Deductions for 2025 (Tax Year 2024): A Beginner's Guide

You’ve worked hard to get where you are, and one thing you’ve no doubt learned along the way is that tax season is usually the biggest pain when you’re managing your accounts.

And if you’re not familiar with the deductions you may qualify for that pain is even worse.

Don’t pull your hair out over the confusing (and ever-changing) tax code— just need some help from the right advisors. Then you can lower your overall tax bill and keep more of your hard-earned money.

In this guide, we’ll break down the essentials of tax deductions for tax year 2024 (what you’ll file in 2025). Whether you’re an individual filer, a small business owner, or someone looking to maximize advanced tax-saving strategies, this article will provide you with the tools you need to take control of your taxes.

We’ll start with standard deductions, the simplest way to lower your taxable income. Then, we’ll explore business deductions, which can help entrepreneurs and freelancers save big. Finally, we’ll dive into advanced deductions, perfect for those looking to optimize their finances with more complex tax strategies.

Let’s get started on your path to smarter tax filing in 2025!

Standard Deductions

As usual, taxpayers, including business owners, can choose between standard deductions and itemized deductions when filing their 2024 income taxes. 

(The standard deduction or itemized deductions differ from self-employed business expense deductions. To maximize your deductions across all income types, we highly recommend you get the tax advice you need for your specific situation.)

Many prefer the standard deduction offered by the IRS due to its simplicity. This fixed amount reduces taxable income and varies based on your filing status. The IRS has increased the standard deduction to account for annual inflation. The standard deduction for married couples filing jointly for tax year 2024 rose to $29,200, an increase of $1,500 from tax year 2023. 

For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600, an increase of $750 from 2023. For heads of households, the standard deduction is $21,900, an increase of $1,100.

The standard deduction amounts for tax year 2024 (taxes filed in 2025) and for tax year 2025 (taxes filed in 2026) are as follows:

Business Deductions

The more tax deductions your business claims, the lower your taxable profit—and that means more money in your pocket.

But knowing what’s deductible and following IRS rules is key. Also, you and your CPA need to know the difference between credits and deductions for businesses and how to claim them on your tax return. 

In simple terms, a deduction is an amount you subtract from your income when you file so you don’t pay tax on it. A credit is an amount you subtract from the tax you owe. Here are credits you can claim when you file your taxes this year.

As for business deductions, claiming as many of them as you're entitled to can make a big difference for your bottom line. 

So, the question now becomes …

What Deductions Can Your Small Business Claim?

When totaling up your business expenses, remember these common deductions:

Auto Expenses

If you use a car for business, you can deduct costs like gas, maintenance, and even depreciation. There are two ways to calculate this:

• Actual Expense Method: Track and deduct all business-related car expenses, including depreciation.
• Standard Mileage Rate: Deduct a set amount for every mile driven (67 cents per mile for 2024) plus business-related tolls and parking fees.

Startup Costs

Getting your business off the ground? You can deduct up to $5,000 in startup expenses the first year. The rest must be spread out over 15 years.

Legal and Professional Fees

Fees for lawyers, tax pros, or consultants are deductible. If the service benefits future years, spread the deduction across the life of the benefit.

Insurance

You can deduct premiums for business-related insurance, including:

• Employee health insurance
• Liability insurance
• Property insurance (fire, theft, flood)
• Business interruption insurance

Travel

Business trips? Deduct airfare, car expenses, lodging, meals, and even laundry. If you mix business with pleasure, only the business-related costs are deductible.

Interest

If you borrow for your business, the interest is tax-deductible. But if your profits exceed $25 million, only 30% of interest expenses are deductible under current laws.

Taxes

Yep, what you paid in taxes can reduce your tax burden. Certain taxes are deductible, like:

• Sales tax on business supplies
• Property taxes on business locations
• Employer-paid payroll taxes

However, federal income taxes on business profits are not deductible.

Education

Training and education expenses that improve your current business skills are deductible. Just make sure it’s related to your existing work—not a new career.

Advertising and Promotion

Deduct the cost of promoting your business, such as business cards, websites, or even sponsoring local events—if there's a clear link to your business.

20% Pass-Through Deduction

If you run a pass-through business (like a sole proprietorship, partnership, or LLC), you may qualify to deduct up to 20% of your net income. This deduction lasts through 2025.

Employee Expenses

Employee salaries, payroll taxes, and benefits like health insurance are fully deductible.

Independent Contractors

The cost of hiring independent contractors, such as bookkeepers or cleaners, is deductible too.

Home Office

If you work from home, you can deduct a portion of your home expenses, like rent, utilities, and maintenance. The space must be used exclusively for business.

