With an LLC, you can write off any expense that is ordinary and necessary for running the business. The list is long and covers most of what a small business actually spends money on: rent, utilities, payroll, contractor payments, insurance premiums, vehicle costs, business travel, equipment, advertising, professional fees, software, supplies, licenses, and interest on business debt.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses The test is simple: if you spent the money to earn business income and the expense is common in your industry, it almost certainly reduces the net income your LLC pays tax on. The categories below walk through what qualifies, what’s capped, and what trips people up.
Everyday Operating Costs
Most of what an LLC deducts falls under recurring operating expenses. Each of these is fully deductible in the year you pay it, provided the spending relates to the business and you can document it.
Rent for commercial space is deductible in full, along with electricity, gas, water, and other utilities for that space. Co-working memberships and shared office fees qualify the same way. A dedicated business phone line and business internet service are deductible; if you use one plan for both personal and business purposes, only the business share counts. The base cost of the first landline into your home cannot be deducted even when you use it for business calls, but a second line used exclusively for business is fully deductible.
Office supplies, postage, and consumables get expensed as you buy them. Software subscriptions, cloud services, accounting platforms, and industry-specific tools are deductible in the year you pay for them. Individually small, they add up quickly.
Insurance premiums for general liability, professional liability, property coverage on business assets, and commercial auto policies are deductible. One notable carve-out: if the LLC buys a life insurance policy on an owner or key employee and the LLC is the beneficiary, those premiums are not deductible.2eCFR. 26 CFR 1.264-1 – Premiums on Life Insurance Taken Out in a Trade or Business
Fees paid to attorneys, accountants, bookkeepers, and consultants are deductible when the services relate to the business. Tax preparation for the business portion of your return qualifies. Legal fees paid to acquire a business asset are different: those get added to the asset’s cost basis rather than expensed right away.
Advertising and marketing spending is fully deductible: digital ad campaigns, website hosting and development, print materials, and public relations. So is interest on business loans, business credit cards, and lines of credit. A separate cap under Section 163(j) applies to larger businesses with average annual gross receipts above roughly $31 million, but most LLCs sit well below that line.3Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense
Courses, workshops, and continuing education are deductible when they maintain or improve skills you already use in the business, or when a licensing authority requires them. Education that qualifies you for a new profession does not count. A licensed accountant deducting a CPE seminar is fine; the same accountant deducting law school tuition is not.4Internal Revenue Service. Work-Related Education Expenses
State and local business licenses, professional registration fees, industry-specific permits, annual LLC filing fees, and state franchise taxes are all deductible ordinary costs.
If a customer owes you money you already reported as income and the debt becomes uncollectible, you can write it off as a business bad debt. You need to show reasonable collection efforts and no realistic chance of repayment. Cash-method taxpayers generally cannot deduct unpaid invoices they never reported as income, because there’s nothing to write off.5Internal Revenue Service. Topic No. 453, Bad Debt Deduction
If your LLC sells physical products, the direct costs of producing or purchasing inventory are recovered through cost of goods sold rather than listed separately. Raw materials, freight, storage, and direct labor feed into that calculation and cannot be double-counted as operating expenses.
Home Office
If you use part of your home regularly and exclusively for the LLC, you can deduct a portion of your housing costs. The space has to be your principal place of business or somewhere you regularly meet clients. A spare bedroom that doubles as a guest room fails the exclusive-use test and does not qualify.6Internal Revenue Service. How Small Business Owners Can Deduct Their Home Office From Their Taxes
There are two calculation methods. The simplified method is $5 per square foot of dedicated office space, capped at 300 square feet, for a maximum deduction of $1,500 per year.7Internal Revenue Service. FAQs – Simplified Method for Home Office Deduction The regular method tracks actual costs (mortgage interest or rent, property taxes, utilities, insurance, repairs) and deducts the percentage matching your office’s share of total home square footage. It requires more records but usually produces a larger deduction.
Either way, the deduction can’t exceed your gross business income for the year. Under the regular method, unused amounts carry forward. Under the simplified method, they don’t.8Internal Revenue Service. Topic No. 509, Business Use of Home
Vehicles, Travel, Meals, and Gifts
These categories draw heavy IRS scrutiny because personal and business costs mix so easily. Every deduction here needs the date, amount, location, and business purpose on record.
Vehicle Use
Two methods are available for a personal vehicle used for business. The 2026 standard mileage rate is 72.5 cents per mile and bundles fuel, maintenance, insurance, and depreciation into a single per-mile figure.9Internal Revenue Service. Internal Revenue Service Notice 2026-10 – 2026 Standard Mileage Rates The actual expense method deducts real operating costs (gas, oil changes, repairs, insurance, registration, depreciation) proportional to your documented business-use percentage. Either way, keep a mileage log with date, destination, purpose, and miles. Commuting between home and a regular workplace is personal and never deductible, even if you take business calls on the way.
Travel Away From Home
When business requires an overnight stay outside the area of your tax home, airfare, hotels, rental cars, taxis, and baggage fees become deductible.10Internal Revenue Service. Topic No. 511 – Business Travel Expenses If you tack personal days onto a business trip, only the business-tied portion is deductible.
Meals
Business meals are 50% deductible. There must be a clear business purpose, you or an employee must be present, and the cost can’t be lavish.11Internal Revenue Service. Income and Expenses FAQs Rather than tracking every receipt on the road, you can substantiate meal costs using IRS per diem rates. For October 2025 through September 2026, the meals-and-incidentals per diem is $86 per day in high-cost areas and $74 per day everywhere else. The 50% limit still applies to the per diem amount.
