Tax deductions LLC owners should know for 2026

When it comes to tax deductions for limited liability companies (LLCs), the more you take, the lower your tax bill will be. As a self-employed individual or small business owner, this is a crucial step in protecting your company’s bottom line.

Taking advantage of business deductions in 2026 can provide many benefits, including:

• Lowering tax liability can keep the tax rate as low as possible.
• Increasing profitability and cash flow, allowing the company to reinvest the tax savings into the business.
• Avoiding double taxation, since profits and losses are reported on an LLC owner’s personal tax return.
• Attracting and retaining top talent, since employee health and retirement benefits are deductible, allowing businesses to offer competitive packages.
• Optimizing tax structure, because LLCs can choose how they’re taxed, allowing them to determine which option provides the greatest financial benefit.

This guide breaks down the key tax deductions available to small business owners in 2026, so you can understand how to save money during tax season.

If you’re unfamiliar with federal tax law, business tax filing, or claiming deductions, it’s also a good idea to speak with a CPA or tax professional who can ensure you’re set up for financial success.

LLCs can generally deduct 100% of their ordinary and necessary expenses from their business income. This means the expenses you write off must be reasonably priced and required to run your business.

To properly claim any deductions, you must keep detailed records of every business expense in the event of an audit by the IRS. This documentation should include:

• Mileage logs
• Itemized receipts for gas, parking, hotels, airfare, and other eligible expenses
• Dated records detailing an expense’s business purpose, total amount, vendor, or any other information that can substantiate business use

To get started, here are some of the most common tax deductions LLC owners can take in 2026:

Marketing your small business is key to drawing customers and growing your business. You can deduct a range of advertising expenses, namely:

• Website costs, particularly design, development, and maintenance services
• Digital and social media ads
• Email subscription programs
• Traditional ads for magazines, TV, and radio platforms
• Promotional events

E-commerce retailers, online fitness coaches, social media content creators, and other digitally forward small businesses may see substantial tax write-offs in this expense category.

If you drive to clients’ homes or drop off customer orders using a business-owned vehicle or your own vehicle, you can typically write off associated expenses, such as wear and gas, using one of two methods:

• Standard mileage rate: Using a simple formula, you can deduct a flat rate for every work-related mile you drive, plus parking fees and tolls. For the 2026 tax year, the standard mileage rate for business is 72.5 cents per mile.
• Actual expenses: You can deduct the actual costs to operate your vehicle for work, including gas, maintenance, repairs, tires, depreciation, registration fees and licenses, parking fees and tolls, and insurance.

If you claim a vehicle depreciation amount under actual expenses, you’ll also need to file Form 4562, Depreciation and Amortization.

When you purchase insurance to protect your LLC, your premiums are generally deductible if the coverage is considered ordinary and necessary for the type of work you do.

These are the types of business insurance that are typically deductible:

• General liability insurance
• Professional liability insurance, also known as errors and omissions insurance
• Workers’ compensation insurance
• Cyber insurance
• Commercial property insurance

For more information on business insurance deductions, see IRS Publication 334.

To be eligible for the home office deduction, you must use a portion of your home exclusively and regularly as your place of business. Working from a kitchen table that’s used for business and personal reasons wouldn’t typically count.

There are two ways you can calculate this write-off:

• Simplified method: Deduct the total square footage of your home office at a standard rate of $5 per square foot. The IRS allows a deduction of up to 300 square feet, or $1,500.
• Actual expense method: Writes off the business’s portion of your total home expenses, including mortgage or rent payments, utilities, homeowner’s insurance, repairs, and property depreciation. While this method can net a higher deduction, it also requires meticulous record-keeping and calculation.

For more information on home office deductions, see IRS Publication 587.

Fees for professional services are deductible as long as they’re ordinary and necessary for your specific business operations. These expenses can include:

• Accounting and bookkeeping costs, such as maintaining financial records, performing audits, and buying tax preparation services.
• Legal services, including an attorney’s advice or assistance with contracts, leases, and other business-related legal matters.
• Consulting fees, from marketing or IT consultants, or other professional advisors who assist with business operations.

For more information on legal and professional fees deductions, see IRS Publication 334.

Everyday office supplies and small equipment are typically deductible in the year they are purchased. This list can include:

• Paper, pens, notepads, folders, and printer ink
• Postage and shipping costs
• Work-related software and subscription services
• Desk lamps and adjustable monitor stands

Office equipment, including larger, longer-lasting items such as computers, printers, machinery, and office furniture, is typically considered capital assets, and their value must be depreciated during their useful life. However, special rules allow immediate expensing:

• Section 179 deduction: This allows businesses to deduct the full purchase price of eligible equipment in the year it’s installed, instead of depreciating it over time. In 2026, the maximum deduction is about $2.56 million with a phase-out starting around $4.09 million in total equipment purchases, although these numbers are adjusted annually for inflation.
• Bonus depreciation: For the 2026 tax year, businesses can write off 20% of the cost of new or used equipment in the first year, after applying the Section 179 deduction if applicable.

If you claim a property depreciation amount, you’ll also need to file Form 4562, Depreciation and Amortization.

If you rent a dedicated office, storefront, or warehouse space for your LLC, the rent and utilities are fully deductible business expenses.

