Every Business Expense Category That Could Be Saving You Money

I’ve been working with Houston business owners for over a decade. The ones who stay organized end up with thousands more in their pocket at the end of the year. The ones who don’t pay the price in April.

Last year I had two marketing consultants in the Memorial area with almost identical revenue. One guy kept his receipts organized, tracked his mileage, logged his meals. The other threw everything in a shoebox and hoped for the best. When we got done with their returns, the organized guy kept $6,200 more than the other. Same gross income. Different outcome.

The key difference was how they categorized their expenses.

Every receipt matters. That $47 lunch with a prospect. The 1,800-plus miles you drove for client meetings. The $89 software subscription that came off your personal credit card. Leave it out and you’re just handing money to the IRS.

What Makes an Expense Deductible

The IRS calls it “ordinary and necessary.” Those two words control everything.

Ordinary means normal for your type of work. A Spring Branch electrician buying copper wire is ordinary. That same electrician buying a boat is not.

Necessary means it makes reasonable sense for running your business. You don’t need the IRS auditor to think it was clever. You just need them to see it made sense.

Both ordinary and necessary? Deductible. The hard part is documenting it right and putting it in the right category so you have the paper trail when questions come up.

The Categories That Actually Matter

Advertising and Marketing

Anything you spend to bring in clients. Website design, hosting, Google Ads, Facebook ads, LinkedIn sponsored content. Business cards, brochures, flyers. Trade show booths. SEO services. Social media management. Even that billboard off the Westheimer exit if that’s your thing.

I’ve got a law firm in the Galleria that runs about $2,847 a month in Google Ads and another $520 in content marketing. That adds up to $40,404 in deductions they’re claiming for the year. One category, huge number.

Vehicle Expenses

Trucks, cars, vans, whatever you use for work. There are two ways to claim them.

Standard mileage is 70 cents per mile for 2025. You track your business miles, multiply by 0.70, done. Clean and simple.

Actual expense method adds up everything. Gas, oil, maintenance, repairs, insurance, registration, depreciation. I’ve got a contractor out in Katy who drives an F-250 for his work and puts up 18,342 business miles a year. Standard mileage gives him $12,839. But that truck’s insurance is expensive, and he had $3,100 in repairs last year. With actual expenses, he came out ahead.

Here’s what kills most people. You have to document every business mile. Date, destination, purpose, mileage. I’ve watched the IRS throw out $14,000 in vehicle deductions because the client’s mileage log was gone. No log, no deduction.

Contract Labor

Any money paid to freelancers, subcontractors, consultants, or contract workers. Designers, writers, programmers, temp agencies, construction subs, whoever.

Here’s the rule that matters. If you pay someone $600 or more in a year, you have to send them a 1099-NEC by January 31st. You need their W-9 filled out before the first payment. I get calls every late January from panicked clients who paid someone $8,500 and never got a W-9. Don’t be that person.

Depreciation and Equipment

Equipment, machinery, furniture, vehicles, computers, building improvements. The big ticket items you use over several years.

I worked with a construction company in Pearland that bought a $52,000 excavator last year. Using Section 179, we wrote off the whole $52,000 in year one instead of spreading it over seven years at $7,428 annually. That’s significant timing for cash flow and taxes.

The rules matter here. You need to know when to use Section 179, when bonus depreciation works better, and when to just depreciate over time. This is where getting a CPA involved actually pays for itself.

Insurance

All of it. General liability, professional liability, property insurance, workers’ comp, business interruption, cyber liability, commercial auto insurance. All deductible.

Your self-employed health insurance is deductible too, but it goes on a different line than your Schedule C. Still saves you money, just filed differently.

Interest

What you pay to borrow money for your business. Business credit card interest, business loans, lines of credit, equipment financing. All of it.

Here’s what gets people in trouble. Personal credit card interest is never deductible, even if you used it 100% for business purchases. The IRS sees it as personal debt. Get a business credit card instead and life becomes a lot cleaner.

Legal and Professional Services

Attorneys for business matters, CPA fees, tax prep, bookkeeping services, consultants, financial advisors. All deductible.

You might spend $2,100 a month on good bookkeeping but find an extra $3,500 in deductions that would have gone unclaimed. The service pays for itself and then some.

Office Expenses

Paper, pens, office supplies, postage, printer ink, small equipment, software subscriptions, cloud storage. Everything you need to keep the office running.

These pile up fast. $47 for something, $83 for something else, $15 in stamps, $129 for a subscription. I had a consulting firm in Midtown that got to $3,247 in office expenses by December. They would have missed that entire amount if we weren’t tracking it month to month.

Rent and Lease Expenses

Office rent, warehouse space, storage, equipment leases, vehicle leases. Anything you pay to use without owning.

