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- Maximize your LLC's savings: A complete guide to tax-deductible business expenses
Maximize your LLC's savings: A complete guide to tax-deductible business expenses
Reducing your tax bill to boost your bottom line
Understanding tax-deductible business expenses and effectively leveraging them could be the key to optimizing your financial health as a limited liability company or LLC.
The Internal Revenue Service (IRS) allows expenses considered "ordinary and necessary" for running your business to be deducted from your gross income. This concept applies to all business entities, including all types of LLCs.
This guide comprehensively lists these expenses and explains how intelligent expense management can boost the bottom line.
Why every LLC owner needs to master expense deductions
The equation is simple — every expense deducted reduces taxable income and the tax paid.
When injected back into the business, the resulting savings fuel growth, pay down debt, improve cash reserves, invest for future returns outside the company, or distribute the same to owners/shareholders.
This is why, as an LLC owner, you should not consider this a cost-saving opportunity during tax season. You need to consider this an all-year-round strategy to help your company thrive during a conducive business landscape and survive a recessive one.
Here is a comprehensive list of expenses your LLC can typically deduct.
Note: While this list provides a comprehensive overview, specific details and limitations for each deduction can vary across industries and verticals, and could be complex.
Please consult IRS Publication 334 (Tax Guide for Small Business) and other relevant IRS publications like Publication 463 (Travel, Gift, and Car Expenses)
It is also best to consult with a qualified tax professional who can ensure accurate deductions for your specific business.
38 everyday tax-deductible expenses for LLCs: A cheat sheet
Compensation & Personnel Costs
1. Salaries, Wages, & Commissions: Employee payments (including bonuses, severance, vacation pay, and tips subject to FICA).
2. Independent Contractor Payments: Fees paid to freelancers, consultants, and 1099 contractors.
3. Employee Benefits:
- Health insurance premiums (for employees and potentially for self-employed members via self-employed health insurance deduction).
- Contributions to qualified retirement plans (e.g., 401(k), SEP IRA, SIMPLE IRA).
- Group term life insurance premiums (up to certain limits).
- Educational assistance programs.
- Dependent care assistance programs.
- Other fringe benefits (e.g., parking, transit passes, wellness programs).
4. Payroll Taxes: Employer's share of Social Security, Medicare (FICA), Federal Unemployment (FUTA), and State Unemployment (SUTA) taxes.
5. Workers' Compensation Insurance Premiums: Mandatory insurance in most US states.
Occupancy & Office Expenses:
6. Rent or Lease Payments: For office, retail, warehouse, or other commercial property.
7. Utilities: Electricity, gas, water, sewage, internet, and business phone services.
8. Property Taxes: On owned business real estate.
9. Building Insurance: Premiums for property insurance covering business premises.
10. Repairs and Maintenance: Costs to keep property and equipment in ordinary operating condition (not improvements).
11. Office Supplies: Pens, paper, ink, toner, stationery, and cleaning supplies for the office.
12. Office Equipment: Smaller items like calculators, shredders, and small appliances for the office breakroom. Larger equipment may be depreciated (see #21).
13. Cleaning and Janitorial Services: For business premises.
14. Security Systems and Monitoring: Costs associated with securing the business location.
Travel, Meals & Entertainment:
15. Business Travel Expenses:
- Airfare, train, bus, or boat fares
- Lodging (hotel, motel)
- Meals (50%)
- Car rental fees, taxi fares, rideshare costs
- Baggage fees
- Tips related to travel expenses
16. Vehicle Expenses (Business Use):
Standard Mileage Rate: This is a simplified method in which you deduct a set amount per business mile (the rate changes annually). It covers gas, oil, repairs, maintenance, and depreciation.
Actual Expenses: Deducting actual costs for gas, oil, repairs, maintenance, insurance, registration, tires, and depreciation (or lease payments). Tolls and parking fees are deductible under both methods.
