Overview · 3 min read
Business deductions guide
A business can deduct costs that are ordinary and necessary for the work. The test is simple to say and easy to stretch. Here are the common categories, the gray areas and the records that support them.
- Who it fits
- Self-employed people and small business owners.
- Figures
- 2026 tax year
The key rule
Ordinary (common in your field) and necessary (helpful for the business), with a receipt and a business purpose for each.
How it works
| Usually deductible | Depends on use | Usually not deductible |
|---|---|---|
| Software and subscriptions | Phone and internet | Commuting |
| Computers and equipment | Vehicle | Personal meals |
| Contractors and payroll | Home office | Everyday clothing |
| Professional fees | Travel with personal days | Entertainment tickets |
| Insurance and advertising | Education | Fines and penalties |
| Business travel; 50% of business meals | Political contributions |
5 steps
Use business accounts
Put every business cost on a business card or account.
Save receipts digitally
Snap a photo or forward the email receipt to your bookkeeping system.
Note the business purpose
For meals and travel, write who you met and why.
Split mixed-use costs
Use a reasonable business percentage for phone, internet and vehicle.
Check the qualified business income deduction
Pass-through profit can qualify for a deduction of up to 20%. We calculate it every year.
Example
A meal and a trip
Lunch with a client to discuss a project: 50% deductible, with a note of who and why. A three-day conference in another city: flights, hotel, conference fee and 50% of meals deductible. Two extra days of sightseeing: hotel and meals for those days are personal.
Common mistakes
- Deducting family vacations as business travel.
- Missing receipts for large purchases.
- Deducting the full cost of a phone or internet plan that is mostly personal.
- Treating club dues as deductible. Most are not.
Questions we hear
Is a new laptop deductible right away?
Usually, yes. Most equipment can be expensed in the year you buy it.
Can I deduct education?
Courses that maintain or improve skills for your current business are deductible. Training for a new career is not.
What records do I need?
A receipt, the date, the amount, the business purpose and, for meals, who attended.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.