Home office works differently. If you use part of your home exclusively for business, you can deduct it. Two ways to calculate. Simplified method gives you $5 per square foot up to 300 square feet. Or actual expense method where you figure out what percentage of your home is office space and deduct that percentage of your mortgage, rent, utilities, insurance, and repairs.

Repairs and Maintenance

Equipment repairs, building maintenance, vehicle maintenance, computer repairs. Keeping everything functional.

The key distinction. If you’re fixing something so it keeps working, that’s a repair and it’s deductible now. If you’re doing something that extends the useful life significantly, that needs to be capitalized and depreciated instead. New engine in your work truck? Capitalize it. Oil change? Repair. The line gets blurry sometimes and that’s where a CPA earns their money.

Supplies

Whatever materials you use up doing your work. Cleaning supplies, small tools, packaging, job-specific materials.

I’ve worked with a cleaning company in Bellaire that runs $8,347 a year on supplies. Every bit of it is deductible.

Taxes and Licenses

State and local business taxes, payroll taxes, business license fees, professional license renewals, property taxes on business property, Texas franchise tax if you’re above the threshold.

Here’s what’s never deductible. Federal income taxes. Penalties. Fines. Parking tickets. IRS penalties. None of it.

Travel

Trips for work. Airfare, hotels, rental cars, rideshares, baggage fees, tips. Meals while traveling get deducted at 50 percent.

You need to write down why you went. “Dallas 3/15-3/17, attended industry conference, met with potential clients” works better than just “Dallas trip” if the IRS ever asks what it was for.

Meals (Business)

Fifty percent deductible. Meals with clients, business associates, or while traveling.

You need the receipt, and you need to write down who attended and what you discussed. Business has to actually be discussed before, during, or after the meal.

That $127 dinner at Pappas Bros with a prospective client about their project? You deduct $63.50. But only if you wrote on the receipt that you met with Sarah Johnson from ABC Company to discuss the Q2 project. Don’t just write “dinner.”

Utilities

Electricity, gas, water, internet, phone. The infrastructure that keeps your business running.

If you work from home, you deduct the business portion. Home office takes up 15 percent of your square footage, you deduct 15 percent of your utilities.

Wages

Salaries, hourly wages, bonuses, commissions, vacation pay, sick pay.

If you’re a sole proprietor or partnership, you can’t deduct your own salary. Your draw comes from profit. If you’re incorporated as an S-corp or C-corp, then you can pay yourself a wage and deduct it.

What You Can’t Deduct

Some things sound like business expenses but aren’t.

Personal expenses. Period. Doesn’t matter if you bought them during work hours.

Commuting from home to your regular office. That drive doesn’t count. But driving from the office to a client site does.

Clothing unless it’s a uniform or protective gear you can’t wear anywhere else. That nice suit for client meetings doesn’t cut it.

Political contributions. Never.

Penalties, fines, parking tickets, IRS penalties, late fees. None of that.

Personal portions of things. Your phone is 60 percent business and 40 percent personal? You deduct 60 percent.

Anything lavish or extravagant. The IRS doesn’t define it precisely but you know it when you see it.

Houston Things to Know

Texas has no state income tax, which is great. But don’t think state-level taxes disappear completely.

Texas Franchise Tax hits if your revenue goes over $2,470,000 in 2025. Below that, you file but owe nothing. Above it, you pay.

Depending on your industry, the rules change. Construction companies out in Cypress and Spring have their own deduction rules. Oil and gas companies have specialized provisions. Medical practices have different requirements. Restaurants have their own set of rules. Know what applies to you.

The Documentation That Saves You in an Audit

For every deduction, you need a receipt. Amount, date, vendor. Proof of payment from your bank or credit card statement. The business purpose written down somewhere. For meals and travel, who was there and what you discussed.

How long do you keep it?

What You’re Keeping	How Long
General business records	3 years minimum
Employment tax records	4 years
Depreciation records	Life of the asset plus 3 years
Bad debt or loss records	7 years

I recommend keeping everything for 7 years. Safer that way.

How to Actually Make This Happen

Good expense tracking doesn’t take heroics. It takes consistency.

Weekly. Fifteen minutes categorizing transactions.

Monthly. Review your statements and reconcile.

Quarterly. Look at your year-to-date totals by category. Do they make sense?

Annually. Year-end cleanup before tax season.

I’ve watched simple systems that get used beat complicated systems that are abandoned by March every single time.

What This Saves You

Every dollar of legitimate deductions saves you about 25 to 40 cents in taxes, depending on your tax bracket and how your business is set up.

Claim $10,000 more in properly documented deductions and you keep $2,500 to $4,000 in your pocket.

That’s not aggressive planning. That’s just tracking what you actually spent.

We help Houston businesses build their chart of accounts, categorize expenses the right way, and keep the records that make the IRS auditor’s job easy. Contact us if you want help getting your system right.

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This is general information, not tax advice. Your specific situation is different from everyone else’s. Talk to a CPA about what applies to you.