One of the most popular small business structures is the LLC, or limited liability company. LLCs are flexible, relatively simple to set up, and offer personal liability protection, making them a go-to for freelancers, side hustlers, and growing businesses alike. Each LLC type, like single-member or multi-member, has its own tax considerations.
LLC tax fundamentals
Understanding how LLC tax deductions work is key to keeping more of what you earn. Good recordkeeping plays a big role here. Tracking your expenses carefully can help you maximize your LLC write-offs and avoid errors that could cost you at tax time. Getting familiar with these basics early on sets you up to claim every deduction you're entitled to while staying compliant.
Types of LLC deductible expenses
Not every LLC expense qualifies as a tax deduction. To be deductible, an expense must be both ordinary (common for your type of business) and necessary (helpful and appropriate for running it) in the eyes of the IRS. However, one of the biggest LLC advantages is flexibility. This typically allows businesses to deduct expenses like:
- Operating expenses: Day-to-day costs like office supplies, internet, software subscriptions, and utilities.
- Travel and transportation: Business-related mileage, lodging, and meals while traveling for work.
- Marketing and advertising: Costs for your website, social media ads, print materials, or branding.
- Professional services: Fees paid to accountants, lawyers, consultants, or other business pros.
- Home office deductions: A portion of your rent, mortgage, and utilities if you work from home.
- Equipment and depreciation: Computers, furniture, and machinery used for business.
- Employee wages and contractor payments: Salaries, bonuses, and payments to 1099 freelancers.
Related: How to start an LLC
25 deductible LLC expenses (with real examples)
Keeping track of your business expenses throughout the year is essential to claiming the right LLC tax deductions come tax time. When done correctly, these deductions can reduce your taxable income and help you keep more of your earnings. Below are 25 of the most common LLC deductions and examples of what they could look like in real life. Keep in mind that what you can write off with an LLC may change depending on your business, so you may want to consult a tax professional.
1. Payroll expenses
If you have employees, wages, salaries, commissions, and bonuses are all considered deductible business expenses. For instance, if you operate a digital marketing agency and pay two employees a total of $7,500 per month in wages, those payments count as LLC tax write-offs. Payroll taxes and benefits also fall under this category.
2. Office rent
Rent paid for physical office space, co-working space, or leased storefronts is fully deductible if the space is used strictly for business purposes. For example, if your LLC leases a retail space for $2,000 per month, you can write off $24,000 annually. Even virtual office leases may qualify depending on their use. Just be sure the lease agreement is in your business name.
3. Utilities
Utilities like electricity, water, gas, and trash service tied to your commercial space are considered essential business expenses. Imagine you run a photography studio and pay $350 a month in utilities to keep the lights on and equipment running, you can deduct that $4,200 annually.
4. Home office deduction
You may qualify for a home office deduction if you use a specific space in your home exclusively and regularly for business. If you run an online consulting business from a dedicated room that takes up 15% of your home’s square footage, you can deduct 15% of rent, utilities, insurance, and more.
5. Marketing and advertising
Marketing is a vital part of growing your business, and the associated expenses are typically tax-deductible for LLCs. This includes spending on digital ads, print materials, branded merchandise, and even your website. If you run a handmade goods shop and spend $2,500 on Facebook ads, email platforms, and postcards, that full amount can be written off.
6. Insurance premiums
Business-related insurance policies, like general liability, property, errors and omissions (E&O), or workers’ compensation, are fully deductible. A construction LLC might pay $3,000 annually in liability and property insurance. These costs protect your business and qualify as LLC deductions.
7. Office supplies and expenses
Items like paper, pens, postage, notebooks, and toner are all considered standard LLC write-offs if used for business purposes. For example, if your consulting firm spends $600 annually restocking your supply cabinet, those purchases are deductible. Don’t forget to save receipts and track recurring purchases like printer ink and mailing supplies to make the process easier.
8. Travel expenses
Business trips — including airfare, hotel stays, car rentals, and baggage fees — are deductible as long as they are primarily for business. Let’s say you attend a trade conference in New York and spend $450 on airfare, $800 on lodging, and $150 on local transportation. That entire $1,400 trip could be claimed as a business expense, as long as you document the business purpose and keep records.
9. Meals
Business meals are typically 50% deductible if they’re tied to business activities like client meetings or travel. If you spend $120 on lunch and coffee while entertaining a potential client, you can deduct $60. It’s important to note that the IRS requires you to record the meal’s date, business purpose, and attendees for it to be deductible. It’s a good idea to keep every receipt in case of an audit.
10. Professional fees
Any fees paid to professionals like attorneys, tax preparers, accountants, or consultants are fully deductible. If your LLC pays a CPA $1,000 to prepare your taxes and a legal advisor $1,500 for contract reviews, you can write off the full $2,500.
11. Education and training expenses
Courses, webinars, industry certifications, and other forms of professional development are deductible if they improve or maintain your business skills. For instance, if you’re a freelance writer and enroll in a $300 SEO course, you can deduct the full cost. The education must be relevant to your current business, not a new field you’re hoping to get into.
