Small Business Tax Deductions for 2026: A Complete Guide

Small Business Tax Deductions for 2026: A Complete Guide

As a small business owner, understanding the ever-changing tax code is key to maximizing your profits and keeping more money in your business. The IRS updates deduction rules yearly, and staying current with these changes can mean the difference between overpaying thousands in taxes or strategically minimizing your tax liability. This comprehensive guide—tailored for small businesses, consultants, freelancers, and especially Washington-based entrepreneurs—walks you through every major deduction, little-known breaks, and critical IRS changes you need to know for 2026.

 

 

Table of Contents

• Key Takeaways
• What is a Tax Deduction?
• New for 2026: Critical IRS Tax Changes
• Top Small Business Tax Deductions in 2026
• 1. Vehicle and Mileage Deductions
• 2. Home Office Deduction
• 3. Section 179 and Depreciation
• 4. Business Meals and Entertainment
• 5. Office Supplies and Equipment
• 6. Insurance Premiums
• 7. Retirement Contributions
• 8. Continuing Education
• 9. Professional Services & Memberships
• 10. Startup Costs
• Qualified Business Income (QBI) Deduction in 2026
• Special Deductions for Washington State Businesses
• Common Mistakes to Avoid
• Uncle Kam in Action: Small Business Owner Saves $23,500 with Strategic Deductions
• 2026 Small Business Tax Deduction Checklist
• Frequently Asked Questions
• Resources
• Next Steps
• Conclusion

Key Takeaways

• Section 179 expensing increased to $1,210,000 for 2026, allowing you to immediately deduct the full cost of qualifying equipment and software purchases instead of depreciating them over years
• Bonus depreciation drops to 60% in 2026 (from 80% in 2025), making Section 179 even more valuable for maximizing first-year deductions
• Standard mileage rate rises to 68.5¢ per mile, the highest rate in recent years—keep detailed mileage logs to capture every deductible business mile
• The QBI deduction allows pass-through entities (LLCs, S-Corps, sole proprietors) to deduct up to 20% of qualified business income, potentially saving thousands
• Self-employed health insurance premiums are 100% deductible, not subject to the 7.5% AGI threshold that applies to personal medical expenses
• Retirement contributions through SEP-IRAs and Solo 401(k)s can reach $69,000 in 2026, offering substantial deductions while building your retirement nest egg
• Documentation is everything—the IRS requires contemporaneous records, receipts, and business purpose explanations for every deduction you claim

What is a Tax Deduction?

A tax deduction is an expense that the IRS allows you to subtract from your gross business income, reducing your taxable income and lowering the amount of taxes you owe. Think of deductions as the IRS recognizing that running a business costs money—and they don’t tax you on money you’ve already spent on legitimate business expenses.

Here’s how it works: If your business generates $150,000 in revenue and you have $50,000 in deductible expenses, you only pay taxes on $100,000 of income. If you’re in the 24% tax bracket, those deductions save you $12,000 in federal taxes alone ($50,000 × 24%).

The key to maximizing deductions is understanding what qualifies as “ordinary and necessary” business expenses—a term the IRS uses to describe expenses that are common in your industry and helpful for your business. From office supplies and software subscriptions to professional development and vehicle expenses, documenting all eligible expenses can save your business thousands each year and keep more cash available for growth, hiring, and investment.

According to the IRS Small Business Tax Center, the most commonly overlooked deductions include home office expenses, vehicle mileage, professional development, and retirement plan contributions—areas where many small business owners leave money on the table simply by not tracking these expenses throughout the year.

New for 2026: Critical IRS Tax Changes Small Businesses Must Know

The IRS adjusts tax provisions annually for inflation, and 2026 brings several important changes that affect how much you can deduct:

• Section 179 Expensing Limit Increases: The maximum deduction rises to $1,210,000 (up from $1,160,000 in 2025), with the phase-out threshold increasing to $3,050,000 in total equipment purchases. This means you can immediately expense up to $1.21 million in qualifying equipment, vehicles, and software purchased and placed in service during 2026.
• Bonus Depreciation Continues Its Scheduled Decrease: Only 60% bonus depreciation is allowed in 2026 (down from 80% in 2025, 100% in 2022). This first-year depreciation benefit phases out completely by 2027 under current law, making 2026 one of the last years to claim it.
• Standard Mileage Rate Increases: The IRS set the business mileage rate at 68.5¢ per mile for 2026, up from 67¢ in 2025. This reflects rising vehicle costs, fuel prices, and maintenance expenses. If you drive 10,000 business miles, that’s $6,850 in deductions.
• Retirement Contribution Limits Rise: SEP-IRA contribution limits increase to $69,000 for 2026 (or 25% of compensation, whichever is less). Solo 401(k) limits also rise, with employee deferrals up to $23,500 (or $31,000 if age 50+) plus employer contributions.
• Standard Deduction Increases: While not a business deduction, the standard deduction rises to $15,000 for single filers and $30,000 for married filing jointly in 2026, which affects your overall tax planning strategy.
• QBI Deduction Phase-Out Thresholds Adjusted: The income thresholds where the Qualified Business Income deduction begins to phase out for certain service businesses increase to approximately $191,950 for single filers and $383,900 for joint filers (exact figures pending final IRS guidance).
• Meal Deduction Remains at 50%: After the temporary 100% deduction for restaurant meals expired in 2022, business meals are back to 50% deductible in 2026. Entertainment expenses remain non-deductible.

See all IRS 2026 inflation adjustments

Top Small Business Tax Deductions in 2026

Deduction	Limit 2026	Key Notes
Business Meals	50%	Must be business-related, keep receipts with business purpose noted
Home Office	Up to $1,500 (simplified)	Exclusive and regular business use required
Office Supplies	No limit	Must track receipts/documentation for all purchases
Vehicle Expenses	68.5¢ per mile	Must keep contemporaneous mileage log
Health Insurance (Self-Employed)	Premium paid	100% deductible for self-employed individuals
Section 179	Up to $1,210,000	Equipment/software purchases, phase-out starts at $3,050,000
Startup Costs	Up to $5,000	Organizational + investigative costs in first year
Continuing Education	No limit	Must maintain or improve skills for current business
Retirement Contributions	Up to $69,000 (SEP)	Varies by plan type and age
QBI Deduction	20% of QBI	Pass-through entities, subject to income limits

1. Vehicle and Mileage Deductions

Vehicle expenses represent one of the largest potential deductions for small business owners, yet many fail to claim the full amount because they don’t maintain adequate records. The IRS offers two methods for deducting vehicle expenses:

Standard Mileage Rate Method: For 2026, the standard rate is 68.5¢ per mile for business use of your vehicle. This rate covers gas, oil, repairs, insurance, depreciation, and license fees—essentially all costs of operating your vehicle. To use this method, you must:

• Keep a contemporaneous mileage log showing date, destination, business purpose, and miles driven
• Track your odometer reading at the beginning and end of each year
• Note that you cannot switch between methods once you’ve used actual expenses

Example: If you drive 15,000 business miles in 2026, your deduction equals 15,000 × $0.685 = $10,275. That’s over ten thousand dollars in deductions just for driving you’re already doing for your business.

