What are Deductible Business Expenses?
Todd Phillips
Mar 24, 2025
8 min read
Social media is full of influencers claiming their G-Wagon is “100% deductible,” their Botox is a business write-off, and their latest handbag is “marketing.” The truth? Most of those claims won’t survive an IRS audit. There are legitimate expenses, and owning your own business is highly favored in the tax code. Let's dig in.
This article breaks down:
20 common and legitimate business deductions
5 legal workarounds that save real money
10 viral tax myths that can get you in trouble
I help my clients create and implement real tax plans that keep them from overpaying. These are just a few of the items we plan for.
20 Smart and Common Business Deductions (With Real Depth)
1. Home Office (Even If It’s Just a dedicated corner of your house)
If you use a space exclusively and regularly for business, you can deduct a percentage of:
Mortgage interest or rent (not mortgage principal)
Utilities (electricity, gas, water, trash)
Wi-Fi and Internet
HOA fees
Lawncare and maintenance
Security systems and homeowners insurance
Depreciation (for homeowners — be mindful of §1250 recapture rules)
Imperative tip: If you’re an S corp or C corp owner, you MUST use an accountable plan to reimburse yourself instead of deducting directly on your personal return.
2. Vehicle Expenses (make a choice)
If used for business purposes, you can deduct either:
Standard mileage rate (67¢ per mile in 2024)
Actual expenses, including:
Gas
Oil changes
Repairs and maintenance (tires, brakes, etc.)
Insurance
Registration and license fees
Lease payments or depreciation
Car washes (business-related)
Bonus tip: Use a mileage tracking app to prove business use. You can switch from mileage to actual expenses in later years if it benefits you.
3. Software and Subscriptions
You can deduct digital tools you use to run your business, including:
QuickBooks, Xero, or bookkeeping tools
CRM software (e.g., HubSpot, Salesforce)
Content creation tools (Canva, Adobe, Grammarly)
Scheduling apps (Calendly, Acuity)
Cloud storage (Google Drive, Dropbox)
4. Professional Services
Fees paid to:
Attorneys
CPAs and enrolled agents
Business consultants
Fractional CFOs or marketing strategists
Pro tip: Strategy is deductible. So is implementation. Therefore, fees paid to Todd Phillips for tax saving strategy implementation are deductible. Book an appointment
5. Contract Labor (1099s and Freelancers)
Any independent contractor you pay to do business-related tasks:
Graphic designers
Developers
Virtual assistants
Ghostwriters
Must issue a 1099-NEC if you pay $600+ annually.
6. Business Meals (50%)
Deductible if:
Meal has a legitimate business purpose
You’re meeting with a client, vendor, employee, or advisor
It's not lavish or extravagant
Keep records of who, where, and what was discussed.
Bonus: See my guide to Meals and Entertainment for 2025
7. Travel Costs (Fully or partially deductible when planned correctly)
Includes:
Flights and baggage fees
Hotels and lodging
Uber/Lyft or rental car
100% of transportation
50% of meals while traveling (this can get tricky when there are non-business activities)
Laundry, tips, and baggage handling
Tip: You can deduct a business trip to a vacation destination if over 50% of days are business-related (75% for international)
8. Advertising and Marketing
Website design and hosting
Paid ads (Facebook, Google, LinkedIn)
Brand strategy consultants
SEO and content writing
Business cards and print materials
Podcast production
9. Office Supplies and Equipment
Includes:
Pens, printer ink, paper
Filing cabinets
Office chairs, desks, lighting
Computers and monitors
Cameras for content (if used in business)
Bonus: These qualify for Section 179 expensing, bonus depreciation, or deminimis expensing if you have an approved deminimis plan. Book an appointment to get a free deminimis plan.
10. Business Insurance
Types that are deductible:
General liability
Professional liability (E&O)
Workers comp
Cybersecurity insurance
Commercial auto coverage
Umbrella policies (if tied to business risk)
11. Utilities (If Used in Business)
Internet (business-use portion)
Cell phone (prorated if also personal)
Business VOIP or landline
12. Employee Benefits
You can deduct:
Health insurance premiums
HSA contributions
Dental/vision plans
Retirement plan matches (401(k), SEP-IRA)
Dependent care FSA contributions
Planning note: Check out my guide to fringe benefits
13. Education and Training
Online courses that enhance skills in your current trade
Industry-specific conferences
Professional licenses or renewals
Books and subscriptions tied to your business
Note: Education that qualifies you for a new trade is not deductible.
