Tax Deduction Cheat Sheet for Online Entrepreneurs
Running an online business is incredibly rewarding, but it also comes with challenges. Taxes are usually one of them. Understanding which expenses you can deduct is one of the best ways to keep more of your hard-earned revenue and reduce stress at tax time.
This guide breaks down the most common (and often overlooked) deductions for online entrepreneurs so you can feel more confident and prepared. If you want a simple overview of how business taxes really work, download my free guide, The Tax Basics Every New Business Owner Should Know. It’s a simple, non-overwhelming introduction to the core pieces every online business owner needs.
1. Home Office Deduction
If you run your business from home, there’s a good chance you qualify for the home office deduction. To claim it, you need to use a specific part of your home regularly and exclusively for business.
Home office expenses can include:
- A portion of your rent or mortgage
- Utilities like electricity and internet
- Repairs made specifically to your office space
You can calculate the deduction using either the simplified method (5 dollars per square foot up to 300 square feet) or the actual expenses method, which uses a percentage of your home’s total expenses.
The biggest rule is “exclusive use.” A dedicated corner of your living room can count, but spaces you share with your family — like your couch or dining room table — don’t qualify. Creating a clearly defined workspace not only helps your productivity but also ensures this deduction is legitimate.
2. Business Equipment and Supplies
Any tools or equipment you use directly for your business are deductible. This includes laptops, cameras, phones, office furniture, and everyday supplies like pens, notebooks, printer ink, or shipping materials.
Larger purchases may need to be depreciated over several years, but many entrepreneurs can deduct the full cost in the year they purchased it using Section 179.
Be sure to keep detailed documentation, including receipts and what the item is used for. A little record keeping goes a long way with this category.
3. Marketing and Advertising
Promoting your business is considered a deductible expense. This includes:
- Paid social ads
- Website hosting
- Domain fees
- Email marketing platforms
- Branding, photography, or video production
- Influencer collaborations
Even if you handle marketing yourself, all software tools you use to create and run your campaigns qualify. Good marketing fuels growth, and these deductions support that investment.
4. Professional Development
If you’re improving your skills to support your business, those expenses are deductible.
Common examples include:
- Online courses
- Certifications
- Workshops and webinars
- Business books
- Conferences
Just be sure the training directly relates to improving or maintaining skills you need for your current business.
5. Travel Expenses
Business travel can be deducted when the trip is primarily for business.
Deductible travel expenses include:
- Airfare
- Hotel stays
- Rental cars and rideshares
- Meals while traveling (50 percent)
If a trip mixes business and personal time, you can only deduct the business-related portion. For example, if you attend a two-day conference and then stay for a three-day vacation, only the first two days count.
Don’t forget smaller costs like baggage fees, parking, and tips. These add up over the year.
If you want more help understanding what qualifies, read my blog post on travel deductions.
6. Meals and Entertainment
Business meals are 50% deductible, but entertainment costs are generally not. For meals, save receipts and note the purpose, who was present, and how it relates to your business. Examples include lunch with a client, meals during business travel, or even a team meeting over coffee.
If you’re hosting a team retreat or event, food provided as part of the program may qualify for higher deduction rates. While entertainment is no longer deductible, expenses closely tied to meals during a business event might still be partially eligible. Clear record-keeping is key to ensuring these deductions stand up to scrutiny.
7. Professional Services
Hiring professionals is a legitimate business expense and is fully deductible.
Examples include:
- Accountants and bookkeepers
- Attorneys
- Virtual assistants
- IT specialists
- Consultants
- Designers and creatives
If you’re delegating tasks or getting expert help, those fees reduce your taxable income.
8. Internet and Phone Bills
If you rely on your phone or internet for business, you can deduct a portion of these expenses. For example, if 30% of your internet usage is business-related, you can deduct 30% of your internet bill. If your cell phone is primarily used for business, then you can deduct a larger portion, for example 80% – 85%.
9. Taxes and Licenses
Certain taxes and fees are deductible, including business license renewals, state and local taxes, and even sales tax on business purchases.
State-specific fees, such as franchise taxes or annual reporting charges, also qualify. However, payments like quarterly estimated taxes or your income tax payments don’t qualify as business deductions.
10. Health Insurance Premiums
Self-employed individuals can deduct their health insurance premiums for themselves, their spouses, and dependents. To qualify, your business must generate a profit, and you must not be eligible for coverage through another employer or a spouse’s plan.
If you offer health insurance to employees, you can also deduct these premiums as a business expense. Keep detailed records of all premiums paid, as well as any employer contributions if applicable.
11. Bank and Payment Processing Fees
Business-related financial fees are fully deductible. This includes monthly bank account fees, credit card processing charges, and platform fees from services like PayPal, Stripe, or Square.
These fees are often provided in annual reports by payment processing platforms, making it easy to compile totals. By categorizing these expenses accurately in your bookkeeping software, you’ll ensure they’re captured correctly during tax preparation.
12. Insurance Premiums
Business insurance premiums, such as liability insurance, professional liability (errors and omissions), and cybersecurity insurance, are fully deductible. These policies protect your business from potential risks and ensure peace of mind.
Evaluating your insurance needs annually ensures your coverage is adequate while maximizing this deduction. Keep records of policy agreements, payments, and any claims filed, as these documents may be needed for tax purposes.
Stay Organized and Maximize Your Deductions
Keeping clean records throughout the year makes tax time easier and helps ensure you don’t miss legitimate deductions.
Use bookkeeping software, store receipts digitally, and make sure you’re running everything through a dedicated business bank account.
If you want help understanding the basics of taxes as a business owner, download my free guide:
👉 The Tax Basics Every New Business Owner Should Know
If you want step-by-step help calculating how much to save for taxes, how quarterly payments work, and how to avoid surprise tax bills, check out my course:
👉 Know What You Owe: A Step-by-Step System for Quarterly Taxes
Understanding your deductions is one of the simplest ways to keep more of what you earn and make tax season far less stressful.
