How tax write-offs actually work for small business owners

Executive overview

A tax write-off is not a refund. It reduces your taxable profit, not your tax bill dollar-for-dollar. The core equation: revenue minus expenses equals taxable profit — you pay taxes on profit, not revenue.

What you save depends on your marginal tax rate, not the size of the deduction.

Everyday deductions that qualify

• Software subscriptions
• Business phone and internet
• Office supplies
• Marketing and advertising
• Rent or co-working space
• Professional services (legal, accounting)

The three most misunderstood write-offs

• Meals: need a genuine business purpose; typically only 50% deductible
• Travel: a vacation with occasional work emails does not qualify as a business trip
• Car: business mileage is deductible; commuting to your regular work location is not

The IRS standard in plain English

• If it's mainly personal, it's not a business expense
• Expenses must be ordinary and necessary for your business

Employee-related deductions

• Wages, payroll taxes, and benefits are often the largest deductions available
• Health insurance premiums for employees typically qualify