Actual Expense Method: Alternatively, you can deduct the actual business percentage of all vehicle expenses: gas, oil changes, repairs, insurance, registration fees, lease payments, and depreciation. If you use your vehicle 70% for business and 30% for personal use, you deduct 70% of all these costs.

This method typically works better if you drive an expensive vehicle, have high maintenance costs, or use the vehicle almost exclusively for business. You’ll need to:

• Keep all receipts for gas, repairs, insurance, and other vehicle expenses
• Calculate the business-use percentage based on actual mileage
• Track depreciation according to IRS tables or use Section 179 for immediate expensing

Pro Tip: Use mileage-tracking apps like MileIQ, Everlance, or QuickBooks Self-Employed to automatically log your trips via GPS. These apps categorize trips as business or personal, generate IRS-compliant mileage logs, and can save you hours of manual record-keeping while ensuring you don’t miss a single deductible mile.

Remember: Commuting from home to your regular place of business is not deductible. However, travel from your home office to client sites, suppliers, or temporary work locations is deductible business mileage.

2. Home Office Deduction

The home office deduction remains one of the most valuable—and most scrutinized—tax breaks available to small business owners. If you use part of your home exclusively and regularly for business, you can claim a portion of your housing costs as a business expense.

Simplified Method: The IRS offers a simplified calculation of $5 per square foot for up to 300 square feet of home office space, providing a maximum deduction of $1,500. This method requires no allocation of actual expenses or depreciation calculations—just measure your office space and multiply by $5.

Regular Method: Calculate the percentage of your home used for business (divide office square footage by total home square footage), then apply that percentage to eligible expenses:

• Mortgage interest or rent
• Property taxes
• Utilities (electricity, gas, water, internet)
• Homeowners or renters insurance
• Repairs and maintenance
• Depreciation on the business portion of your home

Example: Your home is 2,000 square feet and your dedicated office is 200 square feet (10% of the home). Your annual eligible expenses total $24,000 (mortgage interest, property taxes, utilities, insurance, repairs). Your home office deduction is 10% × $24,000 = $2,400, significantly more than the simplified method’s $1,000 (200 sq ft × $5).

The regular method typically provides a larger deduction for homeowners with mortgages, while the simplified method works well for renters or those with smaller office spaces.

Critical Requirement: The IRS requires exclusive and regular use. Your home office must be used only for business—not a spare bedroom that doubles as a guest room or a dining room table where you occasionally work. The space must be your principal place of business or where you regularly meet with clients.

Exception for Storage and Daycare: If you operate a daycare facility or use your home for inventory storage (for example, products you sell online), you don’t need exclusive use—but you must still use the space regularly for business.

3. Section 179 and Depreciation

Section 179 of the tax code allows small businesses to immediately deduct the full purchase price of qualifying equipment and software instead of depreciating the cost over several years. This is one of the most powerful tax-saving tools available, especially for businesses making significant equipment investments.

Deduction Type	2026 Limit	Notes
Section 179 Expense	$1,210,000	Equipment and software placed in service in 2026
Phase-Out Threshold	$3,050,000	Deduction begins reducing dollar-for-dollar above this amount
Bonus Depreciation	60%	First-year depreciation for new and used equipment

Qualifying Property Includes:

• Machinery and equipment
• Business vehicles over 6,000 lbs. GVWR
• Computers, servers, and networking equipment
• Office furniture and fixtures
• Software (off-the-shelf or custom)
• Agricultural equipment
• Certain improvements to commercial property

Example: Your consulting business purchases $80,000 in equipment during 2026: new computers ($15,000), office furniture ($10,000), a company vehicle ($45,000), and specialized software ($10,000). Under Section 179, you can deduct the entire $80,000 in 2026 rather than depreciating it over 5-7 years. If you’re in the 24% tax bracket, that’s an immediate tax savings of $19,200.

Strategic Timing: You don’t have to claim the full Section 179 deduction if it would create a loss or you want to spread the tax benefit over multiple years. You can elect to expense any amount up to the limit and depreciate the remainder. Additionally, equipment must be purchased and placed in service by December 31, 2026 to qualify—simply ordering equipment isn’t enough.

Bonus Depreciation in 2026: After claiming Section 179, you can apply 60% bonus depreciation to remaining equipment costs (or to equipment exceeding the Section 179 limit). Bonus depreciation doesn’t have a dollar limit but only applies to new and used property with a recovery period of 20 years or less.

Example: If you purchase $1,500,000 in equipment, you could expense $1,210,000 under Section 179 and claim 60% bonus depreciation on the remaining $290,000, deducting an additional $174,000 in the first year—for a total first-year deduction of $1,384,000 on $1,500,000 in equipment.

Learn more at the IRS Form 4562 page and Section179.org.

4. Business Meals and Entertainment

Business meal deductions have changed significantly in recent years, and it’s crucial to understand current rules to avoid disallowed deductions during an audit.

50% Deductible: Meals with clients, prospects, or employees where business is discussed are 50% deductible in 2026. This includes:

• Meals during business meetings or negotiations
• Meals with clients where you discuss current or potential projects
• Meals at business conferences and trade shows
• Team meals during business travel
• Office meals provided for the convenience of the employer (like working lunches)

100% Deductible: Certain meal expenses remain fully deductible:

• Meals provided to employees as a taxable fringe benefit (reported on their W-2)
• Recreational expenses for employees (holiday parties, summer picnics) up to reasonable amounts
• Meals included in charitable events

NOT Deductible: Entertainment expenses—including tickets to sporting events, concerts, theater, golf outings, or entertainment facilities—are not deductible even if business is discussed. This changed with the Tax Cuts and Jobs Act of 2017 and remains in effect for 2026.

Documentation Requirements: To claim meal deductions, you must maintain records showing:

• Amount spent (keep the itemized receipt, not just the credit card slip)
• Date and location of the meal
• Business relationship of the person(s) you dined with
• Business purpose—what you discussed or the business reason for the meal

Pro Tip: Take a photo of receipts immediately using your phone and note the business purpose in your accounting software or expense app the same day. Write directly on the receipt who attended and what you discussed. The IRS requires “contemporaneous” records—reconstructing meals from credit card statements months later won’t satisfy audit requirements.

