Deduction #2 alone saves most S-Corp owners $5,000+
THE IRS DOESN'T PENALIZE YOU FOR MISSING DEDUCTIONS. THEY JUST KEEP THE MONEY.
April 15 is six days away.
If you're filing on time, you still have a window. If you're filing an extension — which most business owners with complex returns should — you have until October 15.
Either way, this is the right time to read this.
This is the final week of the deduction series. Weeks 1 through 3 covered the standard vs. itemized decision, vehicle deductions, and home office. This week is everything else — the deductions that add up to thousands and get missed every single year.
Here's what's not on your return yet.
1. Health insurance premiums
The highest-dollar item on this list for most business owners — and the most misconfigured for S-Corp owners.
Sole proprietors and single-member LLCs: 100% of premiums for yourself, your spouse, and dependents are deductible above the line. This reduces AGI without itemizing.
S-Corp owners: The S-Corp reimburses your premiums through payroll, deducts them as a business expense, and adds them to your W-2 as income. That income is then deducted on your personal return as self-employed health insurance — but those premiums are not subject to payroll tax.
Family health insurance averages $18,000 per year. At 32%, that's $5,760 in annual savings. Many S-Corp owners are paying premiums out of pocket with no deduction because the reimbursement structure was never set up. If that's you, fix it now for 2026.
2. Retirement contributions
Solo 401(k)s and SEP IRAs are not just for businesses with employees. They exist for owner-only businesses.
2025 limits: Solo 401(k) up to $70,000 total ($77,500 if 50+) — employee deferrals up to $23,500, employer contributions up to 25% of W-2 wages. SEP IRA: up to 25% of W-2 wages, capped at $70,000.
S-Corp owners: employer contributions are based on W-2 wages. Sole proprietors: the calculation runs off net self-employment income — about 20% of net profit.
Here's where it gets important for your 2025 return. The Solo 401(k) has two buckets with two different deadlines. Employee deferrals had to be funded by December 31, 2025. If you missed that, it's gone. But the employer contribution can go in up until you file — October 15 if you're extended.
The SEP IRA is even more flexible. You can open one and fund it in a single step — meaning even if you don't have a plan in place today, you can still establish one and make a 2025 contribution up to the due date of your return. April 15 if you're filing on time. October 15 if you extend.
A $30,000 contribution at 32%: $9,600 saved. A $50,000 contribution at 35%: $17,500.
For 2026: establish your 401K by December 31. Fund the employee portion by December 31. The employer side can wait until you file.
3. Professional development
Courses, coaching programs, masterminds, conferences, industry books, professional certifications. Any expense that maintains or improves skills in your current business qualifies.
The line: it has to relate to your existing trade. A consultant taking advanced sales training: deductible. The same consultant taking a real estate licensing course: not deductible.
The practical problem: these get paid from personal accounts and never make it into business expenses. Keep a running list throughout 2026 — don't try to reconstruct it next March.
A $5,000 coaching program at 32% saves $1,600. A $2,000 conference plus travel saves another $640.
4. Business meals
50% deductible when there's a documented business purpose — client meetings, prospect lunches, working dinners with your team.
One exception that is 100% deductible: company-wide events where all employees are invited.
You still need to document who was there, the business purpose, and the date. A note in your phone right after the meal is sufficient. The deduction isn't the obstacle. The habit of tracking is.
5. Legal and professional fees
CPA fees, bookkeeping services, attorneys for business contracts or disputes, business consultants. These are significant expenses that get treated as overhead without being deducted.
Tax preparation: $2,000–$5,000/year. Bookkeeping: $3,600–$7,200/year. Legal: $1,000–$5,000/year.
Combined: $6,600–$17,200 in annual deductions. At 32%, that's $2,100–$5,500 in savings. They belong on the return.
Note: personal legal fees — divorce proceedings, personal estate planning — are not deductible. Business-related legal fees are.
6. Bank and credit card fees
Merchant processing fees run 2.5–3% of revenue. On $100,000 in revenue, that's $2,500–$3,000 in deductible fees per year. Add annual credit card fees ($95–$550 for most business cards), monthly account fees, and wire transfer fees.
Total: often $3,000–$4,000 annually in expenses that get paid on autopilot and never categorized as deductions. At 32%, that's $960–$1,280 saved with no work other than making sure they're in your books.
If your accounting software is connected to your bank, these are being captured. If you're doing manual entry, you're missing them.
