Tax deductible expenses for an LLC are the ordinary and necessary costs of running the business, which reduce the profit that flows through to the owners’ personal returns. Because an LLC is a pass-through entity by default, the company itself pays no federal income tax; every legitimate deduction lowers the taxable income each owner reports. The categories below cover what qualifies, what has a cap or a special method, and what the tax code refuses to let you write off no matter how business-related it feels.
The Ordinary and Necessary Test
Nearly every business deduction traces back to one rule under Section 162: the expense must be both ordinary and necessary for your trade or business.1Office of the Law Revision Counsel. 26 U.S.C. 162 – Trade or Business Expenses Ordinary means common and accepted in your industry. Necessary means helpful and appropriate for running the business, though it doesn’t have to be indispensable. A graphic design firm buying software subscriptions passes both tests without effort. That same firm buying a fishing boat almost certainly doesn’t, unless charter fishing is somehow part of the business model. When you’re unsure, ask whether a reasonable person in your line of work would recognize the cost as a normal part of doing business.
Everyday Operating Costs
Rent for an office, storefront, or warehouse is fully deductible, and so are the utilities tied to that commercial space, along with internet and phone service used for the business. These are the easiest deductions to document and the least likely to draw questions.
Insurance premiums for liability, property, and professional indemnity coverage are deductible as ordinary operating costs. Office supplies, postage, and similar small items belong in the same bucket.
Interest on business loans and business credit cards is deductible, with one cap that affects larger operations. If your LLC’s average annual gross receipts over the prior three years exceed roughly $31 million, the deduction in any year is limited to 30% of adjusted taxable income plus any business interest income you earned.2Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense Most small LLCs sit well below that threshold and can deduct all of their business interest.
Fees paid to attorneys, accountants, bookkeepers, and outside consultants are deductible as professional services, as are subscriptions to bookkeeping software and the cost of preparing the business return.
Wages, Contractors, and Employee Benefits
Salaries and hourly wages are fully deductible, along with the employer’s share of Social Security and Medicare payroll taxes.3Internal Revenue Service. Understanding Employment Taxes Compensation must be reasonable for the work actually performed; the IRS can challenge inflated pay to owners or family members whose duties don’t justify it.
Payments to independent contractors are deductible too. When you pay a contractor $600 or more in a year, you’re required to file Form 1099-NEC.4Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Missing that filing doesn’t wipe out the deduction, but it exposes you to penalties.
Employer contributions to group health insurance and qualified retirement plans reduce taxable income as well. For a SEP IRA, 2026 contributions are capped at the lesser of 25% of the employee’s compensation or $72,000 per participant.5Internal Revenue Service. SEP Contribution Limits (Including Grandfathered SARSEPs) SIMPLE IRAs and Solo 401(k) plans have their own limits, but each is deductible under the same principle.
Deductions Only LLC Owners Can Claim
Some of the most valuable write-offs don’t appear on the LLC’s books at all; they’re taken on the owner’s personal return.
Half of Your Self-Employment Tax
LLC owners classified as self-employed pay both halves of Social Security and Medicare taxes, a combined 15.3% on net self-employment income. The Social Security portion (12.4%) applies to earnings up to $184,500 in 2026; the Medicare portion (2.9%) has no ceiling.6Social Security Administration. Contribution and Benefit Base You can deduct the employer-equivalent half as an adjustment to income on your personal return, which lowers your adjusted gross income.7Office of the Law Revision Counsel. 26 U.S.C. 164 – Taxes
Self-Employed Health Insurance
Self-employed LLC owners can deduct 100% of health insurance premiums for themselves, a spouse, dependents, and children under age 27, even when those children aren’t dependents. The deduction covers medical, dental, vision, and qualified long-term care insurance, and it’s claimed on Schedule 1 using Form 7206.8Internal Revenue Service. Instructions for Form 7206 One limit: you cannot claim it for any month you were eligible to participate in an employer-subsidized plan, whether your own or a spouse’s.
The Qualified Business Income Deduction
Under Section 199A, owners of pass-through businesses can deduct up to 20% of qualified business income directly from taxable income, whether or not they itemize. The full 20% is available without restriction if your 2026 taxable income is below $201,750, or $403,500 for married couples filing jointly.9Internal Revenue Service. Revenue Procedure 2025-32 Above those thresholds, the deduction begins to phase out for service-based businesses (law, medicine, accounting, consulting) and becomes subject to W-2 wage and depreciable-property limits for others. The math gets complicated quickly at higher income levels, and this is where a good accountant earns their fee.
Travel, Vehicles, Meals, and Gifts
Business travel that takes you away from your tax home (the general area of your main place of business) is deductible: airfare, hotels, rental cars, and similar costs, as long as the trip is primarily for business.10Office of the Law Revision Counsel. 26 U.S.C. 274 – Disallowance of Certain Entertainment, Etc., Expenses Keep records of the amount, dates, destination, and business purpose. Mixed trips are deductible only for the business portion.
For vehicle expenses, you choose between two methods. The 2026 standard mileage rate is 72.5 cents per mile driven for business.11Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile To use the standard rate on a vehicle you own, you must pick it in the first year the vehicle is placed in business service. For leased vehicles, the standard rate must be used for the entire lease. The actual expense method tracks gas, insurance, repairs, and depreciation, then applies your business-use percentage. High-cost vehicles often produce a larger deduction under the actual method.
