Common Tax Deductions for LLCs (2026 Guide)

An LLC can deduct any expense that is ordinary and necessary for its business under IRC section 162. Ordinary means common in your line of work, and necessary means helpful and appropriate for running the business. A default single-member LLC is a disregarded entity, so these deductions flow onto Schedule C of your personal return, while a multi-member LLC reports them on Form 1065.

The categories most owners use are home office, vehicle, health insurance, retirement contributions, startup costs, software and subscriptions, professional fees, and business travel and meals. On top of the direct expenses, eligible owners take the qualified business income deduction and deduct half of their self-employment tax. Each deduction lowers taxable income, which is why disciplined expense tracking pays for itself.

The home office deduction applies when you use part of your home regularly and exclusively for business. The IRS offers two methods. The simplified method multiplies the square footage of your office by a set rate the IRS publishes each year. The actual expense method deducts the business-use percentage of rent, mortgage interest, utilities, insurance, and repairs.

Exclusive use is the rule people miss. A spare room used only for the LLC qualifies, but a kitchen table shared with family does not. Keep a simple record of the room dimensions and the total home size so the business-use percentage is defensible if the IRS asks. If you outgrow the home office, the same principle carries over to a rented office or coworking membership, which is fully deductible.

Yes. Business use of a vehicle is deductible under one of two methods. The standard mileage rate multiplies your business miles by a per-mile rate the IRS sets each year, so check the current figure rather than relying on last year's number. The actual expense method deducts the business-use share of gas, insurance, maintenance, and depreciation. You pick one method and track miles either way.

Business travel away from your tax home is deductible in full for airfare, lodging, and ground transport. Meals are different. Most business meals are deductible at 50%, whether you are traveling or hosting a client locally. Commuting from home to a regular workplace is never deductible, so log the business purpose of each trip to keep personal and business miles separate.

Yes, and both are among the largest write-offs available to a self-employed LLC owner. The self-employed health insurance deduction lets you deduct premiums for medical, dental, and qualifying long-term care coverage for yourself, your spouse, and dependents. It is an above-the-line deduction, so you claim it even without itemizing, subject to the earned income limit.

Retirement contributions are just as powerful. A SEP-IRA lets you contribute a percentage of net self-employment earnings, and a Solo 401(k) allows both employee and employer contributions for a higher ceiling. Contributions reduce taxable income now and grow tax-deferred. The exact annual limits change each year, so confirm current thresholds before you fund the account near tax time.

A new LLC can deduct up to $5,000 of startup costs in its first year under IRC section 195, with the remainder amortized over 15 years. Startup costs include market research, legal and formation fees, and the price of investigating whether to launch the business, all incurred before you open for operation.

Formation itself is a deductible cost. Our Anonymous LLC package is $397 all-in for Wyoming, and state-specific formations start from $347 total, all of which falls inside the section 195 startup category. If your total startup spend exceeds a phase-out threshold the first-year deduction shrinks, so keep every formation, filing, and consulting receipt from before your launch date.

The qualified business income deduction, under IRC section 199A, lets eligible US taxpayers deduct up to 20% of their pass-through business income. Because an LLC is a pass-through entity by default, its net profit qualifies. This deduction sits on top of your ordinary expense deductions, so it stacks with everything above.

The 20% figure is a ceiling, not a guarantee. Above certain income thresholds the deduction phases out for specified service businesses such as consulting, law, and accounting, and is limited by W-2 wages paid and the value of business property. The rules are worth modeling with a tax professional, but for many owners under the threshold the full 20% applies with no wage test at all.

Depreciation lets an LLC deduct the cost of equipment and other long-lived assets, and two provisions accelerate it into the first year. Section 179 expensing and bonus depreciation both allow a large upfront write-off for qualifying property placed in service during the tax year.

Section 179 deducts the full cost of qualifying equipment, machinery, and off-the-shelf software up to an annual dollar cap, limited to the amount of profit the business earns that year. Bonus depreciation covers assets beyond the Section 179 cap and applies even in a loss year. Both require the asset to be purchased and placed in service by December 31, so timing a year-end purchase pulls the deduction into the current return. Assets you do not expense upfront are written off over the recovery periods the IRS sets for each asset class, from five years for computers to 39 years for commercial buildings.

An LLC cannot deduct personal expenses, commuting miles, fines and penalties, political contributions, or the personal share of any mixed-use cost. The test is the ordinary-and-necessary standard in IRC section 162: an expense must serve the business, not the owner's private life.

Several disallowed items catch new owners. Clothing you can wear outside work is personal even when you bought it for a client meeting. The drive from home to a regular workplace is commuting and never deductible, while travel between two business locations is. Entertainment such as event tickets is fully disallowed, and the meal half of any outing follows the 50% rule. Keep business and personal spending on separate cards so the split is clean and every claimed deduction survives an IRS review.

A non-resident owner deducts business expenses only against income that is effectively connected income (ECI), meaning income tied to a US trade or business. If the LLC has no ECI, there is no US taxable income to reduce, so the deductions above do not come into play on a US return. Non-residents also do not pay self-employment tax and therefore do not claim the half-of-SE-tax deduction.

When a non-resident-owned LLC does generate ECI, ordinary and necessary expenses reduce that ECI in the same way they would for a resident. The QBI deduction, by contrast, is limited to eligible US taxpayers. Because the treatment turns on residency and ECI status, non-resident owners should keep US and foreign expenses cleanly separated and confirm their filing position with a cross-border tax advisor.

Pair this with strong bookkeeping. Read our guide to LLC accounting basics to set up the record-keeping that supports every line above, and see self-employment tax for how the deductible half interacts with your return.