7. Software subscriptions on personal cards
Project management, CRM, design tools, email marketing, AI tools, cloud storage, accounting software, communication platforms. The business uses them. These are charged to a personal card. They never make it into business expenses.
Action for this week: pull three months of personal credit card statements. Flag every subscription used for business. Move it to a business card or get it into your bookkeeping going forward.
10 subscriptions at $30/month average: $3,600/year. At 32%: $1,152 saved for an hour of work.
8. Cell phone business use
You use your personal phone for business. A percentage of the annual bill is deductible.
Track business versus personal use for one month. Apply that percentage to your annual plan cost. The IRS doesn't require call-by-call logs — a documented, reasonable estimate is sufficient.
60% business use on $1,200/year: $720 deduction, $230 saved at 32%. Small. It still belongs on the return.
9. Charitable giving
Writing a check is the least tax-efficient way to give. Donating appreciated stock to a donor-advised fund eliminates capital gains, generates a full fair-market-value deduction, and gets the money to charity. Same dollars out of pocket — much better tax outcome.
We covered the full strategy and the math in October. If you give on a regular basis and aren't using either structure, pull up that issue before your next donation.
10. Start-up costs (if you launched in 2025)
Up to $5,000 in start-up costs are deductible in the year you launch: market research, entity formation fees, initial legal and accounting, early advertising, website development. If total start-up costs exceed $50,000, that $5,000 deduction phases out dollar-for-dollar.
Costs below the threshold that aren't deducted in Year 1 are amortized over 15 years. The first-year deduction is overlooked — new business owners assume everything gets capitalized or isn't available until the business turns a profit.
At 24%: $1,200 back in Year 1 on money you already spent.
Add It Up
Missing half of these — a conservative estimate. Every figure below assumes modest usage and a 32% effective rate:
Health insurance: $2,880. Retirement: $4,800. Professional development: $1,200. Business meals: $1,250. Legal/professional: $1,000. Bank fees: $500. Software: $1,152. Cell phone: $540.
Missed tax savings: $13,122 per year.
Over 10 years: $131,220. On deductions that are documented, legal, and expected by the IRS.
These aren't aggressive positions — they're expenses you already paid that never made it onto your return.
If You Filed an Extension, Here's Where You Stand
An extension buys you time to file — not time to act on everything. Some of these had a December 31 deadline. Others are wide open until October 15.
Still on the table:
Retirement contributions — the employer side of a Solo 401(k) and SEP IRA contributions can still be funded up until your extended filing date. This is the most valuable thing you can still do before October 15.
Documentation and categorization — every deduction on this list requires records. If your books aren't clean, now is the time to fix that before the return goes out.
Closed as of December 31, 2025:
Employee 401(k) deferrals — had to be elected and funded by December 31.
Charitable giving — contributions needed to be made by year-end to count for 2025.
Health insurance reimbursement setup — too late for 2025. Set it up now so 2026 is covered.
The rest of this list is about making sure everything that happened in 2025 is on your return. That's still in play.
How to Stop Missing These
Three things that actually move the needle:
Separate business and personal accounts. If you're running business expenses through personal cards, you're losing deductions before they ever reach your CPA.
Categorize monthly, not in March. Every deduction on this list requires documentation. Reconstructing a year of expenses in tax season is how things get missed.
Work with a CPA who asks questions. If nobody's asking "Did you take any courses this year?" or "Is your health insurance running through payroll?" — they're not looking for this stuff.
One more: don't overlook QBI. The 20% qualified business income deduction doesn't require you to spend a dollar. If your business generates $200,000 in qualified income, QBI alone reduces taxable income by $40,000. At 32%, that's $12,800 back.
It's calculated on your return — but only if your income structure supports it and your CPA is applying it right. Above $197,300 (single) or $394,600 (married filing jointly) in 2025, limitations kick in based on your industry and payroll. Service businesses face stricter phase-outs than product or trade businesses.
If nobody has walked you through how QBI applies to your situation, that's the conversation to have before your return gets filed.
Want a systematic review of what you're missing, and a plan to stop leaving this money on the table in 2026? Book a consultation with Better Bookkeeping.
Until next time,
Mitchell Baldridge, CPA, CFP®
P.S. That wraps the deduction series. Four weeks, the decisions that move the needle. Save them — these are worth $15,000–$30,000 annually for most business owners. None of it requires anything aggressive. Just the right structure and consistent tracking.