Example: You take a prospective client to lunch to discuss a potential $50,000 consulting project. The meal costs $120. You can deduct 50% × $120 = $60. If you’re in the 24% bracket, that saves you $14.40 in taxes. Over 50 client meals per year, that’s $720 in tax savings.

5. Office Supplies and Equipment

Every ordinary and necessary supply you purchase for your business is fully deductible in the year purchased. This category is broader than many business owners realize and includes:

Traditional Office Supplies:

• Paper, pens, staplers, paper clips, folders, binders
• Printer ink and toner cartridges
• Postage and shipping supplies
• Business cards and letterhead
• Whiteboard markers, sticky notes, desk organizers

Technology and Software:

• Computer peripherals (keyboards, mice, monitors, webcams, headsets)
• Software subscriptions (Microsoft 365, Adobe Creative Cloud, QuickBooks, CRM systems)
• Cloud storage services (Dropbox, Google Workspace, OneDrive)
• Domain names and web hosting
• Project management tools (Asana, Monday.com, Trello)

Small Equipment (Under $2,500): The IRS has a de minimis safe harbor election that allows you to immediately expense items costing $2,500 or less per item (or per invoice). This includes:

• Desk chairs, filing cabinets, bookcases
• Monitors and display screens
• Small printers and scanners
• Cell phones and tablets

Example: Your business spends $4,500 annually on supplies: $1,200 for software subscriptions (QuickBooks, Zoom, Adobe), $800 on office supplies, $1,500 on a new ergonomic office chair and standing desk, and $1,000 on shipping supplies and postage. The entire $4,500 is deductible. At a 24% tax rate, that’s $1,080 in tax savings.

Record-Keeping: Keep receipts for all purchases. For subscription services paid monthly or annually, your credit card statement showing the charge to the vendor (e.g., “Adobe Creative Cloud”) is usually sufficient documentation. For larger equipment purchases, keep the invoice showing the item description and purchase date.

Many business owners use expense management tools like QuickBooks, Expensify, or Receipt Bank to photograph and categorize receipts automatically, making year-end tax preparation much simpler.

6. Insurance Premiums

Business insurance premiums are fully deductible as an ordinary business expense, and self-employed individuals get special treatment for health insurance that salaried employees don’t receive.

Business Insurance (100% Deductible):

• General liability insurance
• Professional liability (errors and omissions insurance)
• Commercial property insurance
• Business interruption insurance
• Commercial auto insurance (for business-use percentage)
• Workers’ compensation insurance
• Cyber liability insurance
• Directors and officers (D&O) liability insurance

Self-Employed Health Insurance (100% Deductible): If you’re self-employed, you can deduct 100% of health, dental, and qualified long-term care insurance premiums for yourself, your spouse, and your dependents. This is an “above-the-line” deduction taken on Form 1040, Schedule 1—you don’t have to itemize to claim it, and it’s not subject to the 7.5% adjusted gross income threshold that applies to personal medical expenses.

Example: You pay $18,000 annually for family health insurance coverage. As a self-employed business owner, you deduct the full $18,000. At a 24% federal tax rate plus 15.3% self-employment tax (on 92.35% of the amount), this deduction saves you approximately $6,800 in taxes.

Qualification Requirements:

• Your business must show a net profit (you can’t deduct more in health insurance than your business earns)
• You cannot be eligible for health insurance through your spouse’s employer
• The insurance plan must be established under your business (sole proprietor can be in their own name; partnerships and S-corps have specific rules)

Pro Tip: If you have a spouse on payroll, you may be able to establish a health reimbursement arrangement (HRA) that makes health insurance premiums and out-of-pocket medical expenses fully deductible to the business while not taxable to you—consult with a tax professional about this strategy.

7. Retirement Contributions

Contributing to a retirement plan is one of the most powerful tax strategies available to small business owners, offering immediate tax deductions while building long-term wealth.

SEP-IRA (Simplified Employee Pension):

• Contribution limit: Up to 25% of compensation or $69,000 for 2026, whichever is less
• Easy to set up and administer—minimal paperwork
• Contributions are tax-deductible to the business
• Must contribute the same percentage for all eligible employees
• Contributions can be made up until your tax filing deadline (including extensions)

Example: Your sole proprietorship earns $200,000 in net self-employment income. After the self-employment tax deduction, your compensation for SEP-IRA purposes is approximately $184,000. You can contribute 20% (the effective rate for self-employed individuals) = $36,800. At a 24% tax rate, that’s $8,832 in immediate tax savings plus $5,640 saved on self-employment tax.

Solo 401(k):

• Employee deferral: Up to $23,500 for 2026 ($31,000 if age 50 or older)
• Employer profit-sharing contribution: Up to 25% of compensation
• Combined limit: $69,000 ($76,500 if age 50+)
• Allows both salary deferrals and profit-sharing contributions
• Can make Roth contributions (taxed now, tax-free withdrawals later)

Example: You’re 52 years old and earn $150,000 from your S-corporation (taking $80,000 as W-2 wages). You can defer $31,000 as an employee contribution (including the $7,500 catch-up) and contribute 25% × $80,000 = $20,000 as an employer contribution, for a total of $51,000 in retirement contributions and tax deductions.

SIMPLE IRA:

• Employee deferral: Up to $16,500 for 2026 ($20,000 if age 50+)
• Employer contribution: Either 2% non-elective for all eligible employees or 3% matching contribution
• Less paperwork than 401(k) plans
• Good option for businesses with employees

Strategic Timing: Unlike 401(k) plans which must be established by December 31, SEP-IRAs can be set up and funded up until your tax filing deadline (including extensions). This means you can wait until April 15, 2027 (or October 15, 2027 with an extension) to establish and fund a 2026 SEP-IRA, giving you maximum flexibility to see your year-end income and optimize your tax strategy.

Pro Tip: If your business is highly profitable one year, maximize retirement contributions to lower your tax bracket. If you have a lower-income year, reduce contributions and take more cash. This flexibility is one of the key advantages of being self-employed.

8. Continuing Education

The IRS allows you to deduct education expenses that maintain or improve skills required in your current business. This is an often-underutilized deduction that can cover a wide range of learning and professional development.