Don’t Miss These Additional Write-Offs

Here are some easy-to-overlook deductions:

• Bank fees
• Business association dues
• Office supplies
• Parking fees
• Business gifts (up to $25 per gift)
• Trade shows and seminars

Maximizing deductions takes careful planning, but it’s worth it. When in doubt, consult a tax professional to ensure you’re getting every tax break your business deserves.

Advanced Deductions

When it comes to working with a tax professional this year, Don’t leave money on the table by working with someone who doesn’t understand advanced strategies for reducing your tax burden.

Many CPAs don’t understand that it's possible to save outside the standard deductions. What are we talking about? 

Things like tax-loss harvesting can offset gains and reduce tax liability. Charitable giving or even setting up a private nonprofit foundation can also help.

The IRS also provides tax incentives for business investments in fixed assets through Section 179 and Bonus Depreciation deductions. Let’s take a closer look at these.

These two deductions are often applied for manufacturing and real estate companies, but they can be creatively applied to many other businesses as well. 

Bonus depreciation requires applying the deduction across all assets within a particular asset class, whereas Section 179 allows for more selective application on an asset-by-asset basis. 

Both deductions must be taken in the tax year when the asset is placed into service. However, Section 179 allows flexibility to defer part of the expense, while bonus depreciation requires a set percentage to be applied.

Understanding the differences between these deductions helps optimize tax benefits. Let’s take a look.

Section 179

Section 179 gets its name from section 179 of the Internal Revenue Code. It allows business owners to write off the full cost of eligible property in the year it is purchased and put into use instead of deducting the depreciation over time.

Note: You cannot take a 179 deduction on property purchased in a previous year, even if this is the first year you used the property for business purposes.

Section 179 Eligibility

Property eligible for the Section 179 deduction is usually tangible personal property (usually equipment or office furniture) purchased for use in your business. If you use property for both personal and business purposes, you can only use a Section 179 deduction if the asset is used at least 51 percent of the time for business. 

Section 179 Deduction Limitations

The total amount of purchases you can write off changes every time Congress updates IRC section 179 of the tax code. For tax years beginning in 2024, the maximum section 179 expense deduction is $1,220,000. 

Section 179 + S Corp

Using a Section 179 tax deduction with your S Corp means you can deduct the full purchase amount of business equipment from your personal taxable income. Since an S Corp is a pass-through entity, when a Section 179 deduction is personally allocated to you from an S Corp or partnership, the income and expense are “passed through” to you, and you claim it on your individual tax return. 

This means any income you earn from your S Corporation will be reduced by your Section 179 deductions, and you’ll only have to pay taxes on the reduced amount. 

Bonus Depreciation

If you can't write off an asset immediately, you have to depreciate it. You deduct a percentage of the value each year until you've written off the entire cost.

It's also possible that you can take off extra for expenses that exceed the Section 179 limit, the first year as "bonus depreciation." 

Starting in 2024, bonus depreciation rates decreased to 60 percent.

Bonus Depreciation Eligibility

Eligible assets extend to farm buildings and land improvements with a useful life of 1-20 years, including certain real estate improvements.

Bonus Depreciation Deduction Limitations

Unlike Section 179, there’s no business income limit, so it's usable even when reporting a business loss.

Combining Section 179 and Bonus Depreciation

You can use both Section 179 and bonus depreciation, especially when near the Section 179 deduction limits. However, state regulations may differ from federal rules, so be mindful of potential complications when filing state tax returns.

By strategically using Section 179 and bonus depreciation, business owners can effectively manage their tax liabilities while maximizing deductions on qualifying assets.

• Income and Expense Evaluation: Use Section 179 if you have enough business income; otherwise, bonus depreciation is more suitable.
• Consider Fixed Asset Purchases: If total fixed asset additions exceed Section 179 limits, bonus depreciation may be the better choice.
• Tax Bracket Planning: Analyze current and future tax brackets to decide between accelerated or straight-line depreciation.

Get Help, Get Results

Remember: Staying informed about the latest tax changes is crucial to avoid costly mistakes. The choices you make for your business this year will directly impact your tax obligations next year. 

The right tax professionals can help you navigate complex regulations, maximize tax benefits, and align with current tax laws. 

Lower level CPAs may not even know it's possible to save outside the standard deductions, and even more competent CPAs tend to only know about S-Corporations and real estate investing.

What you want is a CPA who earns a high income, just like you, and who has found a way to pay nearly $0 in tax by leveraging advanced strategies. It's even better if they have an MBA and can perform Chief Financial Officer functions. When you work with a CPA at that level, you’ll find lots of ways to save on tax, even if you're a W2 employee (or active 1099) with zero investment experience.

In turn, that improves your cash flow and gives you more cash to reinvest in your business's success and in your long-term strategy for building generational wealth.