An LLC can take tax write-offs for any expense that is ordinary and necessary to run the business, and because most LLCs are pass-through entities, those deductions flow to the owners’ personal returns and reduce the income tax they owe.1Internal Revenue Service. LLC Filing as a Corporation or Partnership The list below covers what qualifies, how much of it you can deduct, and where the common traps sit. Whether your LLC files on Schedule C, Form 1065, or Form 1120-S, the underlying rules for what counts as a deductible expense are the same.
The Test Every Write-Off Has to Pass
The IRS allows a deduction for expenses that are both ordinary and necessary for your trade or business. Ordinary means common and accepted in your industry. Necessary means helpful and appropriate for how you operate. Both tests apply.2Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses A landscaping company buying a new mower passes easily. Courtside basketball tickets do not.
Personal expenses never qualify, even when they feel loosely business-related. When something serves both purposes, split the cost and deduct only the business portion. A cell phone you use 70% for work produces a 70% deduction.
Documentation matters as much as the expense itself. Keep receipts, invoices, bank statements, and logs that show the amount, date, and business purpose. “I’m pretty sure I spent about $500 on supplies” won’t survive an audit. Without records, the deduction disappears.
Timing follows your accounting method. Most small LLCs use the cash method and deduct expenses in the year they’re paid. Accrual-method LLCs deduct when the liability is fixed, even if the check hasn’t cleared.
Operating Costs and Overhead
Day-to-day costs of running the business are deductible in the year paid, as long as they don’t create an asset that will last beyond the current year.
Rent, Utilities, and Repairs
Rent for office space, retail, warehouse, or any other commercial property is fully deductible, and so are the utility bills for that space: electricity, gas, water, internet, and phone.2Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses Keep the LLC as the account holder so the paper trail is clean.
Routine repairs and maintenance to leased property are deductible immediately, as long as they don’t substantially increase the property’s value or extend its useful life. Replacing a broken window is a repair. Adding a second story is a capital improvement that has to be depreciated.
Insurance
Premiums for general liability, commercial property, professional liability or malpractice, and business interruption insurance are all deductible. Health insurance the LLC pays for employees is deductible as compensation.
Sole proprietors and partners follow different rules for their own health insurance. You can deduct 100% of the premiums for yourself, your spouse, and your dependents (including children under 27) as an above-the-line deduction on your personal return. You can’t take the deduction for any month you were eligible for a subsidized plan through a spouse’s or another employer.3Internal Revenue Service. Instructions for Form 7206 The deduction also can’t exceed the net profit from the business under which the plan is established.
Supplies and Small Equipment
Office supplies, postage, and cleaning products are deductible when purchased. For small equipment and tools, the de minimis safe harbor lets you expense items right away rather than depreciate them. LLCs with an applicable financial statement (audited by a CPA) can expense up to $5,000 per item or invoice. LLCs without one can expense up to $2,500 per item or invoice.4Internal Revenue Service. Tangible Property Final Regulations Items above these thresholds are capitalized and depreciated.
Professional Fees and Interest
Fees for attorneys, accountants, tax preparers, and consultants used for ongoing operations are deductible in the year paid. Legal fees to defend a business lawsuit qualify. Legal fees to acquire a building or buy another company do not; those get capitalized as part of the asset’s cost.
Interest on business loans, lines of credit, and business credit cards is generally deductible. Larger businesses face a cap, but for most small LLCs the deduction is straightforward.5Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense
Marketing
Advertising is deductible in the year you pay for it. This covers digital ads, print, business cards, signage, website development, and promotional materials. Costs to acquire intangible assets like trademarks or customer lists follow a different path: they must be capitalized and amortized over 15 years.6Office of the Law Revision Counsel. 26 USC 197 – Amortization of Goodwill and Certain Other Intangibles
State Fees and Licenses
Most states require an annual or biennial LLC report and filing fee. Those, along with local business license fees, are deductible as ordinary business costs. They range from nothing in a few states to several hundred dollars, and they’re easy to forget.
Paying Employees and Contractors
Wages, salaries, and bonuses paid to employees are deductible. So are the employer’s share of payroll taxes and the cost of benefits like health insurance and retirement plan contributions. The deduction depends on proper payroll tax withholding and reporting; skip that step and the IRS can disallow the entire deduction.
