Deductions and Owner Reimbursements
Deductions are where entity structure and daily habits meet the tax return. The rules are not exotic. Most of them require that an expense be ordinary and necessary, that it actually be business, and that you can prove it. What varies is how they work for different entity types, and that is the theme of this hub.
The most important structural point is the difference between owners who are employees and owners who are not. Sole proprietors and single-member LLC owners deduct business costs directly on Schedule C. S-corp and C-corp owners are employees of their own company, and unreimbursed employee expenses are generally not deductible on personal returns under current federal law, which is why the accountable plan guide is a good place to start. It explains how a corporation can reimburse owners tax-free.
From there, the guides address the deductions owners ask about most. Home office and vehicle deductions both come down to qualification tests and records. Business meals and travel explains the 50 percent rule and what to write down. Self-employed health insurance is a personal-return deduction with its own limits.
Two guides deal with employing relatives, which can be legitimate and valuable when documented: hiring family members and hiring your children. For bigger purchases and new ventures, see startup and organizational costs and Section 179 and depreciation basics. Finally, is it a business or a hobby covers the profit-motive test that sits underneath every deduction.
A note on figures: we mention limits and rates only for years we are sure of and label them by year, because they change. Always confirm current amounts. The bookkeeping hub shows how to capture the records these deductions depend on.
All 10 guides in this topic
- Accountable Plans: How to Reimburse Owners and Employees Tax-FreeHow an accountable plan works, the three IRS requirements, what can be reimbursed (home office, mileage, phone), how to write and run one, and why S-corp owners in particular rely on it.
- The Home Office Deduction: Rules, Methods, and Common MistakesWho qualifies for the home office deduction, regular and exclusive use, principal place of business, simplified versus actual expense methods, and how S-corp owners handle it differently.
- Vehicle Deductions for Business Owners: Standard Mileage, Actual Expenses, and RecordsHow to choose between the standard mileage rate and actual vehicle expenses, what counts as business travel, what records the IRS expects, and how the rules differ for corporations and heavy vehicles.
- Business Meals and Travel Deductions: What Qualifies, What Is Limited, and What to RecordThe rules for deducting business meals and travel, including the 50 percent limit, entertainment restrictions, overnight travel requirements, per diem, and documentation practices.
- The Self-Employed Health Insurance Deduction: Who Qualifies and How It WorksHow sole proprietors, partners, and S-corp shareholders deduct health insurance premiums, the earned income limit, the eligibility rules around other employer coverage, and how to report it.
- Hiring Your Spouse or Family Members: Tax Rules, Wages, and DocumentationHow to legitimately employ a spouse, parents, or other relatives in your business, including reasonable wages, payroll tax treatment, benefits, and documentation that holds up.
- Hiring Your Children in the Family Business: Payroll Exemptions, Limits, and ProofHow employing your own children can work for a small business, including FICA and FUTA exemptions in a parent-owned sole proprietorship or partnership, the child's own tax situation, and documentation.
- Startup and Organizational Costs: What You Can Deduct Before Opening DayHow the tax rules treat costs incurred before a business opens, including the $5,000 startup and organizational deductions, amortization, what qualifies, and record-keeping tips for new businesses.
- Depreciation, Section 179, and Bonus Depreciation: A Small Business PrimerHow businesses recover the cost of equipment, vehicles, and improvements, including capitalization versus expensing, MACRS, Section 179, bonus depreciation, safe harbors, and planning cautions.
- Is It a Business or a Hobby? The Profit Motive Test and What It Means for DeductionsHow the IRS distinguishes a business from a hobby, the nine factors, the presumption for profitable years, consequences for deductions, and how to document business intent for side ventures.
Not sure where to start? Browse the FAQ, look up terms in the glossary, or see the other topic hubs.