• Rent: 100% of the rent paid for business property is deductible, provided you’re not building equity in the property (e.g., a rent-to-own agreement) and the rent payment is a reasonable amount.
• Utilities: All necessary utilities for the commercial space, such as electricity, gas, water, trash collection, phone lines, and internet service, are 100% deductible.

For more information on rent and utility deductions, see IRS Publication 334.

Payroll, benefit packages, and retirement contributions are all usually deductible expenses. However, the regulations depend on how your LLC is taxed.

Non-owner employee deductions

• Employee salaries, wages, bonuses, and commissions are paid to employees who receive W-2 forms and independent contractors who get 1099-NEC forms.
• Employer-paid payroll taxes, including Social Security, Medicare, and unemployment taxes.
• Employer contributions toward employee health insurance premiums, Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and education assistance are deductible for the business. For 2026, the annual HSA limit is $8,750 per family, and the FSA limit is $3,400 for individuals.
• Employer contributions to employee retirement plans (e.g., 401(k), SEP IRA, SIMPLE IRA) are deductible business expenses.

LLC owners

• Sole proprietors: As pass-through entities, single-member and multi-member LLCs can’t deduct their own salary or wages as a business expense. Your compensation, and any partners’, are business profits that go through to your individual income tax return.
• S corps or C corps: If you elect to have an S corp or C corp, your W-2 wages as a company employee are deductible by the business.

For more information on payroll and employee benefit deductions, see IRS Publication 15.

Starting a business can come with a lot of initial expenses before you even begin to make money. For the 2026 tax year, an LLC can deduct up to $5,000 in startup costs, but that cap is reduced on a dollar-for-dollar basis if your total startup costs exceed $50,000.

Startup costs can include:

• Market research
• Advertising
• Employee onboarding and training
• Travel to meet suppliers or find a location

If you form a C corp or S corp, you can also deduct up to $5,000 in organizational costs, such as:

• State registration and incorporation fees
• Legal fees for drafting operating agreements
• Accounting setup fees

If your total costs reach $55,000 or more, you can’t take the initial $5,000 deduction and must amortize, or gradually write off, the entire amount. Any startup or organizational costs that aren’t immediately deducted are spread out evenly over 180 months, starting from the month the business begins active operations.

For more information on startup and organizational cost deductions, see IRS Publication 583.

LLCs can typically write off a variety of taxes and licensing fees required to run the business, including:

• Employer’s portion of payroll taxes
• State and local taxes (SALT), including real estate taxes on business property
• Sales tax paid on business purchases, if not claimed as a credit
• Professional licenses, including certification, renewal, and maintenance fees
• Business registration and formation fees

For more information on tax and license fee deductions, see IRS Publication 334.

Business-related travel expenses can be deducted if the trip requires an overnight stay away from the company’s “tax home.” Fully deductible business travel expenses for 2026 include:

• Transportation, including airfare, train tickets, car rentals, and taxi or rideshare services
• Personal vehicle expenses, such as mileage, gas, parking fees, and tolls
• Lodging, including hotels, motels, and Airbnbs
• Baggage fees, internet access, tips for hotel staff, and other incidental costs

Business meals during a business trip, including those from restaurants, room service, and airport vendors, are typically 50% deductible, but the expense must be reasonable, not lavish or extravagant.

For more information on travel expense deductions, see IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.

If you own a small business, there are a handful of tax breaks you can take advantage of to save more money during tax time, including:

Self-employment tax deduction

For W-2 employees, their employer withholds the employee’s share of FICA taxes, which cover Social Security and Medicare taxes. But if you’re self-employed, you typically pay both the employer’s and employee’s share of FICA, which is called the self-employment tax.

The self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. However, as a self-employed LLC owner, you can deduct half of this tax, or 7.65%.

Qualified business income (QBI) deduction

The QBI deduction, also known as the Section 199A deduction, lets eligible self-employed individuals deduct up to 20% of their qualified business income on their personal tax returns. Certain types of income are excluded from QBI, including:

• W-2 wages received as an employee
• Guaranteed payments to partners
• Capital gains and losses
• Specific dividends, interest income, and investment income
• Income earned outside of the U.S.

In 2026, you generally qualify for the full 20% deduction if your income as a single filer is below $203,000 or $406,000 if married filing jointly. If your taxable income exceeds these thresholds, additional limitations may apply.

For more information on the QBI deduction, see IRS Form 8995.

New 2026 tax deductions and credits

As an LLC owner, your business income and deductions pass through to your individual tax return, allowing you to claim some of the new tax benefits on Form 1040, including:

• $6,000 senior deduction: In 2026, an additional deduction of $6,000 per eligible taxpayer aged 65 and older, or $12,000 for qualifying married couples, is available.
• $2,500 American Opportunity Tax Credit (AOTC): Eligible students can get a tax credit for educational expenses worth up to $2,500 for the first four years of college.

To ensure you fully utilize your tax breaks, here are some tips:

• Keep your business and personal finances separate, using a dedicated business bank account and credit card.
• Coordinate major purchases, such as equipment, to maximize Section 179 or bonus depreciation benefits for the 2026 tax year.
• Purchase expense tracking software to log all expenses and simplify record-keeping.
• Consult a CPA or qualified tax professional to navigate complex deductions, improve your tax planning, and ensure compliance with the IRS.