12. Charitable contributions
LLCs taxed as corporations can deduct charitable donations made to qualified nonprofits. For example, if your business donates $1,000 to a registered 501(c)(3) organization, that amount may be deductible. If you’re a single-member LLC, donations may need to be deducted on your personal return instead, depending on how your LLC is taxed.
13. Licenses and permits
Any licenses or permits required by local, state, or federal law to legally operate your business are deductible. A food truck operator might pay $500 annually for health and vending permits. That amount qualifies as a business expense, so long as the licenses are directly tied to LLC operations.
14. Depreciation
Business assets like equipment, computers, and furniture typically lose value, or depreciate, over time. Instead of deducting the full cost in the year you buy them, you generally write off a portion each year based on IRS guidelines. Say you purchase a $3,000 work laptop, you might deduct part of that amount annually over its useful life. However, under Section 179 of the tax code, you may be able to deduct the entire cost in the first year, as long as the item qualifies and you stay within the annual deduction limits.
15. Vehicle expenses
If you use your car for business, you can deduct either actual expenses or the IRS standard mileage rate. For example, if you drive 4,000 business miles in a year and use the 2024 mileage rate of 67 cents per mile, you could deduct $2,680. However, you must keep a mileage log showing the date, miles driven, and purpose of each trip for vehicle expenses to qualify.
16. Loan interest
Interest on business loans, lines of credit, or business credit cards is deductible. If your LLC takes out a $20,000 loan and pays $1,200 in interest over the year, that amount is a valid LLC tax deduction. Make sure the loan is used solely for business purposes, and keep documentation of how the funds are used.
17. Startup costs
You can deduct up to $5,000 in startup expenses during your first year of business, with the remainder amortized over 15 years. These expenses may include legal fees, research, business formation costs, and initial marketing. Imagine you spend $7,500 getting your LLC off the ground, you may deduct $5,000 this year and the rest gradually.
18. Self-employment tax deduction
If your LLC is taxed as a sole proprietorship or partnership, you’re responsible for self-employment taxes. You can deduct half of this amount on your personal tax return. For instance, if your self-employment tax totals $6,800, you can deduct $3,400. This deduction helps offset the double tax burden entrepreneurs face.
19. Employee benefits
Health insurance premiums, retirement plan contributions, and other fringe benefits offered to employees are deductible business expenses. If your LLC provides a $ 200-per-month health insurance plan for each employee in a team of four, that’s $9,600 annually that you can deduct.
20. Bank fees
Monthly fees from your business checking account, credit card processing fees, overdraft charges, and wire transfer costs are all deductible. If your LLC pays $20 per month in banking fees and $200 per year in payment processing costs, you can deduct the entire $440.
21. Software subscriptions
Tools like QuickBooks, Slack, GoDaddy Airo, and other subscription-based platforms you use to operate your business are deductible. If you pay $25 per month for design software and $30 per month for invoicing tools, that adds up to $660 in annual LLC write-offs.
22. Internet and phone expenses
If you use internet or phone services for business, a portion or the full cost may be deductible. If you work from home and use the internet 60% for business, you can deduct 60% of the bill. The same rule applies to a dedicated business cell phone line or VoIP service.
23. Repairs and maintenance
Costs related to the upkeep of your office, storefront, or equipment are considered deductible. If your LLC spends $800 repairing your in-office HVAC system or $200 on printer repairs, those costs are business-related and deductible. Routine maintenance and unexpected fixes can both qualify.
24. Inventory costs
The cost of inventory — also known as cost of goods sold (COGS) — is deductible. If you own a T-shirt printing business and spend $5,000 annually on blank shirts, ink, and packaging, those are valid LLC tax deductions tied directly to revenue generation.
25. Bad debts
If you’ve extended credit to a customer who fails to pay, you may be able to write off the uncollected amount as a bad debt. For example, if you invoice a client $1,200 for design work, and they never pay despite follow-up attempts, that unpaid invoice may qualify as a deductible business loss under IRS rules.
Non-deductible LLC expenses
While many business costs qualify as LLC tax deductions, not everything you spend money on will pass the IRS test. Some expenses are strictly off-limits, even if they feel business-related at the time. Here are a few common non-deductible LLC expenses to watch out for:
- Personal expenses: You can’t deduct anything that isn’t directly tied to your business. That includes personal groceries, clothing, or family vacations, even if you took a call during the trip.
- Fines and penalties: Parking tickets, late fees, and other penalties from government agencies are not deductible.
- Commuting costs: Traveling from home to a regular office isn’t considered business travel, so mileage or transit costs for your daily commute won’t qualify.
- Political contributions: Donations to political candidates, parties, or campaigns are never deductible, no matter your intent.
- Entertainment expenses: Taking a client to a sports game or concert may be good for relationship-building, but these costs are not deductible under current IRS rules.