Business meals are deductible at 50% of the cost.12Internal Revenue Service. Topic No. 511, Business Travel Expenses The temporary 100% deduction for restaurant meals ended after 2022. Record the date, the people present, and the business purpose for each one.
Business gifts to clients or contacts are capped at $25 per recipient per year.10Office of the Law Revision Counsel. 26 U.S.C. 274 – Disallowance of Certain Entertainment, Etc., Expenses Inexpensive branded items costing $4 or less with your business name permanently printed on them don’t count against the cap, and neither do signs or display materials for a client’s premises.
Marketing and Advertising
Spending to promote your products or services is fully deductible with no percentage limitation. Digital advertising, social media campaigns, search engine ads, website hosting, and domain registration all qualify. Print items like business cards, brochures, and newspaper ads do too.
Branded promotional items handed out broadly at events count as advertising rather than gifts, so the $25 gift cap doesn’t apply when you’re passing out logo pens at a trade show. The distinction is audience: advertising reaches a wide group, a gift targets one person.
Equipment, Vehicles, and Other Capital Assets
When your LLC buys long-lived assets like equipment, vehicles, furniture, or computers, the cost is generally spread over the asset’s useful life through depreciation. Two provisions let most LLCs write off the full cost right away.
Section 179 Expensing
Section 179 lets you deduct the full purchase price of qualifying equipment and software in the year it’s placed in service.13Office of the Law Revision Counsel. 26 U.S.C. 179 – Election to Expense Certain Depreciable Business Assets For 2026, the maximum deduction is $2,560,000, and it phases out dollar-for-dollar once qualifying property placed in service during the year exceeds $4,090,000.9Internal Revenue Service. Revenue Procedure 2025-32 Sport utility vehicles claimed under Section 179 are separately capped at $32,000.
Bonus Depreciation
On top of Section 179, bonus depreciation allows a 100% first-year write-off for eligible property acquired after January 19, 2025. The One Big Beautiful Bill Act made this permanent, so there’s no year-by-year phase-down to plan around.14Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill Bonus depreciation applies to new and used property and has no dollar cap.
Home Office
If you run your LLC from home, you can deduct a share of your housing costs, but the space must be used exclusively and regularly for business.15Office of the Law Revision Counsel. 26 U.S.C. 280A – Disallowance of Certain Expenses in Connection With Business Use of Home A desk in the corner of your living room doesn’t qualify. A spare bedroom that functions only as your office does. The space must also be your principal place of business or a place where you regularly meet clients.
The simplified method deducts $5 per square foot, up to 300 square feet, for a maximum of $1,500.16Internal Revenue Service. Simplified Option for Home Office Deduction The regular method applies your office’s percentage of the home to actual costs (mortgage interest, property taxes, utilities, insurance, repairs) and often produces a larger deduction. It’s worth running both.
Start-Up and Organizational Costs
Money spent before the LLC opens for business is treated separately. You can deduct up to $5,000 of start-up costs in your first year of operations. That allowance shrinks dollar-for-dollar once total start-up spending exceeds $50,000, and disappears at $55,000. Anything left over is amortized evenly over 180 months.17Office of the Law Revision Counsel. 26 U.S.C. 195 – Start-Up Expenditures Start-up costs include market research, scouting locations, and training employees before launch.
Organizational costs (the legal and filing expenses to actually create the LLC, such as state filing fees, operating agreement drafting, and initial registered agent fees) follow the same $5,000/$50,000 structure.
Education and Professional Development
Training that maintains or improves skills you already use in your business is deductible: conferences, workshops, online courses, trade publications, and certifications tied to what your LLC does.18Internal Revenue Service. Topic No. 513, Work-Related Education Expenses A web developer taking a bootcamp on a new language is claiming an ordinary business expense. Education that qualifies you for a different profession, or that meets the minimum requirements to enter one, is not deductible. An LLC owner who goes to law school will lose that argument every time.
Expenses the Tax Code Blocks
Some categories are off-limits no matter how connected they feel to the business:
- Fines and government penalties for violating a law, including traffic tickets picked up while driving for work, OSHA fines, and regulatory penalties.1Office of the Law Revision Counsel. 26 U.S.C. 162 – Trade or Business Expenses
- Political contributions and lobbying expenses, including the share of trade association dues that funds lobbying.
- Bribes, kickbacks, and other payments that violate federal or state law.
- Sexual harassment settlements subject to a nondisclosure agreement, along with the related attorney’s fees.
- Personal expenses. Groceries, personal clothing, gym memberships, and vacations dressed up as business trips don’t become deductible because the LLC’s card paid the bill; mixing personal and business spending is the most common audit trigger.
The fine rule has one narrow opening: amounts identified as restitution or as payments to bring you into compliance with the law you violated can still be deductible, but only when the court order or settlement specifically calls them that.
Records That Protect Your Deductions
Every deduction above is only as strong as the documentation behind it. The IRS can disallow otherwise legitimate expenses when you can’t produce records. Keep receipts, bank statements, and mileage logs organized by category through the year rather than reconstructing them at tax time. For travel and meals in particular, note the business purpose and who was present at the time of the expense, not months later from memory. Real-time record-keeping is what separates LLC owners who survive audits from those who don’t.