LLC expenses cheat sheet: 16 tax write-offs for businesses

LLC expenses cheat sheet: 16 tax write-offs for businesses

Knowing which expenses your LLC can deduct is fundamental to maintaining healthy business finances. Every legitimate business expense you properly document and deduct reduces your taxable income, which lowers your tax bill and helps your company keep more of its money. For LLC owners, this can fund growth, operations, or simply improve the bottom line.

New LLC owners often struggle to distinguish between deductible and non-deductible expenses. This confusion can cost thousands in missed opportunities or, worse, trigger unwanted attention from the IRS. To be fair, the rules aren't always intuitive. Why can you deduct 50% of a business meal but nothing for client entertainment? Why does your commute to the office not count, but driving to meet a client does?

This article by Brex serves as a detailed cheat sheet, listing common tax-deductible expenses available to LLCs, identifying costs that cannot be written off, and providing practical strategies for tracking expenses and maximizing legitimate tax benefits. With proper knowledge and documentation, managing LLC expenses becomes a straightforward exercise in good business practice rather than a source of anxiety.

What are LLC expenses?

LLC business expenses are the ordinary and necessary costs incurred in operating your business. The IRS requires expenses to meet both criteria to qualify as deductible. "Ordinary" means the expense is common and accepted in your industry. "Necessary" means the cost is helpful and appropriate for your business operations. These expenses range from everyday operational costs, from rent and supplies, to wages and professional services. When you write off these costs against your income, you reduce the business's taxable profit.

Not all expenses receive equal treatment under tax law. Deductible LLC expenses, also known as write-offs, are business-related costs that the IRS allows you to subtract from revenue, lowering your taxable income. These include most costs directly connected to running your business: office rent, employee salaries, marketing costs, and business insurance premiums.

Non-deductible expenses are costs that cannot be written off. These often include personal expenses, entertainment costs, and certain fines or penalties. The IRS typically divides expenses into these two categories, making it important for owners to know which is which to stay compliant and maximize savings. Recognizing what qualifies as a legitimate business expense forms the foundation for effective tax planning and bookkeeping for any LLC owner.

Why you should track your business expenses

Keeping detailed records of business expenses throughout the year directly impacts your tax savings. Every dollar in legitimate expenses that you document and deduct is a dollar less in taxable income, keeping more money in the business. Meticulous tracking helps avoid missing out on deductions that you're legally entitled to claim.

Compliance is equally important. Proper documentation protects you during IRS audits and helps avoid legal complications. Maintaining clear records and separating business expenses from personal expenses creates a defensible paper trail. If you face an audit, having expense receipts and documentation for each expense, from invoices to mileage logs, will substantiate your deductions. Without this documentation, the IRS can disallow your claims, resulting in back taxes, penalties, and interest.

By tracking expenses in real time using spreadsheets, accounting software, or mobile apps, business owners create an accurate record process. This practice provides peace of mind when tax season arrives and helps monitor cash flow throughout the year. Treat business expense tracking as an integral part of running a successful LLC.

16 tax-deductible LLC expenses

This section forms the core of your expense tracking strategy. Each category includes what it covers, why it qualifies as deductible, and any special IRS rules or limits you should know.

1. Payroll expenses (employee wages & contractor payments)

All compensation paid to employees and independent contractors qualifies as ordinary business expenses. This includes W-2 wages, salaries, bonuses, and 1099 contractor payments. Employer-paid payroll taxes also count, including Social Security, Medicare, and unemployment insurance. File W-2 forms for employees and 1099-NEC forms for contractors paid $600 or more annually. Proper filings substantiate deductions and maintain compliance. For LLCs with staff, payroll often represents the largest available write-off.

2. Employee benefits

Benefits provided to employees are fully deductible. These include health insurance premiums, retirement plan contributions, life or disability insurance, and other fringe benefits. Benefits must generally be available to all eligible employees to qualify. Some have annual limits that adjust yearly. As long as plans meet IRS requirements, your LLC can deduct these costs in full.