A common mistake small business owners make is blending personal and business expenses. This can create red flags and potentially lead to audits. To stay on the safe side, keep detailed records and separate accounts for your LLC. If you’re filing business taxes for an LLC for the first time, it’s worth researching what qualifies and what doesn’t to avoid surprises.
How to track and categorize LLC expenses
Keeping your business finances organized is one of the most effective ways to maximize your LLC tax deductions. With clear, consistent records, you’ll avoid last-minute stress during tax season and be better prepared in case of an audit.
- Open a dedicated business bank account. This keeps your personal and business finances separate, which makes it easier to track expenses, generate reports, and spot deductions without the guesswork.
- Save your receipts. Hang on to digital or paper receipts for every business-related purchase. Store them in cloud folders, apps, or even a physical file. You’ll need these if the IRS ever asks for proof of your deductions.
- Use a spreadsheet or expense-tracking tool. A simple Google Sheet or accounting platform like QuickBooks or Wave can help you sort transactions into categories — like travel, meals, advertising, or equipment. Categorization makes tax filing faster and more accurate.
- Label expenses clearly. Get into the habit of adding short notes to transactions when possible (e.g., “client lunch,” “website domain renewal”). This makes it easier to remember what was purchased and why it qualifies as a business expense.
- Review your records regularly. Set a monthly reminder to review your expenses, reconcile accounts, and check for missing documentation. Staying consistent all year long means fewer surprises when tax season arrives.
How to write off LLC expenses on your taxes
Once you’ve tracked and categorized your expenses, the next step is to apply those LLC deductions on your tax return. This can be a time-consuming process, but it isn’t as complex as you might think. To write off your LLC expenses:
- Identify each deduction type. Start by grouping your expenses into standard IRS categories, such as rent, office supplies, meals, or advertising. Knowing where each deduction belongs will help you use the right forms and avoid mistakes.
- Gather your documentation. Make sure you have receipts, invoices, mileage logs, or payment records to back up your deductions. These aren’t submitted with your return but should be available if the IRS ever asks.
- Separate capital expenditures. High-cost items like computers, tools, or machinery may need to be depreciated over several years. Use IRS guidelines to figure out whether to deduct the full amount now (via Section 179) or spread it out over time.
- Use the correct IRS forms. If you're a single-member LLC, you’ll usually file with Schedule C. Multi-member LLCs typically use Form 1065, along with K-1s for each member. Your structure determines what forms to complete.
It’s important to note that deductions and tax credits are not the same. Deductions reduce your taxable income, while credits reduce your actual tax bill. If it’s your first time navigating this or your situation is complex, talking to a tax pro can help ensure you’re filing accurately and making the most of your LLC tax advantages.
Your LLC tax deduction checklist for every year
LLC tax deductions can make a big difference for your business finances, but only if you stay organized and proactive all year long. Use this simple checklist to make sure you’re set up for success when tax season rolls around:
- Track every expense — Log business-related purchases as they happen using a spreadsheet, bookkeeping app, or accounting software. The more detailed your records, the easier it is to identify deductions when filing.
- Save your receipts — Whether digital or paper, every receipt tells the story behind your deduction. Scan them into folders, store them in apps, or label physical files so you’re not scrambling later.
- Understand what’s deductible — From travel and meals to software and supplies, not all expenses qualify—but many do. Stay familiar with the categories that apply to your business, and don’t be afraid to revisit the IRS guidelines or trusted business tax resources.
- Keep business and personal finances separate — Mixing accounts makes bookkeeping messier and can raise IRS red flags. A dedicated business bank account makes it easier to categorize spending, calculate write-offs, and stay audit-ready.
- Consult a tax professional — Tax pros know the ins and outs of small business deductions. They can help you apply the right forms, take advantage of credits and depreciation, and avoid costly mistakes.
When you build these steps into your routine, tax time becomes a lot less stressful and a lot more rewarding.
Just getting started? GoDaddy Airo can help you set up your LLC and guide you through the essentials.
Frequently Asked Questions
What is the difference between a deductible expense and a capital expenditure?
A deductible expense is a cost you can subtract from your income in the same year, like software subscriptions, office supplies, or business meals. A capital expenditure, on the other hand, is a big purchase—like equipment or furniture—that provides long-term value. Instead of deducting it all at once, you typically spread the write-off over several years through depreciation.
How much can an LLC write off on taxes?
There’s no set limit on how much an LLC can write off on taxes, as long as the expenses are ordinary, necessary, and directly related to your business. Make sure you document everything and only claim what’s allowed.
What deductions can be claimed without receipts?
The IRS recommends keeping receipts for all expenses, but you may still be able to claim some deductions, like mileage or home office use, if you have other detailed records. This means logs, calendars, invoices, or bank statements that clearly support the deduction. However, receipts are your best defense in case of an audit, so keep them whenever possible.
Disclaimer: This content should not be construed as legal or financial advice. Always consult an attorney or financial advisor regarding your specific legal or financial situation.