Deductible Education Expenses Include:

• Professional courses and certifications (PMP, CPA review courses, industry certifications)
• Workshops, seminars, and conferences related to your business
• Webinars and online courses (Udemy, Coursera, LinkedIn Learning, MasterClass)
• Professional and trade publications, journals, and subscriptions
• Books, ebooks, and research materials related to your industry
• Business coaching and consulting for skill development
• Software training and technical skill development

Travel to Educational Events: When you attend a conference, seminar, or workshop away from home, you can deduct:

• Registration and tuition fees
• Airfare, train, or mileage
• Hotel and lodging
• 50% of meals during the event
• Ground transportation (taxis, Uber, rental cars)

Example: You’re a marketing consultant who attends the annual Digital Marketing Summit in Las Vegas. The conference costs $1,200, your flight is $400, hotel for three nights is $600, meals total $300 (50% deductible = $150), and ground transportation is $100. Your total deduction: $2,450. At a 24% tax rate, that’s $588 in tax savings while gaining valuable industry knowledge and connections.

Important Limitation: Education must maintain or improve skills for your current business—not qualify you for a new trade or business. For example, if you’re a graphic designer taking advanced Photoshop courses, that’s deductible. But if you’re a graphic designer taking law school courses to become an attorney, that’s not deductible because it qualifies you for a new profession.

Professional Subscriptions: Don’t overlook industry publications and research tools. Subscriptions to trade magazines, professional journals, market research services, and databases like Bloomberg Terminal or industry-specific analytics platforms are all deductible.

Example: You subscribe to Harvard Business Review ($120/year), The Wall Street Journal ($300/year), and two industry-specific publications ($400/year combined). You also maintain a LinkedIn Premium subscription ($480/year) for business networking and LinkedIn Learning courses. Total deduction: $1,300.

9. Professional Services & Memberships

Fees paid to professionals and membership dues for business organizations are fully deductible business expenses.

Professional Service Fees (100% Deductible):

• Tax preparation and accounting fees
• Bookkeeping services
• Legal fees for business matters (contracts, entity formation, collections)
• Business consulting and advisory fees
• Marketing and PR consultants
• IT support and managed service providers
• Business coaching and mentoring
• Website design and development

Example: You pay your CPA $2,500 for tax preparation, $1,200 for quarterly bookkeeping, and $1,800 to an attorney for contract review and client collection matters. Total deduction: $5,500. At a 24% tax rate, that effectively reduces your cost by $1,320.

Professional Memberships and Dues:

• Chamber of Commerce membership
• Industry trade associations
• Professional licensing fees (real estate license, professional engineering license, etc.)
• Business networking groups (BNI, local business roundtables)
• Coworking space memberships

NOT Deductible: Social, athletic, or sporting club memberships—even if you conduct some business there. Country club dues, athletic club memberships, and airline club memberships are not deductible. However, if you host a specific business event at such a club and pay separately for that event, the event cost may be deductible.

Example: You’re a real estate agent who pays $500 for chamber of commerce dues, $350 for membership in the National Association of Realtors, $150 for a local real estate investors association, and $600 annually for a coworking space membership where you meet clients. Total deduction: $1,600.

Pro Tip: If you pay professional fees that benefit both business and personal matters (for example, an attorney who handles both your business contracts and personal estate planning), you must allocate the fee between business and personal. Only the business portion is deductible. Keep invoices that clearly break down services provided.

10. Startup Costs

The IRS recognizes that starting a business requires upfront investment before you generate revenue. Special rules allow you to deduct startup and organizational costs that would otherwise have to be capitalized and amortized over 15 years.

Startup Cost Deduction: You can deduct up to $5,000 in business startup costs in your first year of operation. Eligible startup costs include:

• Market research and analysis
• Advertising for the business opening
• Travel to secure suppliers, distributors, or customers
• Employee training before opening
• Professional fees for business planning
• Consultant fees for feasibility studies

Organizational Cost Deduction: You can deduct up to $5,000 in organizational costs for forming a corporation, LLC, or partnership. These include:

• Legal fees for drafting articles of incorporation or organization
• State filing fees
• Accounting fees related to entity formation
• Costs of organizational meetings

Important Limitation: The $5,000 deduction for each category (startup and organizational) is reduced dollar-for-dollar once your total costs exceed $50,000. If your startup costs exceed $55,000, you cannot take the first-year deduction and must amortize all costs over 180 months (15 years).

Example: You launch a consulting business in January 2026 after spending $8,500 on startup activities during 2025: $2,000 on market research, $1,500 on website development, $1,200 on initial advertising, $2,800 on training and certification programs, and $1,000 on legal fees to form your LLC. You can deduct:

• $5,000 in startup costs in 2026
• The remaining $3,500 is amortized over 180 months = $23.33 per month
• For a full year of 2026: $5,000 + ($23.33 × 12 months) = $5,280 total first-year deduction

When Do Startup Costs Begin? Startup costs are expenses incurred to create an active trade or business or to investigate creating or acquiring one. Generally, costs incurred more than one year before you begin business operations may not qualify as startup costs.

Pro Tip: Keep meticulous records of all pre-opening expenses with dates, amounts, and business purposes clearly documented. Create a separate category in your accounting system for “startup costs” to easily track them for tax purposes.

Qualified Business Income (QBI) Deduction in 2026

The Qualified Business Income deduction—also called the Section 199A deduction or pass-through deduction—allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income. This can result in substantial tax savings and effectively reduces the top federal tax rate on business income.

Who Qualifies:

• Sole proprietors
• Single-member LLC owners (taxed as sole proprietors)
• Partnerships and multi-member LLCs
• S corporation shareholders

C corporations do not qualify—they pay corporate tax rates instead of pass-through taxation.

Basic Calculation: For taxpayers with taxable income below the threshold amounts (approximately $191,950 for single filers and $383,900 for married filing jointly in 2026), the QBI deduction is straightforward: 20% of qualified business income.

Example: You’re a single filer with $150,000 in qualified business income from your LLC. Your QBI deduction is 20% × $150,000 = $30,000. If you’re in the 24% tax bracket, that deduction saves you $7,200 in federal taxes.

Income Phase-Out Rules: Once your taxable income exceeds the threshold, additional limitations apply:

• For Specified Service Trade or Business (SSTB)—including doctors, lawyers, accountants, consultants, financial advisors, and other service professionals—the QBI deduction phases out completely once income exceeds the threshold plus $100,000 ($50,000 for single filers).
• For non-SSTB businesses (retail, manufacturing, real estate, construction, etc.), the deduction is limited to the greater of: (a) 50% of W-2 wages paid by the business, or (b) 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property.