17. Business Meals: Generally 50% deductible if the meal is directly associated with or precedes/follows a business discussion, is not lavish, and is with a business contact.
18. Conference and Convention Fees: Attending industry-related conferences, seminars, or trade shows costs.
Marketing, Advertising & Professional Development:
19. Advertising and Marketing: Website design/hosting, online ads, print ads, social media marketing, direct mail, promotional materials, brochures, and signage.
20. Professional Development: Courses, seminars, workshops, and certifications that maintain or improve skills required for the business. (It does not apply to new trade or business education.)
21. Memberships and Subscriptions: To professional organizations, trade associations, business-related publications, and specialized software/online tools.
Financial, Legal & Administrative:
22. Bank Fees: Monthly service charges, ATM fees, wire transfer fees, and overdraft fees on business accounts.
23. Interest Expense: On business loans, lines of credit, and business credit cards.
24. Legal Fees: For business formation, contracts, litigation, trademarks, etc.
25. Accounting and Bookkeeping Fees: Tax preparation, financial statements, and payroll processing.
26. Permits and Licenses: Annual fees for state, local, or industry-specific business permits and licenses.
27. Taxes (Certain Business-Related): State and local income taxes (for C-Corp elected LLCs), property taxes (on business property), gross receipts taxes, sales taxes incurred by the business, self-employment tax deduction (one-half of self-employment taxes for pass-through LLCs).
28. Bad Debts: Noncollectable amounts owed to your business from sales or services.
29. Startup Costs: Up to $5,000 each for organizational and startup costs can be deducted in the first year, with any excess amortized over 180 months.
30. Amortization: Deducting the cost of certain intangible assets (e.g., patents, copyrights, trademarks) over their useful life.
31. Depreciation: Deducting the cost of tangible assets with a useful life of more than one year (e.g., vehicles, machinery, larger equipment, furniture, buildings) over their useful life. Section 179 and bonus depreciation allow significant upfront deductions for qualified assets.
32. Postage and Shipping: Costs for sending mail, packages, or freight related to business operations.
Other Specific Deductions:
33. Home Office Deduction: If a portion of your home is used exclusively and regularly as your principal place of business, for meeting clients, or as a separate structure. You can deduct some of the rent/mortgage interest, utilities, insurance, and repairs.
34. Cost of Goods Sold (COGS): For businesses that sell products, this is a major deduction that includes the direct costs of producing goods (raw materials, direct labor, manufacturing overhead). It is subtracted from gross receipts to calculate gross profit and is not listed as a separate "expense" on Schedule C, etc.
35. Casualty and Theft Losses: Losses incurred due to business property damaged or stolen (after any insurance reimbursement).
36. Returns and Allowances: Reductions in sales revenue due to returned goods or price adjustments.
37. Pension and Profit-Sharing Plans: Contributions made by the LLC to qualified employee plans.
38. Research and Experimental Expenditures: Certain R&D costs may be amortized over 5 years (or 15 years for foreign research), depending on when they were incurred.
Streamlining your deductions with a travel & expense management solution
Understanding these deductions is a small but essential step in optimizing financial health. Accurately recording, tracking, and categorizing them is the main stumbling block for LLCs. This is where modern travel and expense management software like Zoho Expense becomes indispensable.
Zoho Expense automates expense capture through features like auto scanning of paper receipts, auto forwarding of email receipts, auto-import of card feeds, automatic mileage tracking, and integrations with third-party apps like Uber for business, Lyft, Amazon Business, and more. It also stores all digital receipts, making it easy to remain IRS compliant.
LLCs can also customize expense categories to align with their accounting and view detailed audit trails for every expense captured, processed, and approved.
Zoho Expense also integrates with fintechs like Taxback International and Way2Vat to help LLCs entirely automate their VAT reclaim.
Most importantly, Zoho Expense integrates with almost every leading accounting or ERP software. LLCs can also add their accountants for no additional cost so they can directly and concisely account for all expenses and close books on time, every time.