3. Startup and organizational costs

New LLCs can deduct up to $5,000 of startup costs and $5,000 of organizational costs in the first year if total costs don't exceed $50,000. Qualifying expenses include state registration fees, legal fees to form the LLC, initial marketing, market research, business plan development, and accounting software setup. If costs exceed $50,000, the deduction phases out dollar-for-dollar, with remaining amounts amortized over 15 years. Keep records of all pre-opening expenses.

4. Office supplies and equipment

Everyday office supplies and small equipment purchases are 100% deductible in the year purchased. This includes computers, printers, software subscriptions, furniture, and other business supplies. Items over $2,500 may require depreciation over their useful life rather than an immediate deduction. Section 179 allows businesses to deduct up to $1.25 million of qualifying equipment in 2025 rather than depreciating. Bonus depreciation currently allows an 80% immediate write-off. Track all purchases and consult your accountant for items exceeding the safe-harbor threshold.

5. Rent and utilities

Rent for offices, storefronts, or warehouses is fully deductible. Business utilities, such as electricity, water, gas, heating, internet, and phone lines, also qualify. Expenses must be for business use only. Commercial spaces allow 100% deduction of rent and utilities. Home-based businesses claim these through the home office deduction rather than as direct expenses.

6. Business insurance

Insurance premiums protecting your business are deductible. This includes general liability, professional liability, property insurance, cyber coverage, workers' compensation, and commercial auto insurance. Business interruption insurance also qualifies. Insurance must be business-related. Personal life or auto insurance doesn't qualify, even with occasional business use. Policies must primarily protect the business, not provide personal benefit.

7. Professional services

Fees paid to professionals for business services are deductible. This covers accountants, bookkeepers, attorneys for business matters, tax preparers, consultants, graphic designers, and IT specialists. Services must be directly business-related. Personal legal fees don't qualify, even if you own the LLC. Keep invoices from all professional contractors.

8. Marketing and advertising

Promotional expenses are fully deductible. This includes online ads, social media campaigns, print advertising, business cards, brochures, website development, and logo design. Sponsoring events or running promotional campaigns also qualifies. The advertising must relate to your business. No specific limits apply. You can deduct 100% of marketing costs that aren't lavish or unreasonable.

9. Travel expenses

Business travel away from your principal place of business is deductible. This includes airfare, hotels, rental cars, taxis, rideshares, and incidental expenses like baggage fees. Meals during business travel or meetings are 50% deductible. Company parties and public promotional events allow 100% meal deduction. Travel must have a primarily business purpose. Expenses shouldn't be lavish. Keep detailed records including dates, destinations, purposes, and receipts.

10. Vehicle expenses

Business vehicle use is deductible using either actual expenses or standard mileage. Actual expenses include the business percentage of gas, maintenance, insurance, registration, parking, tolls, and depreciation. The standard mileage rate for 2025 is $0.70 per mile. To use mileage in later years, you must use it in the first year. Only business driving counts; commuting to your regular office isn't deductible, but driving to clients or suppliers is. Just remember to keep detailed mileage logs with dates, miles, and purposes.

11. Home office deduction

A dedicated home space used regularly and exclusively for business qualifies for this deduction. The space must be for business only, not a kitchen table used for family meals. The simplified method allows $5 per square foot up to 300 square feet, capping at $1,500 yearly. The regular method calculates your home's business-use percentage applied to rent, mortgage interest, utilities, insurance, and repairs. The space must be your principal business place or used for regular client meetings.

12. Education and training

Business-related education and training costs are deductible. This includes industry conferences, workshops, business skill courses, job-related classes, and employee training programs. Professional books and journal subscriptions count if they maintain business skills. Education must improve current business skills or meet legal requirements like continuing education. Training for a new profession doesn't qualify.

13. Loan interest and bank fees

Interest on business loans and credit cards is deductible. Business banking fees, including monthly service charges, check fees, payment processing, and merchant account fees, also qualify. Interest and fees must be from business accounts. Personal credit card interest never qualifies, even with occasional business use. Keep year-end statements showing interest paid.

14. Depreciation

Assets lasting over one year typically require depreciation rather than immediate deduction, which spreads the cost across the asset's useful life. The IRS provides depreciation schedules for different asset classes. Section 179 allows immediate deduction up to $1.25 million in 2025. Bonus depreciation offers an 80% first-year write-off. Assets must be used over 50% for business. Land cannot be depreciated.