Payments to independent contractors are also deductible, but the reporting requirements differ. Issue Form 1099-NEC to any contractor paid $600 or more in a year, and collect a Form W-9 from every contractor before the first payment.7Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Misclassifying employees as contractors to dodge payroll taxes is one of the fastest ways to trigger penalties.
Owner draws and distributions are not deductible. They’re a return of profits or capital, not a business expense. If the LLC is taxed as an S-corporation, the owner-employee’s reasonable salary is deductible, but distributions above that salary are not.
Retirement Plan Contributions
LLC owners have access to retirement plans that double as large deductions. Two of the most common are the SEP IRA and the solo 401(k).
A SEP IRA lets you contribute up to 25% of your net self-employment earnings. A solo 401(k) offers two parts: an employee elective deferral of up to $24,500 in 2026, plus an employer profit-sharing contribution of up to 25% of net self-employment income.8Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 If you’re 50 or older, a catch-up contribution adds to the standard limit. Both plans share a combined annual cap on total contributions (the lesser of 100% of compensation or the annual defined-contribution limit).
The employer piece is deducted on the business return or Schedule C. Employee deferrals to a solo 401(k) are reported as an adjustment on your personal return. Either way, the money grows tax-deferred until withdrawal.
Vehicle Expenses
You can deduct vehicle costs only for the business portion of your driving. Commuting from home to a regular office doesn’t count. A contemporaneous mileage log is essential: record the date, destination, purpose, and miles for every business trip. Without one, the IRS will disallow the deduction.
Two methods are available:
- Standard mileage rate: 72.5 cents per business mile for 2026. To use this method, you must choose it in the first year the vehicle is available for business. In later years you can switch to actual expenses, but you’ll be limited to straight-line depreciation going forward. For leased vehicles, whichever method you pick has to stay in place for the entire lease.9Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents per Mile, Up 2.5 Cents10Internal Revenue Service. Topic No. 510, Business Use of Car
- Actual expense method: Track fuel, oil changes, tires, insurance, registration, lease payments or loan interest, and repairs. Multiply the total by your business-use percentage. If you own the vehicle, you also depreciate it.
Passenger vehicles carry annual depreciation caps regardless of method. For a vehicle placed in service in 2026 with bonus depreciation applied, the first-year limit is $20,300. Without bonus depreciation, it drops to $12,300. Later-year caps are $19,800 in year two, $11,900 in year three, and $7,160 for each year after.11Internal Revenue Service. Revenue Procedure 2026-15 Heavy SUVs and trucks over 6,000 pounds are exempt from these caps but face the $32,000 Section 179 SUV limit.
Home Office
If you use part of your home exclusively and regularly as your principal place of business, you can deduct a portion of your housing costs. The exclusivity requirement is strict. A kitchen table that doubles as your desk doesn’t qualify.12Internal Revenue Service. Topic No. 509, Business Use of Home
Two calculation methods are available:
- Simplified method: $5 per square foot of dedicated business space, up to 300 square feet, for a maximum of $1,500 per year. No tracking of household expenses, no depreciation.13Internal Revenue Service. Simplified Option for Home Office Deduction
- Actual expense method: Calculate the business-use percentage of your home by square footage and apply it to rent or mortgage interest, property taxes, utilities, insurance, and repairs. You can also depreciate the business portion of the home over 39 years, though this triggers depreciation recapture when you sell.14Internal Revenue Service. FAQs – Simplified Method for Home Office Deduction
The simplified method is easy and avoids recapture. But if your home office is large or housing costs are high, actual expenses often produce a bigger number. You can switch methods year to year.
Travel and Meals
Business travel is deductible when you’re away from your tax home overnight, or long enough that you need to stop for sleep or rest. Airfare, train and bus tickets, lodging, rental cars, and incidentals like tips and baggage fees all qualify. Personal side trips tacked onto a business trip are not deductible, so allocate carefully between business and personal days.
Documentation should tie each trip to a specific purpose: client meetings, conferences, site visits. Itineraries, meeting notes, and conference registrations all work. Instead of tracking actual lodging and meal costs, you can use federal per diem rates. For fiscal year 2026, the standard meals and incidental expenses rate runs from $68 to $92 per day depending on destination.15GSA. GSA Per Diem Bulletin FTR 26-01
Business meals are 50% deductible if the meal isn’t lavish or extravagant and the taxpayer or an employee is present.16Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses The meal should involve a current or potential client, customer, or business contact, tied to a business discussion. Entertainment (sporting events, concerts, golf outings) is no longer deductible at all, even when directly connected to business development.
