Below is a list of tax deductions available for startup businesses in 2025. Remember to keep detailed records of all expenses and consult with a tax professional to ensure you’re complying with IRS regulations.
- Startup and organizational costs: Up to $5,000 each can be deducted in the first year, provided total startup costs are under $50,000. Expenses exceeding this limit can be amortized over 15 years.
- Advertising expenses: 100% deductible, including online, print, and TV advertisements, as well as marketing efforts and promotional materials.
- Travel expenses: Deductible when ordinary and necessary for business, including transportation, lodging, meals, parking, and toll fees.
- Office supplies: Deductible items include ink cartridges, cleaning supplies, pens, paper clips, staplers, paper, and furniture.
- Equipment and software: Subscription fees for business-related equipment and software are deductible.
- Rent and utilities: Costs associated with business premises are deductible.
- Professional fees: Legal, accounting, and consulting fees related to starting the business are deductible.
- Employee-related expenses: Costs for recruiting, hiring, training, salaries, wages, and benefits are deductible.
Employee benefits and healthcare: Including retirement plan contributions and wellness program costs.
- Insurance: Premiums for business-related insurance policies are deductible.
- Retirement Plan Startup Costs Tax Credit: Eligible employers can claim up to $5,000 for three years for starting a SEP, SIMPLE IRA, or qualified plan like a 401(k).
- Small Business Tax Credit for Plan Contributions: Available for defined contribution plans, SEPs, or SIMPLE IRAs. For businesses with 1-50 employees, the credit ranges from 25% to 100% of contributions, up to $1,000 per participant, over five years.
- Section 179 Equipment Deduction: Allows for immediate expensing of up to $1.16 million in 2025 for both new and used equipment.
- Vehicle expenses: Costs related to vehicles used for business purposes, including mileage, can be deducted. Deductible using either the actual expenses method or the increased standard mileage rate of 70 cents per mile in 2025.
- Home office expenses: Deductible if you use a portion of your home exclusively for business.
- Legal and professional fees: Costs for lawyers, accountants, and bookkeepers are deductible.
- Business losses: Can be written off in full for sole proprietors and LLC owners.
- 20% Pass-Through Deduction (QBI): Allows eligible small business owners to deduct up to 20% of their net business income
Lastly, check your local state legislation for local tax incentives. There are often incentives, some targeting individual industries, while others are more generic.
It’s important to note that personal expenses, capital expenses, and costs for acquiring existing businesses or assets are generally not tax-deductible. Additionally, the bonus depreciation deduction will be 60% in 2024.
This is not meant to be professional tax advice, so remember to consult with a tax professional to see how these tax deductions apply to your particular situation.