14. Banking and Merchant Fees
Monthly bank service charges
Credit card processing (Stripe, Square, etc.)
Wire transfer fees
Other fees (if reasonable and not from personal negligence)
15. Interest on Business Debt
Deduct interest on:
Business credit cards
Equipment loans
Working capital lines of credit
Real estate mortgages (if investment property or used in trade or business)
Note: Personal credit card interest is never deductible.
16. Depreciation of Assets
For larger purchases:
Buildings
Equipment
Furniture
Computers
Ways to Deduct:
MACRS depreciation
Section 179 (immediate expensing, up to $1.22M in 2024)
Bonus depreciation (40% in 2025, per TCJA phase-out)
Deminimis expensing
Pro tip: check out my guide to when to use section 179 vs bonus depreciation.
17. Startup Costs
You can deduct:
Up to $5,000 in your first year
Legal and accounting fees
Research and market analysis
Entity formation costs
Anything over $5,000 is amortized over 15 years.
Pro-tip: Itemize your legal and start-up expenses, some things may not be start-up costs and may fall under regular legal, accounting, and consulting costs.
18. Repairs and Maintenance
For business property (including real estate):
Plumbing repairs
Equipment servicing
Patch jobs and repainting
Routine HVAC maintenance
Major upgrades or improvements? Depreciate those instead.
Pro-tip: If you have done a cost segregation study on the property that is affected by repairs or replacements that need to be capitalized, you may be able to write off the old property.
19. Dues, Licenses, and Subscriptions
Chamber of commerce
Trade associations
Industry publications
Required licenses or permits
Just make sure they relate directly to your business.
Important: The Country Club dues are not deductible. Business meals at the club can be 50%. It’s a good place to have a business lunch.
20. Business Gifts (Capped at $25 per Person Per Year)
Yes, it’s a real rule:
You may deduct no more than $25 per recipient per year.Promotional items with your logo (pens, hats) don’t count toward the cap.
Pro tip: See my guide to deducting sports tickets
5 Workaround Tips That Actually Work
Here are five tax-smart strategies the IRS does allow—if you structure them right:
1. Use Accountable Plans for S Corps and C Corps
Rather than running mixed-use expenses through the company, reimburse yourself tax-free using an accountable plan. It works for:
Home office deductions
Cell phone plans
Business use of personal vehicles
✅ IRS-approved, audit-resistant
Click here to set an appointment and get a free accountable plan.
2. Deduct Your Vehicle the Smart Way
Forget the TikTok hype about $150K write-offs. Instead:
Use actual expenses + depreciation if vehicle is 80%+ business use
Or take IRS mileage rate ($0.70/mile in 2025) for simpler recordkeeping
For SUVs > 6,000 lbs, bonus depreciation still applies (40% in 2025 under §168(k))
3. Create a Family Management Company
Want to pay your kids legally and deduct the expense?
Form a sole proprietorship or family LLC
Hire your children for legitimate work (content creation, filing, etc.)
Pay them under the standard deduction ($15,000 in 2025) with no income tax owed (and if under 18, no social security or medicare taxes)
Document their hours (don’t skip this step)
Set an appointment here to get employment documents for your kids and advice on how to make sure you qualify for the deduction.
4. Deduct Education Creatively
Education must relate to your existing business—not new careers. But you can deduct:
Mastermind groups
Coaching programs
Conferences in vacation spots (if business agenda is documented)
Tip: Keep travel and learning days at 75%+ of trip.
Education assistance programs – these are for employees, but can be up to $5,250. Owners can only do it in a C-corporation.
5. Use Cost Segregation for Real Estate Owners
If you own commercial or rental property:
Do a cost segregation study to accelerate depreciation
Combine with bonus depreciation to generate six or seven-figure deductions
This works even for buildings purchased years ago.