Specified Service Trades or Businesses (SSTB): The IRS defines SSTB broadly to include any trade or business involving the performance of services in fields such as:

• Health (doctors, dentists, nurses, therapists)
• Law
• Accounting
• Actuarial sciences
• Performing arts (actors, musicians)
• Consulting
• Athletics
• Financial services (advisors, brokers, planners)
• Brokerage services
• Investing and investment management
• Trading or dealing in securities

Engineering and architecture are specifically excluded from the SSTB definition—these professionals can claim the QBI deduction even at higher income levels.

Example—SSTB Phase-Out: You’re a single management consultant with $210,000 in taxable income (above the $191,950 threshold). Your QBI deduction begins phasing out. At $241,950 or higher, you receive no QBI deduction. Between $191,950 and $241,950, the deduction is partially available based on a phase-out calculation.

Strategies to Maximize QBI Deduction:

• Maximize retirement contributions: Contributions to SEP-IRAs, Solo 401(k)s, and other retirement plans reduce your taxable income, potentially keeping you below the phase-out threshold.
• Time income and deductions: If you’re near a threshold, defer income to next year or accelerate deductible expenses into the current year.
• Pay reasonable W-2 wages: For S-corps and businesses with employees, paying W-2 wages (including to yourself as an S-corp owner) increases the W-2 wage limitation, potentially increasing your QBI deduction.
• Aggregate businesses: If you own multiple businesses, you may be able to aggregate them for QBI purposes, which can help meet the W-2 wage and property limitations.

Real-World Impact: For a business owner with $300,000 in qualified business income who fully qualifies for the 20% QBI deduction, that’s a $60,000 deduction. At the 35% marginal tax rate, that saves $21,000 in federal taxes—a substantial reduction that can be reinvested in the business or personal financial goals.

The QBI deduction is complex, especially for higher-income taxpayers and service businesses. Consult with a qualified tax professional to ensure you’re calculating and maximizing this valuable deduction correctly. For detailed guidance, see IRS QBI Deduction FAQs.

Special Deductions for Washington State Businesses

While Washington state has no personal or corporate income tax, businesses operating in Washington face unique tax obligations that are deductible on your federal tax return. Understanding these Washington-specific deductions ensures you’re not leaving money on the table.

Business & Occupation (B&O) Tax: Washington’s B&O tax is levied on gross receipts—not net income—and varies by business classification. Unlike income taxes, you pay B&O tax even if your business operates at a loss. B&O tax rates for 2026 include:

• Retailing: 0.471%
• Wholesaling: 0.484%
• Manufacturing: 0.484%
• Service and Other Activities: 1.5% (later reduced to 1.75% after certain deductions)

All B&O taxes paid are fully deductible as a business expense on your federal tax return. For a service business with $500,000 in gross receipts, that’s approximately $7,500 in B&O tax—fully deductible.

City and Local Business Taxes: Many Washington cities impose additional business taxes:

• Seattle Business License Tax (progressive rates based on gross revenue, ranging from $120 minimum to significant amounts for larger businesses)
• Spokane Business License fees
• Tacoma Business & Occupation Tax
• Other municipal business license fees throughout the state

All of these local business taxes and license fees are deductible federal business expenses.

Washington State Licensing and Regulatory Fees:

• Professional licensing fees (contractors, real estate agents, healthcare providers)
• State regulatory fees and permits
• Department of Labor & Industries fees
• Washington State Department of Revenue registration fees

Workers’ Compensation (L&I): Washington requires most employers to carry workers’ compensation insurance through the state’s Labor & Industries program. These premiums are fully deductible as a business insurance expense.

Sales Tax on Business Purchases: Washington’s sales tax (ranging from 7% to over 10% depending on location) paid on business purchases is generally included in the cost of the item and deducted as part of that expense. For example, if you buy a $1,000 desk and pay $100 in sales tax, you deduct the full $1,100 as office furniture expense.

Example—Washington Business Tax Deductions: A Seattle-based consulting firm with $400,000 in annual revenue pays:

• B&O tax (service classification): $400,000 × 1.5% = $6,000
• Seattle Business License Tax: $1,200
• Professional association license fees: $500
• State business registration and regulatory fees: $300

Total Washington-specific tax deductions: $8,000. At a 24% federal tax rate, these Washington taxes reduce federal tax liability by $1,920.

Documentation: Keep all Washington Department of Revenue correspondence, quarterly B&O tax returns, city business license renewal notices, and payment receipts. These documents substantiate your deductions and are essential if you’re ever audited.

For more information, visit the Washington Department of Revenue website.

Common Mistakes to Avoid

Even experienced business owners make tax deduction mistakes that can trigger audits, result in disallowed deductions, or cause them to overpay taxes. Here are the most common pitfalls and how to avoid them:

1. Mixing Personal and Business Expenses

Using the same credit card or bank account for both personal and business expenses creates a documentation nightmare and raises red flags during audits. The IRS may disallow deductions if you can’t clearly demonstrate which expenses were for business versus personal use.

Solution: Maintain separate bank accounts and credit cards exclusively for business use. If you occasionally use a business card for personal expenses (or vice versa), clearly mark these transactions in your accounting system and adjust accordingly. Never run personal expenses through your business or claim personal costs as business deductions.

2. Missing Receipts and Incomplete Records

The IRS requires documentation for all deductions. Credit card statements alone aren’t sufficient—you need itemized receipts showing what you purchased, when, and from whom. Many business owners lose out on thousands in legitimate deductions simply because they can’t prove the expenses during an audit.

Solution: Implement a system to capture receipts immediately. Use apps like Expensify, Receipt Bank, or your accounting software’s mobile app to photograph receipts the moment you receive them. For mileage, use automatic tracking apps like MileIQ. For meals, note the business purpose directly on the receipt or in your app immediately after the meal.

3. Ignoring Depreciation Schedules and Asset Tracking

Many business owners claim Section 179 or depreciation deductions for assets but fail to maintain proper asset records, including purchase date, cost, placed-in-service date, depreciation method, and accumulated depreciation. This creates problems when you sell assets or when the IRS examines your returns.

Solution: Maintain a fixed asset register (a simple spreadsheet works) tracking each depreciable asset, its cost, purchase date, depreciation method, annual depreciation, and accumulated depreciation. Your tax software or accountant should provide depreciation schedules—keep these with your permanent tax records.

4. Forgetting State and Local Fees

Business license fees, professional licensing costs, local business taxes, and regulatory fees are easy to overlook because they’re often paid once annually or biennially. These add up to significant deductions over time.

Solution: Create a checklist of recurring annual or biennial fees and set calendar reminders to record them when paid. Review your prior year’s tax return to identify fees you claimed previously and ensure you’re capturing them again.