15. Repairs and maintenance

Minor repairs and maintenance are fully deductible when they maintain rather than improve property. Fixing leaky roofs, broken machinery, routine vehicle maintenance, and repainting qualify. Major improvements extending property life must be capitalized and depreciated. Repairs under $2,500, or $5,000 with applicable financial statements, fall under the safe harbor for immediate deduction.

16. Charitable contributions

Donations to IRS-recognized charities may be deductible depending on your LLC's tax structure. Pass-through LLCs flow contributions to owners' personal returns. C-corporation LLCs deduct on corporate returns. Corporations typically deduct up to 10% of taxable income. Individuals can deduct up to 60% of adjusted gross income when itemizing. Contributions must be true gifts without a substantial return benefit. Get written acknowledgement for donations of $250 or more.

6 non-deductible LLC expenses

Having gone through deductible expenses, it's equally important to know what cannot be deducted as a business expense. Non-deductible expenses are costs that the IRS explicitly disallows as write-offs. Knowing these limits helps avoid costly mistakes during tax filing.

1. Personal expenses

Any cost that is personal in nature and not directly related to the business cannot be deducted. This includes personal clothing, personal rent or groceries, family travel, or a personal phone that's not used for business. If something like a phone or vehicle has mixed use, only the business-use portion is deductible.

2. Commuting costs

The daily commute from home to a regular workplace is considered personal transportation, not a business expense. Gas, parking, or train fare for commuting generally can't be written off. This is distinct from travel to meet clients or go to a temporary work site, which can be deducted.

3. Entertainment

Expenses for entertainment, amusement, or recreation are not deductible for businesses. Since tax law changes in 2018, taking clients to ball games, concerts, or golf outings cannot be deducted, even if done for business goodwill. Only business meals have a partial deduction, but pure entertainment is out.

4. Gifts over $25

The IRS caps business gift deductions at $25 per recipient per year. If an LLC gives a client a $100 gift, only $25 is deductible. The rest is non-deductible.

5. Fines and penalties

Money paid for breaking the law or regulations cannot be deducted. This includes traffic tickets in a company car, OSHA fines for safety violations, or tax late payment penalties. You can't take a tax deduction for violations.

6. Political and charitable contributions

Political donations from an LLC to candidates, PACs, or campaigns are not deductible. Charitable contributions by an LLC are also generally not a business expense unless the LLC is taxed as a corporation. For most LLCs, donations to charity shouldn't be expected as a business write-off.

If an expense doesn't have a clear business purpose, it's likely not deductible. If you're unsure, consult IRS guidelines or a tax professional.

How to write off LLC expenses

Deducting these expenses on your taxes requires proper documentation and following the right procedures. These practical steps ensure your deductions hold up under scrutiny.

1. Keep organized records

Documentation forms the foundation of all write-offs. Save receipts, invoices, and records for every business purchase, whether physical receipts or scanned copies. Use accounting software or apps to categorize expenses separately for travel, supplies, and meals. Store everything in an accessible way through cloud storage or dedicated folders. Good records make tax filing easier and support each deduction if audited.

2. Separate business and personal finances

Open a business bank account and, if possible, a business credit card for the LLC. Mixing personal and business spending in one account leads to confusion and potential trouble with the IRS. A separate account creates a clear audit trail and helps prove that expenses claimed are truly business-related.

3. Document each deduction properly

Different expenses require different supporting documentation. For a business meal, note who was present and the business purpose of the meeting. For vehicle expenses, keep a mileage log detailing each business trip. Home office deductions benefit from photos or measurements of the workspace. Major purchases should have invoices noting the business use.

4. Use the correct tax forms

How you report expenses depends on your LLC's tax status. Single-member LLCs taxed as sole proprietorships report business expenses on Schedule C of Form 1040. Multi-member LLCs taxed as partnerships file Form 1065, with expenses flowing through to owners' K-1 forms. LLCs electing S-corp or C-corp taxation file Form 1120S or 1120, respectively. Choose the right form and consult a tax professional when needed.

Taking these steps throughout the year, not just at year-end, makes writing off expenses legal, easier, and more effective.

