Business Deductions for Contractors & Small Biz Owners in 2025: What You Can—and Should—Write Off
Imagine this: You’re a contractor or small business owner prepping for tax season—and you discover (too late) that every business trip, home office expense, or new piece of equipment could have slashed your tax bill. In 2025, that’s not just imagination—it’s reality. Smart deductions and tax law enhancements are in your toolkit—but only if you know where to look.
What’s New & Key Deductions You Should Know
Section 179 Expensing
Small businesses can now immediately deduct up to $2.5 million of qualifying assets (like machinery, software, equipment)—double the pre‑OBBB limit of $1.25 million. It phases out completely once total purchases hit $6.5 million.
Qualified Business Income (QBI) Deduction Is Permanent
The 20% pass-through deduction for S‑corps, partnerships, and sole proprietors is now permanent—shielding eligible business income from higher personal tax brackets.
Bonus Depreciation & Full Expensing
OBBBA created permanent 100% bonus depreciation for qualified production property—so businesses can fully deduct these assets immediately.
SALT Deduction for Business-Level Pass-Through Entities
Business owners may deduct state and local taxes at the business level, bypassing the federal individual cap.
Mileage, Home Office & Business Meals
Mileage: With the 2025 IRS rate at 70¢ per mile, tracking business miles can lead to significant savings (example: 100 miles/week = $3,640/year).
Home Office: Deduct direct and indirect expenses if your space is exclusively used for your business—or take the simplified deduction of up to $1,500.
Meals: Business meals are 50% deductible, while in-office staff meals or company parties may be fully deductible.
How This Impacts You
Equipment-heavy businesses (construction, tech): Accelerate deductions now with Section 179 and bonus depreciation to reinvest in growth.
Pass-through entity owners: The permanent QBI and SALT workaround deliver ongoing tax relief—especially critical under rising tax rates.
Mobile or remote workers: Maximize deductions using accurate mileage logs, home office write-offs, and meal expense tracking.
New or expanding businesses: Combine multiple strategies—QBI, expensing, home office—to optimize current deductions and supercharge cash flow.
Tax Planning Tips & Strategies
Plan equipment purchases carefully. Buying and placing assets into service by year-end lets you leverage full Section 179 expensing.
Track your miles meticulously. At 70¢/mile, even modest travel adds up.
Keep home office logs. The simplified $1,500 or actual expenses can both deliver meaningful deductions.
Record meals thoughtfully. Make sure they’re documented and business-related to earn the deduction.
Leverage entity planning. If possible, structure as S‑Corp or partnership to qualify for QBI and SALT deductions at the business level.
Stay informed on new laws. Deduction thresholds and rules may change—keep your strategy nimble.
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1. What’s the 2025 limit for Section 179 expensing?
Up to $2.5 million, phasing out dollar-for-dollar starting at $4 million in asset purchases.2. Is the QBI deduction permanent?
Yes—20% deduction for eligible business income is now a permanent part of the tax code.3. Can state and local taxes still be deducted at the business level?
Yes—new laws allow some pass-throughs to bypass the individual SALT cap by deducting at the business level.4. What’s the IRS mileage rate for 2025?
70 cents per mile—a significant write-off opportunity if tracked properly.5. Am I eligible for home office deductions as an employee?
No—home office deductions are limited to self-employed individuals or contractors.6. Are business meals still deductible?
Yes—50% deductible, and staff meals or small gatherings may be fully deductible.
2025 brings powerful deductions and incentive-rich tax changes that savvy contractors, solopreneur, partnership, and small business owners can’t afford to miss. Whether it's expensing thousands in equipment or optimizing your home office write-offs, the right strategy now pays off.
Ready for tailored guidance to supercharge your business deductions and keep more of what you earn?
Join our 2025 Tax Season Waitlist today: tbtxsolutions.com/join
