What You Can Write Off With an LLC

A Limited Liability Company, or LLC, is a business structure that provides its owners with limited liability protection, similar to a corporation, while often offering the tax flexibility of a sole proprietorship or partnership. This structure appeals to many business owners because it shields personal assets from business debts and liabilities. Beyond liability protection, LLCs can also benefit from various tax advantages through legitimate business write-offs. These deductions reduce a business’s taxable income, which in turn lowers the amount of tax owed.

Understanding Business Expense Deductions

Business expense deductions are based on a core principle established by the Internal Revenue Service (IRS): expenses must be “ordinary and necessary” for the business. An “ordinary” expense is one that is common and accepted in your industry or trade. It does not mean the expense must be habitual or frequent, but rather typical for businesses like yours. A “necessary” expense is defined as one that is helpful and appropriate for your business. This does not mean the expense must be indispensable or absolutely essential, but rather that it contributes to the business’s operation.

The way these deductions are applied and the specific tax forms used depend on how your LLC is classified for tax purposes. An LLC can be treated as a disregarded entity (sole proprietorship) if it has a single owner, a partnership if it has multiple owners, an S-corporation, or a C-corporation. The “ordinary and necessary” rule remains consistent for all business expenses, regardless of classification. Deductions reduce the business’s gross income, lowering taxable income and directly impacting tax liability. Proper expense categorization is a valuable financial strategy.

Common Deductible Business Expenses

Many types of expenses can be deducted, provided they meet the “ordinary and necessary” criteria. Startup costs incurred before your business officially opens can be partially deducted and then amortized. Businesses can deduct up to $5,000 in startup costs and $5,000 in organizational costs in the first year. This immediate deduction is reduced if total startup costs exceed $50,000. Any remaining startup costs are then amortized over a 15-year period, starting when your business begins operations.

Office expenses, such as rent for a commercial space, utilities like electricity and internet, and general office supplies, are deductible. If you operate your business from home, you may qualify for the home office deduction. There are two methods for this deduction: the simplified method ($5 per square foot of home used for business, up to a maximum of 300 square feet ($1,500 maximum deduction)), or the regular method, which calculates the actual expenses attributable to the business use of your home. To qualify, the home office space must be used exclusively and regularly for business, and it must be your principal place of business or a place where you regularly meet clients.

Professional services, including fees paid to lawyers, accountants, and consultants for business advice, are deductible. Travel and meal expenses incurred for business purposes are deductible. Business travel expenses are deductible if you are away from your tax home overnight for business. Meals while traveling for business are 50% deductible if they are not lavish or extravagant, and you or an employee is present.

Vehicle expenses related to business use can be deducted using either the standard mileage rate or the actual expense method. For 2025, the standard mileage rate for business use is 70 cents per mile. The actual expense method allows you to deduct costs like gas, oil, repairs, insurance, and vehicle depreciation, proportionate to business use. Advertising and marketing costs, including website development, social media advertisements, and print ads, are fully deductible.

Insurance premiums for business liability, property insurance, and workers’ compensation are deductible. If you are self-employed and not eligible to participate in an employer-subsidized health plan, you can deduct 100% of the health, dental, and qualifying long-term care insurance premiums paid for yourself, your spouse, and dependents. This deduction is taken as an adjustment to income on your personal tax return and reduces your adjusted gross income.

Education and training expenses are deductible if they maintain or improve skills needed in your current business or trade. However, expenses that qualify you for a new business or profession are not deductible. Wages and benefits paid to employees are fully deductible. Bank fees on business accounts and interest paid on business loans are deductible.

Depreciation allows businesses to recover the cost of certain assets with a useful life of more than one year, such as equipment and furniture, over time. Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software in the year it is placed in service, rather than depreciating it over several years. For 2025, the maximum Section 179 deduction is $1,250,000, with a phase-out beginning when purchases exceed $3,130,000. Bonus depreciation, which allows for a percentage of the cost to be deducted in the first year, is 40% for qualifying property placed in service in 2025.

Keeping Records for Deductions

Meticulous record-keeping is essential for claiming business expense deductions. The IRS requires proper substantiation for all deductions claimed on a tax return. You must have accurate and organized records to support reported expenses. Without adequate documentation, the IRS may disallow deductions, leading to increased tax liabilities and potential penalties.

You should maintain records for all business transactions, including receipts, invoices, canceled checks, and bank statements. For vehicle expenses, a detailed mileage log tracking business miles, dates, destinations, and purposes of trips is essential. Appointment calendars can also serve as supporting documentation for business meetings and travel.

Various methods can be used for record-keeping, from simple spreadsheets to dedicated accounting software or physical filing systems. Digital tools allow for easy scanning and categorization of receipts, while cloud-based software provides secure storage and accessibility. The chosen method should ensure that records are complete, accurate, and readily available for at least three years from the date you file your return, as this is the typical audit period. Establishing a consistent system for capturing and organizing expense information throughout the year simplifies the tax preparation process.

Reporting Deductions on Your Tax Return

After identifying, categorizing, and recording business expenses, the next step is reporting them on your LLC’s tax return. The specific forms you use depend on the tax classification your LLC has elected with the IRS.

If your LLC is a single-member entity and has not elected to be taxed as a corporation, it is considered a “disregarded entity” by the IRS. You will report business income and expenses on Schedule C (Profit or Loss From Business) of your personal Form 1040, U.S. Individual Income Tax Return. For multi-member LLCs, the default classification is a partnership. These LLCs file Form 1065, U.S. Return of Partnership Income, to report their overall income and expenses. Each partner then receives a Schedule K-1, detailing their share of income, deductions, and credits for their individual Form 1040.

Should your LLC elect to be taxed as an S-corporation, it will file Form 1120-S, U.S. Income Tax Return for an S Corporation. Similar to partnerships, S-corporations are pass-through entities, with income and deductions passed through to owners via Schedule K-1. If your LLC is taxed as a C-corporation, it files Form 1120, U.S. Corporation Income Tax Return. On this form, the LLC’s income and expenses are reported at the entity level, and the corporation pays corporate income tax.