September 2026
A Checklist of Small Business Tax Deductions
Most small business owners are paying more in taxes than they need to, and it usually has nothing to do with how much money they made.
It comes down to deductions that never get tracked, receipts that get tossed, and expenses that quietly slip through the cracks because nobody flagged them as deductible in the first place.
This checklist walks through the small business tax deductions owners overlook most often, organized by category so you can work through it in one sitting. Keep it handy throughout the year rather than digging through a shoebox of receipts every April.
The IRS uses a simple test for this: an expense has to be ordinary and necessary for your trade or business.
Ordinary means it’s common and accepted in your industry. Necessary means it’s helpful and appropriate for running your business, even if it isn’t something you couldn’t survive without.
Neither word means “required” in a strict sense, and that trips people up. A marketing consultant buying a nicer laptop to run client presentations smoothly is a completely reasonable business expense, even though an older laptop would technically still turn on.
The other piece owners miss: if something serves both personal and business purposes, like a vehicle or a phone, you can only deduct the business-use portion. Mixed-use expenses need documentation showing how you arrived at that split. A mileage log or a usage percentage based on actual records will hold up far better than a rough guess if you’re ever asked to explain it.
If you use part of your home regularly and exclusively for business, you can deduct a portion of:
The space doesn’t need to be an entire room, but it does need to be used consistently for business and nothing else.
Tracking personal and business miles is key to claiming vehicle deductions under the standard mileage rate or actual car expense method.
This category grows every year for most businesses and is one of the easiest to underreport, since subscription charges are small and easy to forget about individually.
Travel needs a clear business purpose to hold up, so keep the agenda, the invitation, or the meeting notes alongside your receipts.
A few categories that get left off:
Startup costs. Expenses incurred before you officially opened, like market research or initial marketing, can often be deducted or amortized.
Bank and merchant fees. Monthly account fees, credit card processing fees, and wire transfer charges add up and are fully deductible.
Education and training. Courses, certifications, and industry conferences that maintain or improve skills used in your current business.
A portion of your cell phone bill, if you use your personal phone for business calls and can reasonably document the split.
Bad debt. If a client never pays an invoice and you have included the invoice in gross income, that unpaid amount may be deductible.
Retirement plan contributions, including SEP-IRA or Solo 401(k) contributions for owners, which reduce taxable income significantly for many self-employed filers.
Reading a checklist is one thing. Actually using it every month is another. We put together a small business tax deductions checklist PDF you can print or fill in digitally, organized by the same categories above, so you can log expenses as they happen instead of reconstructing everything from memory at tax time.
If you’re a sole proprietor with straightforward expenses and no employees, a well-organized checklist and a solid bookkeeping habit can genuinely get you most of the way there on your own.
Complexity is the signal to bring in a professional. Mixed-use assets, multiple income streams, employees on payroll, or a business structure change all raise the odds of either missing a deduction you’re entitled to or claiming one that isn’t well supported. Both mistakes cost money, just in different directions: one overpays the IRS, the other invites a closer look at your return.
A CPA also sees patterns an individual owner usually doesn’t, simply from working across many businesses in similar industries. That perspective tends to catch deductions owners didn’t know applied to them at all, not just the ones already on a checklist like this one.
We’ve been doing this work in the Brainerd Lakes Area since 1991, and if there’s one thing three decades of local tax returns teaches you, it’s that deductions rarely get missed because an owner wasn’t paying attention. They get missed because nobody told them a certain expense qualified in the first place, or because the record-keeping fell apart somewhere between January and April.
Our tax advisory and tax preparation team works with small business owners across the Lakes Area in construction, hospitality, retail, and professional services, and we bring that cross-industry view into every return we prepare.
We know which deductions tend to get overlooked in your specific line of work, not just the ones that apply broadly, and we’ll ask the questions that uncover them before filing, not after.
Because we’re a local firm with offices in Baxter, Pequot Lakes, and Aitkin, this isn’t a once-a-year phone call with someone who’s never met you. We get to know your business, which means the deductions we flag are based on how you operate, not a checklist alone.
If you want a second set of eyes on what you’re claiming, or you’d rather hand the whole thing off before the next filing deadline, we’re happy to help. Contact our team today and we’ll walk through your specific situation together!
What’s the easiest deduction small business owners miss?
Mileage. Mileage takes consistent tracking, especially when you use the same vehicle for business and personal trips. But the miles between job sites, client visits, supply runs, and, in many cases, trips from a qualifying home office can add up to a significant deduction.
Can I deduct an expense if I don’t have the original receipt?
Yes, in most cases, as long as you can show the expense through another record, like a bank or credit card statement, along with a note on what it was for. A receipt is the strongest documentation, but it isn’t the only acceptable proof.
Do I need a separate business bank account to claim deductions?
It is strongly recommended to have a separate bank account for your business. Using an account exclusively for business transactions helps maintain clear financial records, makes it easier to substantiate business income and expenses, and supports the separation between personal and business finances.
What tends to draw extra attention to deductions on a return?
Deductions that are unusually large relative to your reported income, or mixed-use expenses (like a vehicle or home office) claimed at 100 percent business use without documentation to back it up. Neither is automatically a problem, but both benefit from solid records.
Can I deduct home office expenses if I rent instead of own?
Yes. Renters can deduct the business-use portion of rent, utilities, and renters insurance using the same rules that apply to homeowners.
How long should I hold onto records for deductions I’ve claimed?
Generally three years from the date you filed, though certain situations, like underreported income or a claim involving bad debt, extend that window. If you’re unsure, it’s generally better to keep documentation longer than necessary than to dispose of it prematurely.
For more tax deduction tips from the Lakes Area CPAs, follow our social media updates here.