Business Gifts
Gifts to clients, vendors, or business contacts are deductible up to $25 per recipient per year. Packaging, engraving, and shipping don’t count against the cap. A gift given to a company rather than a specific person is typically deductible in full. The $25 limit hasn’t been adjusted for inflation, so it doesn’t stretch far, but it’s still worth tracking if you routinely send holiday items.
Wages, Contractors, and Owner Compensation
Payroll is often the biggest single deduction an LLC takes. Wages, salaries, and bonuses paid to W-2 employees are fully deductible, and the employer’s share of Social Security and Medicare (FICA) is a separate deductible expense on top of the wages themselves.12Internal Revenue Service. FICA Tip Credit for Employers Employer contributions to retirement plans (401(k) match, SEP-IRA) and premiums for employee health coverage are deductible as compensation costs.
Payments to independent contractors are also fully deductible. For 2026, you must issue Form 1099-NEC to any non-employee you pay $2,000 or more during the calendar year. That threshold rose from $600 for payments made after December 31, 2025.13Internal Revenue Service. 2026 Publication 1099 The reporting threshold changed, but misclassifying an employee as a contractor still triggers penalties fast.
Owners in Pass-Through LLCs
If the LLC is taxed as a partnership or disregarded entity, owners aren’t employees. Payments to them come as distributions or guaranteed payments and are not deducted as business expenses. Owners pay self-employment tax on their share of net income and then deduct half of that self-employment tax on their personal return. This adjustment mirrors the employer FICA portion that a regular employer would have paid.14Internal Revenue Service. Schedule SE (Form 1040) – Self-Employment Tax
Self-Employed Health Insurance
LLC owners who can’t get health coverage through a spouse’s employer can deduct 100% of the premiums they pay for health, dental, and vision insurance covering themselves, their spouse, and their dependents. This is not a Schedule C deduction. It’s an above-the-line personal deduction reported on Form 7206, which reduces adjusted gross income whether or not you itemize.15Internal Revenue Service. Instructions for Form 7206 (2025) The deduction cannot exceed the LLC’s net profit from the business under which the insurance is established. For any month you were eligible for a subsidized employer plan (yours or a spouse’s), you cannot claim the deduction for that month’s premiums.
Equipment and Other Capital Assets
When you buy equipment, machinery, vehicles, computer systems, or other property that lasts beyond a single year, the default rule is to spread the cost over the asset’s recovery period under the Modified Accelerated Cost Recovery System. Computers run on a five-year schedule, office furniture seven, and so on.16Internal Revenue Service. Publication 946 (2025) – How to Depreciate Property Two provisions let you skip the wait.
Section 179 lets you expense the full purchase price of qualifying property in the year you place it in service. For 2026, the maximum is $2,560,000, phasing out dollar-for-dollar once total qualifying property placed in service tops $4,090,000. The Section 179 deduction cannot create a business loss; it’s capped at your taxable business income for the year.17Internal Revenue Service. Depreciation and Recapture
Bonus depreciation lets you deduct 100% of the cost of qualifying new or used property in the first year. The phase-down enacted under the Tax Cuts and Jobs Act would have cut the rate to 20% in 2026, but the One Big Beautiful Bill Act restored the full 100%. Unlike Section 179, bonus depreciation can create or enlarge a net operating loss, which makes it valuable in heavy investment years. Bonus depreciation applies after Section 179, covering any remaining basis before standard MACRS. Both are claimed on Form 4562.18Internal Revenue Service. About Form 4562, Depreciation and Amortization
Start-up and Organizational Costs
Money you spend before the LLC actually opens gets its own treatment. Filing fees, market research, pre-opening advertising, and training employees before launch count as start-up costs. Organizational costs include legal fees for drafting the operating agreement and the state fee to form the LLC.
You can deduct up to $5,000 of start-up costs and $5,000 of organizational costs in the year the business begins operating. Each $5,000 allowance shrinks dollar-for-dollar once costs in that category exceed $50,000. Whatever remains is amortized evenly over 180 months, starting with the month the business opens.19Office of the Law Revision Counsel. 26 US Code 195 – Start-up Expenditures Skipping the election to deduct or amortize these costs means losing the tax benefit until you sell or close the business.
The Qualified Business Income Deduction
This one isn’t technically a business expense and doesn’t appear on Schedule C or Form 1065. It’s still the single largest tax break most LLC owners get. Under Section 199A, owners of pass-through businesses can deduct up to 20% of qualified business income on their personal return.20Office of the Law Revision Counsel. 26 US Code 199A – Qualified Business Income
For 2026, the full 20% is available without restriction if total taxable income falls below roughly $201,750 for single filers or $403,500 for married couples filing jointly. Above those levels, limitations phase in across a $75,000 range (single) or $150,000 range (joint): the deduction becomes tied to W-2 wages the business pays and its depreciable property, and certain service-based businesses lose access entirely.
Those service-based restrictions cover “specified service trades or businesses” such as law, medicine, accounting, consulting, financial services, and athletics. An LLC in one of these fields with income above the phase-in ceiling gets no QBI deduction. Businesses in non-service industries like manufacturing, retail, or construction face the wage-and-property limitation but are never fully excluded. The QBI deduction was originally set to expire after 2025 and has been extended.
Records That Hold Up
Every deduction on this page shares one requirement: proof. The IRS can disallow anything you can’t substantiate, and “I know I spent it” doesn’t count. Keep receipts, invoices, bank statements, and mileage logs organized by category and year. Digital copies work as long as they’re legible and accessible. For vehicle, travel, and meal expenses, notes made at or near the time of the expense carry far more weight than a log reconstructed during an audit. The simplest habit is also the strongest: write the business purpose on every receipt before you file it away.