- November 7, 2025
- Posted by: Gavtax gavtax
- Category: Small Business Tax
Taxes rarely reward the last-minute; they reward the prepared who document well and decide early.
In FY 2026, preparation matters even more as several provisions tied to the 2017 tax law wind down, changing how owners choose entities, forecast cash, and map out small business tax deductions to reduce taxable income.
What changes in 2026?
Several major Tax Cuts and Jobs Act (TCJA) benefits are scheduled to end after 2025, including individual rate cuts, a larger standard deduction, and the 20% Qualified Business Income (QBI) deduction for many pass-throughs, raising tax exposure for owners starting January 1, 2026, unless extended by new legislation. Expect tighter margins and the need to re-evaluate entity choice, pricing, compensation, and investment timing as those rules revert or disappear in 2026. Next, let’s explore how family changes can impact your taxes, because the estate and gift tax exemption is expected to drop significantly, making early tax planning for small business more urgent for closely held businesses.
What are the essentials to prioritize in small business tax deductions?
Use this at-a-glance list to ground your review of the most reliable write-offs for FY 2026, then tailor based on your industry and documentation strength. When in doubt, confirm the business purpose, keep proof, and apply the “ordinary and necessary” test before you claim.
Home office
Use the simplified square-foot method or actual-expense method if you use a space regularly and exclusively as your primary place of business, with documentation of size and purpose.
Office rent and utilities
Rent for external space and related utilities, insurance on the space, and required property taxes under your lease are deductible business costs.
Supplies, software, and small equipment
Everyday supplies and operational software subscriptions are deductible; larger items may qualify for Section 179 or bonus depreciation.
Business vehicle costs
Choose standard mileage or actual expenses, keep a contemporaneous log, and remember commuting is not business travel.
Travel
Airfare, lodging, local transport, baggage, and necessary incidentals for trips primarily for business qualify; split out personal days and keep proof of purpose.
Meals
Generally deductible at 50% when tied to a bona fide business discussion or while traveling for work, with receipts and notes on who attended and why.
Phone and internet
Deduct the business-use percentage for mixed plans or 100% for dedicated business lines and data, supported by a reasonable methodology.
Business insurance
Premiums for general liability, professional liability, property, workers’ comp, commercial auto, and cyber policies are deductible.
Self-employed health insurance
Owners paying their own medical, dental, vision, and qualified long-term care premiums may deduct them, subject to eligibility rules and profit limits.
Employee pay and benefits
Wages, employer payroll taxes, health benefits, paid leave, and retirement contributions are deductible, with reasonable compensation documented.
Contractor payments
Fees to freelancers and vendors are deductible, with Form 1099-NEC generally required for $600+ paid to non-corporate providers.
Interest and bank fees
Interest on business loans and lines of credit, plus routine banking and card fees, are deductible when tied to business activities.
Depreciation and expensing
Section 179 can allow immediate expensing of qualifying assets, while bonus depreciation continues to phase down through 2026, so timing matters.
Startup and organizational costs
Up to certain limits, pre-opening research, initial ads, training, and formation/legal fees can be deducted or amortized.
Legal and professional fees
Accounting, tax prep for the business portion, legal contract work, and compliance consulting are deductible.
Marketing and advertising
Ads, website costs, sponsorships, and promotional materials are fully deductible if they promote the business.
Continuing education
Courses, conferences, and materials that maintain or improve current business skills qualify for owners and employees.
Retirement contributions
Owner and employer contributions to SEP IRAs, SIMPLE IRAs, and 401(k)s are deductible and can be substantial when profits allow.
Charitable giving
Deductible treatment varies by entity; documentation is essential for larger gifts and for claiming the correct form of deduction.
Relocation
Certain business relocation costs may be deductible under specific conditions, with careful record-keeping to substantiate business purpose.
A note on the QBI deduction
Through tax year 2025, many pass-through owners may deduct up to 20% of qualified business income subject to thresholds and limitations, which can be a meaningful reduction for profitable firms. Because this deduction is scheduled to expire after 2025, absent new legislation, planning around income timing and entity structure is prudent as FY 2026 begins.