Startup and Organizational Costs
Expenses incurred before the LLC opens for business get special treatment. Startup costs cover things like market research, scouting locations, training employees, and travel to line up suppliers. Organizational costs include legal fees for drafting the operating agreement, state filing fees, and accounting services related to forming the entity.
For each category, you can deduct up to $5,000 in the year the business begins. That $5,000 phases out dollar-for-dollar once total costs in that category exceed $50,000, and disappears entirely at $55,000. Whatever isn’t deducted immediately is amortized over 180 months (15 years) starting in the month operations begin.
Here’s where owners trip up. If you spent $12,000 researching your business and another $3,000 on legal fees to form the LLC, you don’t just deduct $15,000 in year one. You deduct $5,000 of startup costs and $3,000 of organizational costs right away, then amortize the remaining $7,000 in startup costs over 15 years.
Big Purchases: Depreciation, Section 179, and Bonus Depreciation
When your LLC buys an asset that lasts more than a year, you normally can’t deduct the full cost upfront. Instead, you capitalize the cost and recover it over the asset’s useful life through depreciation, claimed on Form 4562.17Internal Revenue Service. About Form 4562, Depreciation and Amortization The standard system is MACRS, which assigns recovery periods to different asset classes: five years for computers and vehicles, seven years for office furniture and equipment, 39 years for commercial buildings.
Two accelerated methods let you deduct most or all of an asset’s cost upfront.
Section 179 Expensing
Section 179 lets you elect to deduct the full purchase price of qualifying equipment, furniture, machinery, software, and certain building improvements in the year you place the asset in service.18Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets The 2026 maximum is $2,560,000, phasing out dollar-for-dollar once total qualifying purchases exceed $4,090,000. SUVs over 6,000 pounds are capped at $32,000.19Internal Revenue Service. Revenue Procedure 2025-32
The important limit: Section 179 can’t create a net business loss. Your deduction is capped at total taxable income from all active businesses for the year. Any disallowed amount carries forward. The election is not automatic; you have to claim it on Form 4562.
Bonus Depreciation
Bonus depreciation works alongside Section 179 but without the income limitation. The One, Big, Beautiful Bill Act restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, and made it permanent.20Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One, Big, Beautiful Bill Qualifying property generally includes tangible assets with a MACRS recovery period of 20 years or less, plus certain computer software and qualified improvement property.
Bonus depreciation is automatic; it applies unless you elect out. It can also create or increase a net operating loss, which makes it especially valuable for LLCs in their early years when expenses often outpace revenue. Any basis left after Section 179 and bonus depreciation follows the standard MACRS schedule.
Personal-Return Deductions Tied to Your LLC
Two write-offs sit on your personal return rather than the LLC’s, but they exist because of the LLC.
LLC owners who aren’t taxed as a corporation owe self-employment tax on net business income. The rate is 15.3%: 12.4% for Social Security on income up to $184,500 in 2026, and 2.9% for Medicare on all net earnings.21Social Security Administration. Contribution and Benefit Base High earners also owe an additional 0.9% Medicare surtax on self-employment income above $200,000 ($250,000 for married filing jointly). You can deduct half of your self-employment tax as an above-the-line adjustment on your personal return.22Office of the Law Revision Counsel. 26 USC 164 – Taxes It doesn’t reduce the self-employment tax itself, but it lowers the adjusted gross income used to calculate income tax.
Pass-through LLC owners may also qualify for a 20% deduction on qualified business income under Section 199A. The One, Big, Beautiful Bill Act, signed in July 2025, made this deduction permanent. If your 2026 taxable income is below $201,750 for most filers or $403,500 for married couples filing jointly, you generally claim the full 20% without restriction. Above those thresholds, the deduction phases out for certain service businesses and becomes subject to wage-and-capital limits for others. Claim it on your personal return, not the LLC’s.
Records and Quarterly Payments
Every deduction on this list depends on documentation: receipts, invoices, bank statements, mileage logs, meeting notes, and W-9s for contractors. Build the habit during the year, not in April.
The write-offs also feed directly into quarterly estimated tax payments. LLC owners expecting to owe $1,000 or more in federal tax for the year generally need to pay estimated tax on April 15, June 15, and September 15 of 2026, plus January 15, 2027.23Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals Every deduction you track during the year reduces those payments. Missed payments trigger underpayment penalties, and those penalties are not deductible.