Introduction

Most small business owners know to deduct rent, payroll, and office supplies. But there’s a second tier of legitimate deductions that are commonly overlooked — and those can add up. In my 15+ years advising small businesses on taxes and bookkeeping, I’ve helped clients uncover deductions that reduced taxable income by hundreds — and sometimes thousands — of dollars. This article explains those uncommon deductions, shows how they work, and gives practical documentation and audit-risk guidance you can use today.

Why these “uncommon” deductions matter

  • They directly reduce taxable income. Unlike credits, most deductions lower taxable income before tax rates apply. That means every dollar deducted often saves a significant portion in tax.
  • Many are recurring or related to growth. Deductions such as education, software, startup amortization, or QBI are tied to running and scaling the business.
  • Missing them is often a recordkeeping problem, not a law problem. With straightforward documentation you can usually claim these safely.

Quick note on authoritative guidance

Tax rules change and vary by situation. The IRS maintains current rules for business deductions in Publication 535 and dedicated pages such as “Deducting Business Expenses” and the home office deduction guidance (irs.gov). For the Qualified Business Income deduction (Section 199A), see IRS guidance and Forms 8995/8995-A. I’ll cite these pages where relevant, but treat the material here as educational—not personalized tax advice. (See the disclaimer at the end.)

Key uncommon deductions to watch for

1) Startup costs and organizational expenses

  • What they are: Pre-opening costs (market research, legal fees, advertising before launch) and certain organizational costs for corporations/LLCs.
  • How they work: Under current law you may elect to deduct up to $5,000 of qualifying startup costs in the first year, with the remaining costs amortized over 15 years. The $5,000 immediate deduction phases out dollar-for-dollar when startup costs exceed $50,000 (IR C rules still in effect as of 2025).
  • Practical tip: If you organized and launched a business late in the year, the election to deduct vs. amortize can affect the first-year tax bill. Track pre-opening invoices separately from post-opening expenses.

2) Qualified Business Income (QBI) — Section 199A deduction

  • What it is: A potentially sizable deduction worth up to 20% of qualified business income for eligible pass-through entities (sole proprietors, partnerships, S corps, certain trusts and estates).
  • Why it’s often missed: Complex eligibility, phase-ins, wage/property limitations, and differences for specified service businesses make the deduction non-intuitive.
  • Action steps: Use internally consistent bookkeeping and retain Form 8995 or 8995-A worksheets. If you’re a high-income owner of a service business, run the numbers with a tax pro; simplified computations are available for smaller filers (IRS Form 8995) while larger or more complex filers use Form 8995-A. See FinHelp’s guide: Section 199A: Qualified Business Income Deduction Overview (https://finhelp.io/glossary/section-199a-qualified-business-income-deduction-overview/) and the IRS guidance on QBI.

3) Self-employed health insurance deduction

  • What it is: If you’re self-employed and not eligible for employer-subsidized health coverage through a spouse, you can generally deduct 100% of your health insurance premiums (self, spouse, dependents) as an above-the-line deduction.
  • Why it’s important: It reduces adjusted gross income (AGI), which can improve eligibility for other deductions and credits.
  • Verify: Keep insurance statements and proof of payment; confirm eligibility rules match your family’s coverage situation (see IRS “Deducting Health Insurance” guidance).

4) Continuing education, certifications, and industry-specific training

  • What qualifies: Courses, seminars, professional licensing fees, and subscriptions directly related to maintaining or improving skills for your trade or business.
  • Caveat: Education that qualifies you for a new trade or meets minimum requirements for a new profession is not deductible.
  • Documentation: Course invoices, agendas showing business relevance, and travel records if travel was required.

5) Limited business gifts and client incentives

  • Rule of thumb: Business gifts to individuals are generally deductible up to $25 per recipient per year (IRS limit still applies as of 2025). Promotional items (logo pens, mugs) intended for broad distribution do not count toward the $25 limit in the same way and are often deductible as advertising.
  • Practical use: Use promotional swag for marketing and keep gift receipts when gifting to specific clients or employees.

6) Home office and related internet/utility allocations

7) Software, subscriptions, and microcapital expenditures

  • What to consider: Monthly SaaS subscriptions, design apps, bookkeeping tools, and small equipment purchases can be deductible. Under de minimis safe-harbors and Section 179 or bonus depreciation rules, many small purchases may be expensed immediately rather than capitalized.
  • Tip: Use consistent categorization in accounting software so trial balance reports show qualifying amounts easily.

8) Business use of your vehicle beyond the standard mileage method

  • Options: Standard mileage rate or actual expense method (depreciation, gas, insurance, repairs, interest). If you use your car for both business and personal, keep mileage logs showing date, purpose, and miles.
  • Documentation: A contemporaneous mileage log or a credible digital tracking app reduces audit risk.

9) Retirement plan setup and employer contributions

  • Why it’s uncommon: Many small owners delay retirement plan setup. Contributions to SEP-IRAs, solo 401(k)s, and SIMPLE plans are deductible and reduce taxable income while funding retirement.
  • Action: Compare plan types and contribution limits; a solo 401(k) allows higher employee-elective deferrals if you qualify.

10) State and local licensing fees, continuing professional education, and small regulatory fees

  • Often overlooked: Fees that are mandatory to maintain your business license or meet state regulatory requirements are deductible as ordinary business expenses.

How to document and substantiate uncommon deductions

  • Keep organized records: receipts, invoices, bank/credit card statements, contracts, and contemporaneous logs (for mileage and home office use).
  • Use accounting software: Categorize expenses consistently and reconcile monthly. This reduces missed deductions and saves time if you’re audited.
  • Keep a brief memo explaining the business purpose for borderline items (e.g., client entertainment, promotional trial giveaways).

Sample calculation: home office allocation (regular method)

  • Home area used exclusively for business: 200 sq. ft. Home total: 2,000 sq. ft. Business-use percentage = 200 / 2000 = 10%.
  • If annual rent is $24,000 and utilities $2,400, then deductible portion = 10% * ($24,000 + $2,400) = $2,640.

Audit risk and best practices

  • Uncommon deductions attract more IRS scrutiny when records are thin. Keep clear, contemporaneous records and reasonable allocation methods.
  • For complex rules (QBI, cost segregation, large Section 179/bonus depreciation claims) use a tax advisor. I routinely recommend pre-year-end planning calls for any client expecting a high income or large capital purchases.

When to consult a tax professional

  • You’re claiming QBI and have W-2 wage or UBIA questions, large pass-through income, or a specified service trade or business.
  • You plan to claim large startup deductions or take costly bonus depreciation or Section 179 elections.
  • You face state nexus questions (multi-state sales or remote employees) or expect an IRS notice.

Internal resources

Authoritative external sources

Common mistakes to avoid

  • Failing to segregate personal and business expenses.
  • Over-allocating home expenses without exclusive-use justification.
  • Relying on memory for mileage—use a digital log or contemporaneous notes.
  • Assuming promotional items always count as advertising; document distribution and business intent.

Conclusion

Uncommon deductions are often the easiest to overlook and the simplest to document. With organized records and occasional professional help, most small business owners can safely claim these expenses and materially reduce taxable income. Start by reviewing your books for the categories above, gather supporting documentation, and consider a focused tax planning session before year-end.

Professional disclaimer

This article is educational and does not constitute individualized tax advice. Tax law can change and outcomes depend on facts specific to your business. Consult a qualified tax professional or CPA to determine which deductions apply to your situation.

Author note

These recommendations reflect common practice and my experience advising small business owners over 15 years. I frequently see missed savings in startup amortization, QBI optimization, and proper categorization of software and subscription expenses.