The mechanical list of business deductions — ordinary and necessary expenses under IRC §162, startup costs under IRC §195, IRC §179 expensing and bonus depreciation, the home-office deduction, the R&D credit and IRC §174A expensing — is set out in section “Business Income Deductions” and is not repeated here. What that list does not cover are the structural moves that turn ordinary operations into tax savings.
If your business reimburses you or your employees for business expenses incurred personally — a share of home internet, a cell phone, mileage, travel — do it through a formal accountable plan ( Treas. Reg. §1.62-2, “Reimbursements and other expense allowance arrangements”). Under such a plan, with proper substantiation, the reimbursement is a deduction to the business and tax-free to the recipient. Without one, the reimbursement is taxable wages — and because the TCJA suspended the unreimbursed-employee-expense deduction, an S-corporation owner who skips the accountable plan simply loses the deduction.
IRC §280A(g), “Disallowance of certain expenses in connection with business use of a home” lets you rent your home for up to 14 days a year without reporting the rental income at all. A business owner can rent their residence to their own company for legitimate business use — a board meeting, a planning retreat — so the company deducts the rent and the owner receives it tax-free. The rate must be defensible with documented comparables (event-venue or short-term-rental quotes), and the meetings must be real and minuted. Inflated or undocumented rates have been struck down in Tax Court; treated with discipline, the provision is sound.
Wages paid to a child for genuine, age-appropriate work are deductible to the business, and the child’s standard deduction shelters those wages from income tax up to the standard-deduction amount (Table 6.1). The kiddie tax does not reach earned income. One important interaction: wages paid to a child under 18 are exempt from Social Security and Medicare tax only when the employer is a sole proprietorship or a partnership owned solely by the child’s parents. Elect S-corporation status and that exemption disappears — the corporation must withhold payroll tax on the child like any other employee. Earned income also opens the door to a Roth IRA contribution for the child, converting business profit into decades of tax-free compounding (section “Roth IRA”).