Everything You Need To Know About Tax Deductions for Your Business in 2025

Knowing how to take the deductions you are entitled to may help your bottom line if you are a business owner. You may use various deductions this tax season 2025 to manage your taxable income and hopefully keep more of your hard-earned dollars. Here’s a rundown of the main tax deductions your business may take for 2025.

1. Business Operating Expenses

You have operating expenses, which are just your regular expenses for the day-to-day functions of your business. Many of these are tax-deductible, including:

●      Rent or lease expenses for office space or equipment

●      Power, electricity, Internet connectivity,paper, postage, and more.

●      Fees for professional services like legal,accountant, consulting, etc.

●      Costs for insurance, including generalliability, workers' compensation, professional liability, etc.[i]

To qualify as tax-deductible, these expenses mustbe routine for your profession/industry and necessary for running yourbusiness.

2. Salaries, Wages, and Employee Benefits

If you have employees, you may generally deducttheir salaries, wages, and bonuses. The employer’s part of payroll taxes, suchas Social Security and Medicare, are deductible, too.

You also get to deduct the expenses of:

●      Health insurance

●      401(k) employer’s contributions

●      Education reimbursement

●      Paid sick or vacation time off

3. Vehicle and Transportation Expenses

You deduct the actual cost (gas, repairs,insurance), or you may use the base mileage rate (in 2025, it’s 70 cents permile, 21 cents per mile for Medical purposes (also for qualified active-dutymilitary moving expenses) and 14 cents per mile for charitable purposes) if youmaintain detailed mileage records and receipts supporting your claims.[ii]

4. Travel Expenses

If you travel overnight for business, you maydeduct travel expenses, including:

●      Airfare, train, or bus expense

●     Local transportation at your destination (like carrental or ride-sharing)

●      Hotel or lodging costs

●     Meals and tips (50% of the expenses are deductible)[iii]

Keep all travel-related receipts and document thebusiness purpose of the trip.

5. Depreciation of Assets

Whether it’s equipment, machinery, or realestate that you use for your business, you deduct the expense of thoseinvestments from your taxable income as depreciation. If 2025 is your firstyear for an asset, you may qualify for Bonus Depreciation.³

You may deduct a portion of the cost ofeligible assets for the tax year that the assets go into service. The bonusdepreciation rate was 80% for 2023 and is 60% for 2024, declining 20% each yearafter that until it is zero.[iv]

Section 179Deduction

Investing in qualifying assets under Section179 allows you to immediately deduct the total purchase price of eligiblebusiness equipment up to $2.5 million, with a total equipment purchase spendingcap of $4 million in 2025.[v]

Calculating your depreciation deduction iscomplicated, so get a tax professional’s help if you’ve made some largepurchases.

6. Retirement Plan Contributions

Contributing to a retirement plan⁵provides for your future and may give you tax advantages now. Popular optionsinclude:

●      SEP IRA: Deductible contributions up to 25%of compensation or $70,000, with different calculations for self-employed individuals (closer to 20% of net earnings). Max $350,000 of compensation isconsidered for the percentage calculation. [vi]

●     SIMPLE IRA: Employee contributions of up to $16,500are deductible, plus a $3,500 catch-up for those over 50.[vii]

●     401(k) Plans: You may add up to $23,500 ($31,000 if you are 50 and over) as a deductible for 2025.[viii]

These plans lower taxable earnings and may help attract and retain valuable employees.

Final Thoughts

When you have complicated tax arrangements or aretaking large deductions, having your taxes handled by an experienced taxprofessional should help you stay on top of the latest tax laws. Effective taxplanning now may save your company a significant amount in 2025 and beyond.

In the meantime, take charge of your tax planning with our comprehensive checklist. Use the checklist as a guide to help you get a clear roadmap for navigating tax season this year. Access the tax planning checklist here.

Important Disclosures

Content in this material is for educational and general information only and not intended to provide specific advice orrecommendations for any individual.

This information is not intended to be asubstitute for specific individualized tax advice. We suggest that you discussyour specific tax issues with a qualified tax advisor.

All information is believed to be from reliablesources; however, LPL Financial makes no representation as to its completenessor accuracy.

This article was prepared by WriterAccess.

LPL Tracking #837880

[i] 23Small-Business Tax Deductions to Know in 2025 - NerdWallet

[ii] Standard mileage rates | Internal Revenue Service

[iii] Topic no. 511, Business travel expenses | Internal Revenue Service

[iv] Depreciation of Business Assets - TurboTax Tax Tips & Videos

[v] 2025Instructions for Form 4562

[vi] SEPIRA contribution limits for 2025 and 2026 | Fidelity

[vii] SIMPLEIRA contribution limits for 2025 | Fidelity

[viii] IRS Increases 2025 401(k) Contribution Limit by $500