Timing moves for FY 2026
If the 20% QBI deduction sunsets as scheduled, consider whether accelerating income or deferring certain small business tax deductions into years when your effective rate is higher better matches your overall tax posture for 2026 and beyond. Likewise, weigh the trade-offs of immediate expensing versus multiyear depreciation as bonus depreciation continues to phase down, especially for equipment and vehicle purchases. Next, let’s explore how family changes can impact your taxes, because a lower estate and gift exemption increases the importance of earlier transfers, trusts, and buy-sell strategy coordination for owners of closely held businesses.
Documentation habits that pay
- Keep a single “audit-ready” repository for receipts, invoices, mileage logs, client meal notes, and conference records, aligned to how you categorize expenses in your books.
- Separate accounts for business banking and cards make mixed-use disputes less likely and simplify substantiating the business purpose of each line item.
- Map every recurring bill to its deduction category now, so year-end reviews are about confirmation and not reconstruction from scattered statements.
Your 2026 prep checklist
- Re-forecast 2026 cash flow using post-2025 tax rules for your entity, benefits, and compensation plans, and quantify sensitivities to rate and deduction changes.
- Reassess entity choice in light of a potential QBI sunset and personal rate shifts, comparing pass-through status to C-corporation economics for your margins and exit goals.
- Align capital purchases, financing choices, and depreciation elections with the bonus depreciation phase-down and Section 179 options for your sector.
12 Small business tax deductions many owners miss
Mixed-use telecom
Reasonable allocation for cell and internet, plus separate business lines for simpler 100% deductions.
Pre-launch spend
Market research, travel, early ads, and initial training tracked before opening day.
Education that maintains current skills
Conferences with session notes and outcomes tied to your present business.
Bank and merchant fees
Monthly account charges, wires, processing, and annual card fees.
Insurance beyond general liability
Professional, cyber, commercial property, and workers’ comp premiums.
Contractor 1099s
Proper forms bolster deduction support and reduce disputes in review.
Business portion of utilities
For both home office (via the method chosen) and leased space.
Vehicle logs
Contemporaneous miles and trip purposes to secure either method of deduction.
Website and SEO
Domain, hosting, build, and ongoing optimization for marketing.
Retirement plan setup and funding
Deduct contributions and leverage potential startup credits.
Meal records
Keep who, why, and what was discussed to satisfy substantiation rules.
Depreciation elections
Coordinate Section 179 and bonus choices to fit your multiyear tax plan.
Practical language for your files
A simple phrase like “Lunch with vendor to negotiate Q3 pricing; discussed volume tiers and delivery windows” attached to the receipt is exactly the kind of note that prevents disallowance during review. The same goes for travel: “Attended industry conference; met with three prospective suppliers; secured demo and pricing proposals,” pinned to your itinerary and badge confirmation provides a clear business purpose.
Where Texas owners often focus?
Owners operating in and around Houston and Austin frequently prioritize tight books, clean year-round support, and proactive questions about missed prior-year opportunities, because clarity drives better decisions in a changing rule set. Dedicated accountant for small business tax preparation in Texas, access, review of prior returns for overlooked deductions, and secure tooling for filings, reduce friction and help translate guidance into steady-state processes. Next, let’s explore how family changes can impact your taxes if you’re a multi-generational owner in Texas, since succession and estate moves can no longer wait until “later” under the 2026 landscape.
Common pitfalls to avoid
- Combining personal and business spending on one card, then guessing later, increases risk and time wasted at year-end.
- Skipping the home office deduction solely out of audit fear can cost legitimate savings when rules are met and records are clean.
- Treating contractors like employees or paying yourself as a contractor from your own entity can trigger penalties and deduction issues.
Bringing the gap
If you build a simple, repeatable system around the major categories above, you’ll naturally capture the most impactful tax deductions for your situation without overcomplicating the process. Owners who keep a living list of “the best tax deductions for small businesses” should review each quarter, stay organized, and be ready for late-year moves that improve results. Strategic timing around income, benefits, equipment purchases, and entity elections forms the backbone of sound tax planning for small business for resilient results heading into FY 2026.
A Final Word
If this feels like a lot to juggle while you run the business, consider partnering with a year-round advisor who keeps your books tight, scans for overlooked opportunities, and is available by email or phone when questions pop up mid-week.
GavTax Advisory Services supports real estate investors and small businesses with dedicated accountants, prior-year return reviews for missed deductions, entity setup guidance, and secure filings using Drake, alongside bookkeeping services for small businesses that keep your records ready for action.