusively for business (no guest room/dining room double use)
– It should be your principal place of business or a place where you regularly meet clients

If your setup is more complex (e.g., you use a coworking space and a home office), it’s often worth getting tailored advice.

Check out items that are deductible for Home Office

Final Thoughts!

As a small business owner, there’s always that temptation to “beat” the tax system. But in reality, you’re far better off using the rules than fighting them.

Smart tax planning looks like:

– Knowing which expenses are legitimately deductible
– Tracking them properly throughout the year
– Matching the right deduction strategy (standard vs itemized, QBI, home office, etc.) to your specific situation

The result? Lower tax bills, better cash flow, and more money left to reinvest in your business.

Akaunting helps by simplifying how you track income and expenses, attach receipts, and categorize transactions—so when tax time comes, you’re not scrambling through old emails and shoe boxes.

And if you still feel lost in the jargon (especially with new 2026 rules under the One Big Beautiful Bill Act), that’s your cue to bring in an accountant. Akaunting can help you connect with accountants in your region who understand small businesses like yours.

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Frequently Asked Questions

Who can write off expenses on their income taxes?

Tax write-offs are available to:

– Individuals with self-employment income
– Freelancers and gig workers
– Small businesses (sole proprietors, LLCs, partnerships, S corps)
– C corporations

The exact rules differ by structure, but the “ordinary and necessary” standard applies across the board.

Should I itemize or take the standard deduction?

It depends on which option saves you more money:

– If your itemized deductions (mortgage interest, state/local taxes subject to caps, charitable contributions, etc.) are higher than the standard deduction, itemizing usually wins.
– If not, the standard deduction is quicker and simpler.

In 2026, with:

– Higher standard deductions, and
– New charitable rules (0.5% floor for itemizers plus a small non-itemizer charitable deduction),

it’s worth running the numbers or asking your tax advisor to compare both paths.

What are the federal income tax brackets for 2026?

Rate	Incomes of individuals (Single)	Incomes of married couples filing jointly
10%	Less than or equal to $12,400	Less than or equal to $24,800
12%	More than $12,400	More than $24,800
22%	More than $50,400	More than $100,800
24%	More than $105,700	More than $211,400
32%	More than $201,775	More than $403,550
35%	More than $256,225	More than $512,450
37%	More than $640,600	More than $768,700