What can United States businesses claim as expenses?
10 common business expenses with Internal Revenue Service (IRS)-compliant rules for limited companies, sole traders and contractors in United States.
Business Meals (50% Deduction)
Partially — US business meals are 50% deductible under IRC Section 274(n). The temporary 100% deduction for restaurant meals (2021–2022 only) has expired. Entertainment is NOT deductible at all under TCJA.
Business Travel
Yes — ordinary and necessary business travel away from your tax home is fully deductible (transport, lodging, dry cleaning, etc.) plus 50% of meals. The trip must be primarily for business — personal vacation days mixed in get apportioned.
Client Entertainment
No — entertainment expenses are entirely non-deductible since the Tax Cuts and Jobs Act of 2017 (effective 2018). Sports tickets, concerts, theater, golf — all disallowed even if business is discussed. Meals are still 50% deductible if separately stated.
Home Office Deduction
Yes — US self-employed people can claim the home office deduction using either the simplified method ($5/sq ft up to 300 sq ft = $1,500 max) or the regular method (actual expenses × business-use percentage). Employees cannot claim home office under TCJA (2018–2025).
Professional Services (Accountant, Lawyer)
Yes — fees paid to CPAs, tax preparers, attorneys, bookkeepers and consultants for business purposes are fully deductible. Capitalize legal fees that relate to acquiring assets or organizing the business.
Section 179 Equipment Deduction
Yes — under IRC Section 179, US businesses can immediately expense up to $1,160,000 of qualifying equipment placed in service in 2024 ($1,250,000 in 2025). Phase-out begins at $2.89m of total purchases (2024). Bonus depreciation phasing down: 60% in 2024, 40% in 2025, 20% in 2026.
Self-Employed Health Insurance
Yes — self-employed people can deduct 100% of health insurance premiums for themselves, spouse, and dependents as an above-the-line adjustment on Schedule 1, even if they don't itemize. The deduction cannot exceed net self-employment earnings.
SEP-IRA / Solo 401(k) Contributions
Yes — SEP-IRA and Solo 401(k) contributions are fully deductible. SEP-IRA: up to 25% of compensation, max $69,000 (2024) / $70,000 (2025). Solo 401(k) allows up to $69,000 plus $7,500 catch-up (age 50+) — often higher than SEP at modest incomes due to the employee deferral.
Software Subscriptions
Yes — SaaS subscriptions used for business are fully deductible in the year incurred. Perpetual software licenses can be deducted under Section 179 (immediate expense up to $1.16m in 2024) or amortized over 36 months.
Vehicle / Mileage Expenses
Yes — US self-employed people can claim vehicle expenses using either the standard mileage rate (67¢/mile in 2024, 70¢/mile in 2025) or the actual expense method (gas + insurance + depreciation × business %).