
Running a successful business requires a deep understanding of the various expenses that are recognized for tax purposes. These expenses allow businesses to reduce their tax liability and increase profitability, making it essential to know how to categorize and claim them legally to minimize overall business taxes.
While each business has unique deductible expenses, this article outlines the common tax-deductible expenses, categorized for clarity and convenience.
Operational and Ongoing Expenses
Website Maintenance – Includes hosting, site development, and operation.
Office Maintenance – Covers rent, electricity, water, maintenance, and management fees. For home offices, only the proportional share (excluding rent/mortgage expenses) is deductible.
Office Rent – Rent for offices, warehouses, or stores qualifies as a deductible expense (except when the office is part of a residential property).
IT Services – Software, cloud services, domain management, and backups are fully deductible.
Postal and Delivery Services – Includes regular mail and shipping costs.
Vehicle Maintenance – Repairs, fuel, registration, and insurance (45% deductible for self-employed individuals).
Light Refreshments – Tea, coffee, soft drinks, and snacks offered at the workplace (partially deductible).
Office Supplies – Stationery, paper, printer ink, printing services, folders, and other materials.
Repairs and Maintenance – Consumables and routine maintenance services.
Electricity – Fully deductible for office use; partially deductible if working from home.
Municipal Taxes (ארנונה) and Water Bills – Fully deductible for offices, stores, or warehouses, with proportional deduction if the office is at home.
Professional Services and Consulting
Auditing and Accounting Services – All accounting-related services are fully deductible.
Professional Consulting – Includes tax consulting, legal advice, business consultancy, financial advice, advertising, and marketing consulting.
Business Coaching – Fully deductible for tax purposes.
Professional Training and Travel – All costs for professional training and related travel are deductible.
Advertising and Marketing Services – Covers traditional and digital media campaigns, promotions, and public relations.
Salaries and Human Resources
Employee Salaries – Includes wages, national insurance, and pension contributions.
Subcontractors – Payments to freelancers with invoices are fully deductible.
Holiday Gifts for Clients, Suppliers, or Employees – Limited deduction up to a certain annual amount.
Work Uniforms – Clothing designated for the business, particularly if branded with a company logo or trademark.
Pension Contributions – Self-employed individuals can contribute up to 16.5% of their taxable income, subject to a cap.
Study Fund Contributions – Self-employed individuals can contribute up to 4.5% of their taxable income, subject to a cap.
Transportation and Travel Expenses
Taxi Rides – All business-related taxi expenses are fully deductible.
Public Transportation – Buses, trains, and light rail expenses for business purposes.
Private Vehicle Maintenance for Business Use – Partial deduction for expenses like fuel, insurance, and repairs.
Flight Tickets and Accommodation Abroad for Business Purposes – Deductible under certain conditions, including airfare, lodging, and meals.
Capital Assets and Investment Expenses
Depreciation of Fixed Assets – Expenses for purchasing equipment like computers, furniture, and machinery are deductible through depreciation over the asset’s lifespan.
Inventory Purchases – Includes raw materials and products needed for production and sales.
Website Development – Classified as a capital expense, deductible through depreciation over several years.
Insurance and Financial Expenses
Business Insurance – Covers business, equipment, professional, and third-party liability insurance.
Bank Interest and Fees – Banking expenses related to business activities are deductible.
Additional Expenses
Professional Dues and Membership Fees – All fees paid to professional associations are deductible.
Professional Literature – Includes one daily newspaper relevant to the business field.
Gifts – Limited deduction for gifts to clients, suppliers, or employees.
Phone Bills – Landlines and mobile phones used for business purposes (partially deductible).
National Insurance Contributions – 52% of payments made by self-employed individuals are deductible.