Introduction
Running a small business in Texas comes with several tax advantages, including no state income tax and various deductions that reduce taxable income. Knowing which deductions you qualify for can help you lower your tax bill and maximize profits.
This guide outlines the top tax deductions available to Texas small business owners, how to claim them, and ways to stay IRS-compliant.
Home Office Deduction
If you use a dedicated space in your home for business purposes, you can deduct a portion of:
- Rent or mortgage interest
- Utilities (electricity, internet, water)
- Property taxes and homeowners insurance
Two Methods to Claim
- Simplified Method: Deduct $5 per square foot, up to 300 square feet.
- Regular Method: Deduct actual expenses based on the percentage of home used for business.
Business Vehicle Deduction
If you use a car for business, you can deduct either:
- Standard Mileage Rate: $0.67 per mile for 2025.
- Actual Expenses: Gas, repairs, maintenance, insurance, and depreciation.
Qualifying Uses
- Driving to client meetings
- Business errands (bank, supply store, post office)
- Traveling to job sites
Office Supplies & Equipment
Deduct 100% of costs for:
- Office furniture (desks, chairs, filing cabinets)
- Computers, printers, and software
- Business phone and internet expenses
Bonus Depreciation
- Section 179 deduction allows businesses to deduct the full cost of equipment in the year purchased.
Business Meals Deduction
Deduct 50% of business-related meal expenses, including:
- Client meetings
- Employee lunches
- Networking events
Must be:
- Directly related to business
- Properly documented with receipts and business purpose
Travel Expenses
Business-related travel is 100% deductible, including:
- Airfare, hotel stays, and transportation
- Meals (50% deductible)
- Business conference fees
Advertising & Marketing Deduction
Deduct all marketing expenses, such as:
- Website development and hosting fees
- Social media advertising
- Business cards, flyers, and promotional materials
Employee Wages & Benefits
Deduct 100% of wages and benefits paid to employees, including:
- Salaries, bonuses, and commissions
- Employee health insurance premiums
- Retirement plan contributions (401(k), SEP IRA)
Self-Employment Tax Deduction
- Self-employed individuals can deduct 50% of self-employment taxes paid to cover Social Security and Medicare.
Insurance Premiums Deduction
Deduct premiums for:
- Business liability insurance
- Property insurance
- Workers’ compensation coverage
Retirement Plan Contributions
- Contributions to a Solo 401(k), SEP IRA, or SIMPLE IRA are tax-deductible.
- Reduces taxable income while saving for retirement.
Professional Services Deduction
Fees paid to:
- CPAs, attorneys, and consultants
- Business coaching services
- Tax preparation and bookkeeping
Education & Training Deduction
- Business courses, seminars, and workshops
- Online training programs
- Industry certifications
Rent & Lease Expenses
- Rent paid for office space, warehouses, or retail locations is fully deductible.
- Equipment leases (computers, vehicles, machinery) are also deductible.
Telephone & Internet Costs
- If used primarily for business, a portion of your cell phone and internet bill can be deducted.
Bad Debt Deduction
- Businesses can deduct unpaid invoices or loans that become uncollectible.
Legal & Licensing Fees
- Business registration, LLC filing fees, and state licensing fees.
Startup Cost Deduction
- Deduct up to $5,000 in business startup expenses in your first year.
Business Interest Deduction
- Interest on business loans, credit cards, or lines of credit is deductible.
Utilities Deduction
- Electricity, water, gas, and waste disposal costs for business properties are deductible.
Software & Subscriptions
- Business-related software, accounting tools, and industry-specific subscriptions qualify.
How to Claim These Deductions
Step 1: Keep Accurate Records
- Maintain receipts, invoices, and mileage logs.
- Use accounting software for expense tracking.
Step 2: Separate Personal & Business Expenses
- Open a dedicated business bank account.
- Use business credit cards for business purchases.
Step 3: File the Right Tax Forms
- Sole Proprietors & Single-Member LLCs: File Schedule C (Form 1040).
- Partnerships & Multi-Member LLCs: File Form 1065 + K-1 Statements.
- Corporations: File Form 1120 (C-Corp) or Form 1120S (S-Corp).
Should You Work with a CPA for Business Tax Planning?
A CPA can help:
- Identify all eligible deductions to lower taxes.
- Ensure tax compliance and prevent IRS audits.
- Maximize business tax credits to increase savings.
Conclusion
Texas small business owners can save thousands of dollars annually by taking advantage of tax deductions. Proper record-keeping and tax planning are essential to ensure maximum savings and IRS compliance.
For expert business tax guidance, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.