Tracking and managing LLC expenses

Effective expense management requires more than just saving receipts. These ongoing practices help maintain financial clarity and maximize deductions throughout the year.

Establish an expense policy

For single-owner LLCs, this might mean personal guidelines, but if the LLC has employees or multiple partners, set clear expense policies for spending. Determine what types of expenses are approved, spending limits, and how expense reimbursement works for employee-paid items. This prevents confusion and keeps everyone aligned about what the business will pay for.

Use accounting software or tools

Even very small businesses benefit from startup accounting software like QuickBooks, Xero, or well-structured spreadsheets. These tools automatically import bank transactions, categorize expenses, and generate reports. They reduce human error and save time. Reliable bookkeeping software streamlines expense tracking and ensures no deduction is overlooked come tax time.

Track expenses in real time

Don't wait until year-end to sort through receipts. Log expenses weekly or use mobile apps to capture receipts immediately. Keeping up with documentation avoids the stress of re-creating records months later. This also helps monitor cash flow, showing where money goes and allowing adjustments to business spending if needed.

Maintain separate folders and categories

Organize expenses into clear categories consistent with tax categories. Set up folders or tags for "Travel," "Meals," "Supplies," "Utilities," and other expense types. This mirrors how they'll be reported on tax returns and ensures nothing gets commingled. It's also useful for budgeting to see spending in each area.

Review periodically

Review expenses monthly or quarterly. This catches issues like incorrectly categorized expenses or unwarranted charges early. Regular reviews also help make quarterly tax estimates more accurate by projecting deductible business expenses and income.

Implementing these management tips keeps finances clean and clear, making tracking expenses straightforward while maximizing deductions and supporting the business's financial health.

Key tax considerations for LLCs

These additional tax strategies and rules go beyond basic deductions. While slightly more advanced, they can significantly impact an LLC's tax situation.

Qualified Business Income (QBI) deduction

Under current tax law, many LLC owners of pass-through entities can take the QBI deduction, which allows up to 20% of the business's net income to be deducted in addition to regular expenses. If the LLC is profitable, the owner might write off 20% of that profit from taxable income. For the 2025 tax year, single filers with taxable income below approximately $197,300 and joint filers below $394,600 can generally take the full 20% deduction. Above those levels, limitations apply, especially for certain service businesses. Not everyone qualifies for full QBI if income is high. This deduction represents a major tax benefit of LLC pass-through taxation, but consult a tax advisor if the LLC earns near or above those limits due to complexity.

Self-employment tax deduction

LLC owners taxed as sole proprietors or partners usually pay self-employment tax covering Social Security and Medicare on their business profits. However, there's an above-the-line deduction for the employer-equivalent portion of those taxes. In practice, you can deduct half of your self-employment tax. This isn't listed as a business expense per se, but taken on personal tax return Form 1040. It lowers adjusted gross income, and you get it automatically when filing without needing to itemize. LLC owners should know they get a break on Social Security and Medicare taxes as well.

State-specific taxes and fees

States have their own rules for LLCs that can affect expenses and deductions. Some states impose franchise taxes or annual LLC fees regardless of profit. California, for instance, charges an $800 minimum franchise tax yearly for LLCs. States like New York might have separate deduction limits or requirements. While ordinary expenses are generally deductible at the state level too, there could be differences. Some states don't recognize certain federal tax designations like S-corp status. Always check your state's tax guidelines or consult a local accountant to ensure compliance with state rules and take advantage of any state-specific deductions or credits.

Avoiding audit red flags

A few best practices will help you stay off the radar of auditors. Keep business and personal expenses strictly separate with no mixing of bank accounts. Don't overclaim expenses that seem high relative to income. Extremely large travel or meal write-offs in a year with low revenue can attract attention. If you use a vehicle or home office, don't claim 100% business use unless it's absolutely true. The IRS expects businesses to aim for profit. Consistently declaring losses year after year while taking large deductions can trigger scrutiny under the "hobby loss" rule. Document the business purpose of expenses and ensure the business actively tries to be profitable.

Leveraging these additional deductions and being mindful of special rules can significantly optimize an LLC's tax situation, but planning and expert advice prove invaluable for complex cases.

This story was produced by Brex and reviewed and distributed by Stacker.