5. Not Tracking Home Office Expenses Throughout the Year

Many business owners wait until tax time to calculate their home office deduction, then scramble to find utility bills, mortgage statements, and insurance policies from throughout the year.

Solution: Set up a dedicated folder (physical or digital) for home office expense documentation. Each month, save copies of utility bills, mortgage/rent statements, insurance policies, and repair receipts. Calculate your office square footage once and document it with measurements or a floor plan.

6. Claiming 100% Business Use for Vehicles Used Personally

Claiming 100% business use for a vehicle you also drive personally is one of the fastest ways to trigger an audit. The IRS knows that most business owners use their vehicles for some personal driving.

Solution: Track actual mileage honestly. Use a mileage log or app to record every business trip with date, destination, purpose, and miles driven. If your vehicle is 70% business use, claim 70%—not 100%. The IRS respects honest, well-documented business percentages.

7. Deducting Excessive or Lavish Expenses

While business expenses must be “ordinary and necessary,” they must also be reasonable. Claiming a $500 business lunch for two people or a $10,000 “research trip” to a resort destination will likely trigger questions.

Solution: Ensure expenses are reasonable for your industry and clearly business-related. For travel, document the business purpose, meetings attended, clients visited, or business activities conducted. For meals, keep them proportionate to the business being discussed.

8. Not Accounting for Barter or Exchange Transactions

If you exchange services with another business owner (for example, you provide marketing services in exchange for legal advice), the fair market value of services received is taxable income—and the value of services you provided is a deductible expense.

Solution: Report barter income and claim corresponding deductions for the services you provided. Both parties should agree on the fair market value and maintain documentation of the exchange.

9. Misclassifying Employees as Independent Contractors

Treating workers as independent contractors (issuing 1099s) when they should be employees (receiving W-2s) can result in significant penalties, back taxes, and liability for employment taxes.

Solution: Understand IRS worker classification rules. Generally, if you control when, where, and how work is performed, the worker is likely an employee. When in doubt, consult with a tax professional or use IRS Form SS-8 to request a determination.

10. Not Consulting a Tax Professional for Complex Situations

Tax laws are complex and change frequently. Trying to navigate complicated situations—like multi-state operations, significant equipment purchases, real estate transactions, or entity structure changes—without professional guidance often results in missed opportunities or costly mistakes.

Solution: Build a relationship with a qualified CPA or tax advisor who understands small business taxation. The cost of professional tax advice is fully deductible and almost always pays for itself in tax savings, avoided penalties, and peace of mind.

Uncle Kam in Action: Small Business Owner Saves $23,500 with Strategic Deductions

Let’s look at a real-world example of how strategic use of business deductions can generate substantial tax savings.

The Client: Sarah Martinez, a 48-year-old management consultant operating as a single-member LLC (taxed as a sole proprietorship) in Spokane, Washington. Sarah provides strategic planning and organizational development consulting to mid-sized companies throughout the Pacific Northwest.

The Situation: In 2026, Sarah’s consulting business generated $285,000 in revenue. Before implementing a comprehensive tax strategy, she was on track to pay approximately $68,000 in federal income tax and self-employment tax. Sarah engaged Uncle Kam to identify every available deduction and implement tax-saving strategies.

Deductions Implemented:

1. Section 179 Equipment Expensing: $42,000

Sarah purchased new office furniture ($8,000), upgraded computers and monitors ($7,000), and bought a qualifying SUV for business travel ($27,000). Rather than depreciating these over 5-7 years, she used Section 179 to expense the entire $42,000 immediately.

2. Home Office Deduction (Regular Method): $9,600

Sarah’s dedicated 280-square-foot home office represents 14% of her 2,000-square-foot home. She applied this percentage to eligible expenses: mortgage interest ($18,000 × 14% = $2,520), property taxes ($6,000 × 14% = $840), utilities ($4,200 × 14% = $588), homeowners insurance ($1,800 × 14% = $252), internet ($960 × 14% = $134), and home depreciation ($3,500 × 14% = $490). Additionally, she deducted 100% of costs for painting and repairing her office ($3,400) and office-specific expenses like a dedicated business phone line ($376). Total: $9,600.

3. Vehicle Expenses (Standard Mileage Method): $11,644

Sarah meticulously tracked 17,000 business miles driven for client meetings, conferences, and business travel. At 68.5¢ per mile, her deduction totaled $11,644. (This is separate from the Section 179 deduction for the vehicle purchase.)

4. SEP-IRA Retirement Contribution: $51,000

After accounting for all deductions, Sarah’s net self-employment income was approximately $255,000. She contributed the maximum 20% (the effective rate for self-employed individuals) = $51,000 to her SEP-IRA. This provided an immediate tax deduction while building her retirement savings.

5. Health Insurance Premiums: $16,800

Sarah paid $1,400 monthly ($16,800 annually) for family health insurance coverage through the individual marketplace. As a self-employed person, she deducted 100% of these premiums.

6. Continuing Education and Professional Development: $7,200

Sarah attended three industry conferences ($4,500 in registration fees), took online courses in strategic planning and change management ($1,200), and maintained subscriptions to professional publications and research services ($1,500).

7. Professional Services and Memberships: $8,500

Tax preparation and quarterly bookkeeping ($3,800), legal fees for contract review ($2,200), business coaching ($2,000), and professional association dues ($500).

8. Business Meals and Client Entertainment: $4,100

Sarah documented 68 client meals and business dinners throughout the year totaling $8,200. At 50% deductibility, her deduction was $4,100.

9. Other Standard Business Expenses: $18,400

Software subscriptions ($3,600), office supplies ($1,200), business insurance ($2,400), marketing and website costs ($4,800), travel expenses beyond mileage ($4,200), and professional services ($2,200).

Total Deductions: $169,244

Tax Impact Analysis:

Before Tax Strategy:

• Gross Revenue: $285,000
• Minimal deductions: $45,000
• Net Income: $240,000
• Federal Income Tax (24% bracket): $42,500
• Self-Employment Tax (15.3% on 92.35%): $25,500
• Total Tax: $68,000

After Tax Strategy:

• Gross Revenue: $285,000
• Total Deductions: $169,244
• Net Self-Employment Income: $115,756
• Less: Self-Employment Tax Deduction: ($8,155)
• Less: SEP-IRA Contribution: ($51,000)
• Less: Self-Employed Health Insurance: ($16,800)
• Taxable Income (before standard deduction): $39,801
• Less: Standard Deduction: ($15,000)
• Final Taxable Income: $24,801
• Federal Income Tax (12% bracket): $2,896
• Self-Employment Tax: $16,274
• QBI Deduction Benefit: Additional $8,331 savings (20% of QBI)
• Total Tax After All Deductions: $10,839

Total Tax Savings: $57,161

However, Sarah invested $51,000 in her SEP-IRA (money she’ll access in retirement) and $42,000 in equipment she needed for her business. The true “out-of-pocket” tax savings from maximizing deductions on money she was already spending: $23,500.

