Corporate tax deductions are ordinary and necessary business expenses that reduce a company's taxable income, covering costs like employee salaries, rent, advertising, insurance, interest, professional fees, utilities, startup costs, travel, and depreciation, allowing businesses to lower their overall tax liability by subtracting these expenses from their gross income, with specific rules and limits, such as on business meals or interest, applying.
Generally, expenses that may qualify for an itemized deduction include:
The Complete List of S Corp Tax Deductions
C-Corps are allowed to deduct qualified employee fringe benefits such as health and insurance benefits, education assistance, stock options or company discounts, transportation (e.g. company-owned car), moving and housing benefits, retirement plans, fitness club memberships, and meals during work hours.
Because all the earnings stay “inside” the corporation, no dividends are paid to shareholders, and, therefore, there's no double taxation. Double taxation also isn't an issue when a C corporation's taxable income levels are low. You can often achieve this by paying reasonable salaries and shareholder employee bonuses.
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
In general, an LLC can write off all ordinary and necessary business expenses, with no specific dollar limit. However, certain expense categories like vehicle and meal costs have specific percentage limitations or stipulations set by the IRS.
The section 179 deduction allows taxpayers, other than trusts and estates, to elect to expense a specified amount of the cost of qualifying property purchased for use in a business. For tax years beginning in 2026 the maximum deduction is $2,560,000, (2025, the maximum deduction is $2,500,000).
Many business expenses are 100% deductible, including advertising, employee wages, rent, supplies, and certain business meals like company parties or meals for the public, while personal deductions like student loan interest or charitable donations (depending on the type) can also be fully deductible for individuals. The key is that the expense must be "ordinary and necessary" for your trade or business or meet specific IRS criteria, often differentiating from the 50% rule for client meals.
S Corporations: The S Corp must either provide phones as a working condition fringe benefit or reimburse employees for business use under an accountable plan.
Common tax return mistakes that can cost taxpayers
34 Big Tax Deductions (Write-Offs) for Businesses in 2025
Taking a small director's salary topped up with regular dividends from profits is the most tax-efficient way to pay yourself through a limited company. The most tax-efficient director's salary in 2025-26 is either £5,000, £6,500, or £12,570.
Fines, penalties, and legal violations
The IRS does not allow deductions for expenses tied to breaking the law or failing to meet regulatory requirements. These payments are treated as penalties, not business costs. This includes government fines, parking tickets, late tax payment penalties, bribes, and kickbacks.
The Internal Revenue Code allows taxpayers to claim a capital loss deduction from their annual capital gains. Capital loss deductions from regular income are limited to $3,000 a year. Losses over this limit can be carried forward and claimed in future tax years if you make use of a capital loss carryover.
How to reduce your Corporation Tax Bill (legally)