Publised on Nov 26, 2025
A Simple Guide to Business Deductions for Small Business Owners and Freelancers
Kisean Smith
Running your own business means wearing many hats — creator, strategist, accountant, and sometimes even IT support. But one hat that often feels too big to wear is the “tax expert” one. The good news? You don’t need to be a CPA to understand one of the most valuable tools for managing your taxes: business deductions.
Understanding what you can (and can’t) deduct is like finding hidden tools in your financial toolbox. Once you know how to use them, you can shape your business finances with more confidence and efficiency — just like a smith shaping metal into something strong and purposeful.
Let’s break it down simply and clearly.
What Are Business Deductions?
A business deduction is an ordinary and necessary expense that helps you operate your business. In plain English, that means if you spend money on something directly related to earning income, you can usually subtract it from your total business earnings.
Think of deductions as your financial “chisel” — each one chips away at your taxable income, reducing what you owe in taxes.
For example, if you made $80,000 in freelance income but had $20,000 in eligible business expenses, you’d only pay taxes on $60,000.
That’s the power of understanding deductions — you’re not gaming the system, you’re simply using the system as it was designed for business owners like you.
Common Business Deductions You Should Know
There’s no single master list of deductions that fits every business, but here are some of the most common and valuable ones for small business owners and freelancers:
Home Office Expenses
If you regularly use part of your home for business, you can deduct expenses like rent, utilities, and internet — based on the percentage of your home used for work.
Equipment and Supplies
Computers, office furniture, printers, and even everyday supplies like notebooks or pens can qualify. If you buy software or pay for online tools to manage your business, those count too.
Business Travel and Mileage
Whether you drive to client meetings or attend a conference, travel-related costs can often be deducted. This can include mileage, flights, hotels, and meals during business trips.
Phone and Internet
If you use your phone or internet for both business and personal reasons, you can deduct the business-use portion of those bills.
Professional Services
Hiring a bookkeeper, accountant, designer, or legal consultant? Their fees are deductible as professional service expenses.
Education and Training
Courses, workshops, or certifications that help you improve your skills or stay current in your field can also qualify.
Marketing and Advertising
Your website, social media ads, business cards, and even branded merchandise can be written off as advertising expenses.
Common Mistakes to Avoid
Mixing personal and business finances: Using one bank account for everything makes tax time messy. Keep your business and personal finances separate — it makes tracking deductions far easier.
Not keeping receipts or records: Keep digital copies of receipts and invoices. If you’re ever asked to verify an expense, good records will have your back.
Overestimating business use: If you use your car 60% for business and 40% for personal errands, you can’t deduct 100% of your car expenses. Be honest and reasonable.
Forgetting the “ordinary and necessary” rule: Ask: “Would another business owner in my field reasonably need this to do their work?” If yes, you’re probably on solid ground.
How to Stay Organized Year-Round
Use accounting software to categorize expenses automatically.
Set a monthly reminder to review expenses so you’re not scrambling at tax time.
Store digital receipts in a dedicated folder or app for easy access.
Track mileage with a simple app if you drive for business regularly.
Try This Next: See What Deductions You Might Be Missing
Understanding business deductions is one thing — applying them to your specific situation is where the real savings happen.
Try asking The Financial Smith’s AI Financial Assistant:
“What are typical business deductions for [insert business]?”
You’ll get tailored insights that help you uncover potential deductions you might be missing — so you can make smarter, more confident financial decisions all year long.
Your Business Deduction Checklist
Did I separate business and personal expenses?
Have I tracked all business purchases (even small ones)?
Do I have records or receipts for each deduction?
Did I include ongoing costs like software subscriptions or utilities?
Have I reviewed my deductions for accuracy and honesty?
The Bottom Line
Understanding business deductions doesn’t have to be overwhelming. When you view them as tools — not hurdles — you start shaping your finances with confidence and precision.
You’ve worked hard to build your business. Learning how to use deductions wisely helps ensure your money works hard for you, too.
At The Financial Smith, we believe knowledge is the strongest tool in your financial workshop — and with every smart decision you make, you’re shaping yourself into a stronger, more confident financial expert.