Key Takeaways from Sarah’s Success:

• Meticulous record-keeping throughout the year—not scrambling at tax time
• Strategic equipment purchases timed to maximize Section 179 benefits
• Maximizing retirement contributions to lower taxable income while building wealth
• Understanding the QBI deduction and ensuring her income level qualified for the full 20%
• Comprehensive mileage tracking that captured every deductible business mile
• Working with a tax professional to identify opportunities she would have missed on her own

Sarah’s case demonstrates how business owners who implement comprehensive tax strategies—tracking all eligible expenses, maximizing retirement contributions, and understanding available deductions—can legally and ethically reduce their tax burden by tens of thousands of dollars annually.

Are you leaving similar money on the table? Contact Uncle Kam for a comprehensive tax planning consultation to identify your maximum deduction opportunities.

2026 Small Business Tax Deduction Checklist

Deduction Category	Claimed?	Amount	Documentation on Hand?
Vehicle Mileage (68.5¢/mile)	[ ]	$_______	[ ]
Home Office (Simplified or Regular Method)	[ ]	$_______	[ ]
Section 179 Equipment Expensing	[ ]	$_______	[ ]
Bonus Depreciation (60%)	[ ]	$_______	[ ]
Business Meals (50%)	[ ]	$_______	[ ]
Health Insurance Premiums (Self-Employed)	[ ]	$_______	[ ]
Retirement Contributions (SEP/Solo 401k/SIMPLE)	[ ]	$_______	[ ]
Professional Fees (CPA, Attorney, Consultants)	[ ]	$_______	[ ]
Business Insurance Premiums	[ ]	$_______	[ ]
Startup Costs (if first year)	[ ]	$_______	[ ]
Continuing Education & Professional Development	[ ]	$_______	[ ]
Software Subscriptions & SaaS Tools	[ ]	$_______	[ ]
Office Supplies & Equipment	[ ]	$_______	[ ]
Professional Memberships & Dues	[ ]	$_______	[ ]
Marketing & Advertising Expenses	[ ]	$_______	[ ]
Travel Expenses (airfare, hotels, ground transportation)	[ ]	$_______	[ ]
Internet & Phone (Business Portion)	[ ]	$_______	[ ]
Bank Fees & Merchant Services	[ ]	$_______	[ ]
Contract Labor & Freelancer Payments	[ ]	$_______	[ ]
Washington State B&O Tax	[ ]	$_______	[ ]
Local Business License Fees	[ ]	$_______	[ ]
QBI Deduction (20% of Qualified Business Income)	[ ]	$_______	[ ]
Other Deductions (list): __________________	[ ]	$_______	[ ]

Year-End Review Questions:

• Have you gathered all receipts and invoices for business expenses?
• Is your mileage log complete and up-to-date?
• Have you calculated your home office square footage and percentage?
• Did you make all planned equipment purchases before December 31?
• Have you maximized retirement plan contributions before the deadline?
• Are all 1099 forms prepared for contractors paid $600 or more?
• Have you reviewed your entity structure with your tax advisor to ensure it’s still optimal?

Frequently Asked Questions

Can I deduct internet bills if I work from home?

Yes, you can deduct the business portion of your internet service. If you use your home internet connection exclusively for business, the entire cost is deductible. If you use it for both business and personal purposes (which is more common), you must calculate the business percentage and deduct only that portion. For example, if you use your internet 70% for business and 30% for personal use, and your annual cost is $960, you can deduct $672. Keep records showing how you determined the business percentage.

What proof do I need for travel deductions?

For business travel deductions, the IRS requires documentation of: (1) receipts for transportation (airfare, train tickets, rental cars, parking), lodging, and 50% of meals; (2) a detailed itinerary showing dates, destinations, and purpose of travel; (3) documentation of business activities—who you met with, what business was conducted, any conferences or events attended; and (4) a clear business purpose that shows the travel was ordinary and necessary for your business. Keep all boarding passes, hotel invoices, conference registration confirmations, and receipts. For travel lasting more than one day, you should be able to demonstrate that the primary purpose was business, not personal vacation.

Are software subscriptions deductible?

Yes, software subscriptions used for business purposes are fully deductible as ordinary business expenses. This includes SaaS tools like QuickBooks, Microsoft 365, Adobe Creative Cloud, Salesforce, Zoom, Slack, project management software, email marketing platforms, website hosting, cloud storage services, and industry-specific software. Keep records of your subscription payments (bank or credit card statements showing the monthly or annual charges are usually sufficient). If you pay annually, you deduct the full annual amount in the year paid. If a software subscription serves both business and personal purposes, you can only deduct the business portion.

How do I claim the Section 179 deduction?

To claim the Section 179 deduction, you must: (1) purchase qualifying equipment, vehicles, or software; (2) place the property in service (begin using it for business) during the tax year; (3) complete and file IRS Form 4562 (Depreciation and Amortization) with your tax return; (4) elect to expense the property under Section 179 by listing it on Part I of Form 4562; and (5) maintain documentation of the purchase date, cost, placed-in-service date, and business-use percentage. Most tax software walks you through this process. If you use professional tax preparation, inform your CPA or accountant of all equipment purchases during the year along with purchase invoices and dates placed in service.

Can I deduct B&O taxes in Washington state on my federal return?

Yes, Washington state Business & Occupation (B&O) tax is fully deductible as a business expense on your federal tax return. B&O tax is reported as “Taxes and Licenses” on Schedule C (for sole proprietors), Form 1065 (for partnerships), or Form 1120-S (for S corporations). Keep copies of your quarterly B&O tax returns filed with the Washington Department of Revenue and proof of payment. The same applies to city and local business taxes throughout Washington state—these are all deductible federal business expenses even though Washington has no state income tax.

What’s the difference between Section 179 and bonus depreciation?

Section 179 and bonus depreciation both allow you to deduct equipment costs faster than traditional depreciation, but they have key differences. Section 179 has a dollar limit ($1,210,000 for 2026) and begins phasing out once total equipment purchases exceed $3,050,000. It can only be claimed up to your net taxable income—you can’t create a loss with Section 179. Section 179 applies to new and used equipment. Bonus depreciation has no dollar limit and can create a tax loss. For 2026, it’s 60% of the remaining cost after Section 179. Bonus depreciation applies to both new and used property. Strategy: Use Section 179 first for maximum flexibility, then apply bonus depreciation to any remaining equipment costs.