10 “Deductions” That Social Media Gets Wrong
These might go viral on Instagram, but they’ll die in Tax Court, and you will be left holding the bag plus penalties and interest (and maybe worse).
1. Luxury Cars (G-Wagons, Escalades)
Yes, SUVs over 6,000 lbs qualify for bonus depreciation, but only to the extent of business use. Section 179 has limitations for SUVs that aren’t trucks (with a truck bed). Too much personal use kills the write-off. You need a mileage log, not just a social media post. Selling the vehicle later will also require you to recognize tax on the deductions you took.
2. Designer Handbags and Clothing
Unless it’s a required uniform with branding, it’s not deductible. Chanel doesn’t count—even if you “wear it to business meetings.”
3. Makeup, Haircuts, and Personal Grooming
IRS says personal grooming is inherently personal (Reg. §1.262-1(b)(5)). Even if you're on camera daily, these are not deductible.
4. Plastic Surgery and Cosmetic Procedures
Medical deductions? Maybe – and that’s a maybe. Business expense? Almost never. Get a tax opinion before spending the money.
5. “Business Dinners” with Friends
A meal with your spouse or buddy—no matter how much you talk business—isn't deductible unless they’re your customer, employee, or partner. Document the business relationship and purpose.
Before we go on, let’s pause and look at why people get these things wrong: case law has drastically narrowed what is deductible when it can be considered personal.
“Ordinary and Necessary”: Not as simple as it seems:
Under IRC §162(a), a business expense must be both:
· Ordinary: Common and accepted in your line of work
· Necessary: Helpful and appropriate for the business (not necessarily essential)
But this rule has limits. Even if an expense is helpful to your business, it can be disallowed if it’s considered inherently personal.
In Hynes v. Commissioner, 74 T.C. 1266 (1980), the taxpayer—a news anchor—tried to deduct the cost of clothing and grooming products, arguing they were required for his job and enhanced his professional image.
The Tax Court disagreed. It held that clothing suitable for general wear and personal grooming are “inherently personal expenses,” even if they're helpful or even required for work.
The court made it clear that “The fact that the petitioner would not have purchased the items except for his employment is not sufficient.”
Even though the case is 45 years old, Hynes is cited when influencers, business owners, or public-facing professionals try to deduct:
· Clothing
· Hair and makeup
· Gym memberships
· Cosmetic procedures
Unless the expense is exclusively tied to business use (like branded uniforms or theatrical costumes), the deduction won't fly.
Bottom Line: An expense can be helpful and even required—but if it overlaps too much with your personal life, it’s not deductible. This is one of the most common pitfalls in social media tax advice.
6. Home Remodels (Even with a Home Office)
You can deduct a portion of home expenses (via home office deduction), but you cannot deduct full remodels, pools, landscaping, or new kitchens—even if you host meetings at home.
7. Weddings and Parties as “Marketing Events”
You may think your brand is a lifestyle—but the IRS thinks your wedding is personal. Even if clients attend, unless there’s a defined business agenda, it’s not deductible.
8. Gifts Over $25 per Person
The IRS strictly limits client gifts to $25/year per recipient. No exceptions, even if you put your logo on it.
9. Daily Coffee and Meals
Meals must be directly tied to a business purpose—not just “I work better when caffeinated.” No deduction for your daily Starbucks. Coffee meetings where you talk business with a customer ro employee, then maybe.
10. Pets as Office Security
Unless the dog is a trained, certified guard dog (and not a family pet), it’s not deductible. Sorry, Fido.
Final Thoughts
Social media makes it look easy. But the IRS rulebook is complex. One section may look like something is deductible, but you have to look at the whole body of law: code, regulations, and case law.
If you're serious about building wealth and reducing taxes, you need more than trending tactics—you need a real tax strategy.
And if someone online says, “Just run it through the business”—ask yourself this:
Would this hold up in an audit? If the answer is “probably not,” don’t bet your business on it.
And last, but certainly not least, none of this matters without good record keeping.
Want help building a bulletproof tax plan for your business or investments?
Let’s talk by clicking here