Do I need to keep physical receipts or are digital copies acceptable?

The IRS fully accepts digital copies of receipts and records. In fact, IRS Revenue Procedure 97-22 explicitly states that electronically stored records have the same validity as paper records. You can photograph receipts with your smartphone, scan them, or save electronic receipts from online purchases. The key requirements are that digital records must be: (1) accurate and complete; (2) readable and legible; (3) stored in a format that can’t be easily altered; and (4) retained for the required period (generally three years from the date you file your return, or longer for certain situations). Many business owners use apps like Expensify, Receipt Bank, or their accounting software’s mobile app to capture and organize digital receipts automatically.

Helpful IRS & State Resources

• IRS Small Business and Self-Employed Tax Center — Comprehensive guidance on business taxes, deductions, and filing requirements
• IRS Form 4562: Depreciation and Amortization — Instructions for claiming Section 179 and depreciation deductions
• IRS Publication 535: Business Expenses — Detailed guide to what you can and cannot deduct
• IRS Publication 463: Travel, Gift, and Car Expenses — Rules for deducting travel and vehicle expenses
• IRS Publication 587: Business Use of Your Home — Complete guidance on the home office deduction
• IRS 2026 Tax Inflation Adjustments — Annual updates to deduction limits, tax brackets, and standard deductions
• Washington Department of Revenue — B&O tax information, filing, and payment portal
• U.S. Small Business Administration (SBA) — General business guidance, loans, and resources
• Section 179 Deduction Details — Dedicated resource explaining Section 179 expensing

Next Steps: Maximize Your 2026 Tax Savings

Now that you understand the deductions available to your small business in 2026, it’s time to take action. Here’s your roadmap to ensure you’re capturing every available tax break:

1. Organize Your Records Immediately

Don’t wait until tax season to get your financial house in order. Set up a system now—whether it’s cloud-based accounting software like QuickBooks or Xero, a simple spreadsheet, or a professional bookkeeper—to track income and expenses in real-time. Categorize expenses properly so you can identify all deductible items.

2. Implement a Receipt Management System

Download an expense tracking app and start photographing every business receipt immediately. Set a personal rule: no receipt goes in your wallet or gets thrown away until it’s digitally captured and categorized. This five-second habit can save you thousands in unclaimed deductions.

3. Start Mileage Tracking Today

If you’re not already tracking business mileage, begin today. Download MileIQ, Everlance, or another mileage app and start logging every business trip. Even if you’ve missed mileage earlier in the year, capturing it from now until year-end can generate significant deductions.

4. Review Planned Equipment Purchases

If you’re planning to buy business equipment, computers, furniture, or vehicles, consider timing these purchases before December 31, 2026 to claim Section 179 deductions this year. Run the numbers with your tax advisor to determine whether buying in 2026 or waiting until 2027 makes more sense for your tax situation.

5. Maximize Retirement Contributions

Meet with a financial advisor or tax professional to calculate the maximum retirement contribution that makes sense for your situation. Remember, SEP-IRA contributions can be made up until your tax filing deadline (including extensions), but planning now ensures you have the cash flow to make the contribution.

6. Schedule a Year-End Tax Planning Meeting

Don’t wait until January or February when it’s too late to implement tax-saving strategies for 2026. Schedule a meeting with your CPA or tax advisor in November or early December to review your year-to-date income and expenses, project your tax liability, and identify any last-minute moves to reduce your tax bill.

7. Evaluate Your Business Entity Structure

Are you still operating as a sole proprietor when an S-corp election might save you thousands in self-employment taxes? Or are you paying unnecessary S-corp compliance costs when a simple LLC would suffice? Your tax advisor can help you determine if your current structure is still optimal as your business grows and evolves.

8. Review Estimated Tax Payments

If you’re making quarterly estimated tax payments, ensure they’re accurate based on your actual 2026 income. Underpaying can result in penalties; overpaying ties up cash flow you could be using to grow your business. Adjust your fourth-quarter payment if needed.

9. Document Everything

The IRS’s primary reason for disallowing deductions during audits is lack of documentation. Make documentation a habit: save receipts, log mileage contemporaneously, note business purposes on meal receipts, and keep detailed records of travel itineraries and business meetings.

10. Get Professional Help

The tax code is complex and changes constantly. Working with a qualified CPA or enrolled agent who specializes in small business taxation typically pays for itself many times over in tax savings, avoided penalties, and strategic advice. This is especially true if you have employees, operate in multiple states, own real estate, or have annual revenue exceeding $200,000.

Ready to maximize your tax savings? Contact Uncle Kam today for a personalized tax planning consultation. Our team of experienced CPAs and tax strategists will review your specific situation, identify every available deduction, and create a customized plan to minimize your 2026 tax liability legally and ethically.

Conclusion

Understanding and claiming every available small business tax deduction can save you tens of thousands of dollars annually—money you can reinvest in growing your business, hiring employees, upgrading equipment, or building personal wealth. The 2026 tax year brings important changes, including increased Section 179 limits, reduced bonus depreciation, and higher mileage rates that affect how you calculate and claim deductions.

The business owners who pay the least in taxes aren’t the ones who take aggressive or questionable positions—they’re the ones who meticulously track every legitimate business expense, understand the tax code’s rules and requirements, maintain impeccable documentation, and work with qualified professionals to implement strategic tax planning throughout the year.

From the standard deductions like office supplies and business meals to the more complex strategies involving Section 179 expensing, retirement plan contributions, and the QBI deduction, every dollar you can legitimately deduct reduces your tax liability and keeps more cash in your business.

The key is staying organized, documenting everything, and being proactive rather than reactive. Don’t wait until tax season to think about deductions—implement systems now to capture expenses in real-time, and you’ll never leave money on the table again.

For Washington state businesses, remember that while you don’t pay state income tax, your B&O taxes, local business license fees, and other state-specific costs are all deductible on your federal return—often adding up to thousands in additional deductions.

Whether you’re a solo consultant, a growing e-commerce business, a service provider, or a traditional brick-and-mortar operation, these deductions apply to you. Take the time to understand them, implement proper tracking systems, and consult with qualified tax professionals to ensure you’re maximizing every opportunity.

Ready to take control of your tax situation? Contact Uncle Kam for expert tax planning, preparation, and strategic advice tailored to your small business. Our team specializes in helping Washington state business owners minimize tax liability while staying fully compliant with IRS regulations. Schedule your consultation today and discover how much you could be saving.