If you’re self-employed, every business expense you deduct reduces your taxable income, saving you money. Two of the most common yet often underutilized deductions are for your phone and internet. These tools are essential for freelancers, consultants, gig workers, and small business owners—but the IRS requires that you follow specific rules when claiming them. This detailed guide explains how to write off your phone and internet expenses properly and maximize your self-employment tax deductions without triggering red flags.
Why Phone and Internet Qualify as Business Expenses
The IRS allows you to deduct “ordinary and necessary” expenses related to your business. Phone and internet services typically fall into this category because they are essential for communication, marketing, billing, scheduling, research, and managing your operations.
However, since most people also use their phone and internet for personal purposes, you can only deduct the portion used for business. That means calculating your business-use percentage and documenting it carefully.
Eligible Self-Employed Taxpayers
You can claim phone and internet deductions if you report self-employment income on the following forms:
- Schedule C (Form 1040): For sole proprietors and independent contractors
- Schedule F: For farmers
- Partnership or S Corporation filings: If expenses are passed through to personal returns
Even if you’re part-time or just earning side income from freelancing or consulting, you can still qualify for deductions related to your self-employed activities.
What Phone Expenses Can You Deduct?
For most self-employed individuals, phone expenses fall into these categories:
- Business-only phone line: 100% deductible if the line is used solely for business.
- Personal phone with business use: You can only deduct the portion used for business calls, texts, emails, apps, and voicemail management.
- VoIP and virtual phone services: Services like Google Voice, Grasshopper, or RingCentral are deductible to the extent they’re used for your business.
- Equipment costs: If you purchase a phone used primarily for business, you may be able to depreciate the cost over time or deduct it in full under Section 179.
Example: If your monthly phone bill is $100 and you use your phone for business 60% of the time, you can deduct $60/month or $720 for the year.
What Internet Expenses Can You Deduct?
Internet access used for business purposes is also deductible. Just like with your phone, if the service is shared with your household, only the business-use portion is allowed.
Common deductible uses include:
- Uploading and managing business websites
- Video conferencing or virtual meetings
- Email correspondence with clients
- Business-related online research
- Managing e-commerce or booking platforms
Example: If your home internet bill is $120/month and you determine that 50% of it supports your business activities, you can deduct $60/month or $720 annually.
How to Calculate Business Use Percentage
The IRS expects reasonable, good-faith estimates based on actual use. To determine the percentage of use for business, try these methods:
- Phone: Review call logs, text histories, or usage reports. Many providers offer breakdowns that help you estimate business calls vs. personal ones.
- Internet: Track the hours spent on business-related internet activity over a month and compare to your total usage time.
Maintaining a usage diary or spreadsheet for a sample month and applying the same percentage for the year is a defensible approach during an IRS audit.
Where to Report the Deductions on Your Tax Return
For sole proprietors and gig workers using Schedule C, here’s where to include your deductions:
- Line 25 (Utilities): Use this line for internet-related expenses if you work from a home office and it’s part of your utility expenses.
- Line 27a (Other Expenses): Report phone expenses here. You must provide a description, such as “Business Phone – 60% of Monthly Use.”
If you are claiming a home office deduction using the actual expense method, you can allocate a portion of your internet as part of your overall home office utility expenses.
Should You Use Section 179 for Phone Equipment?
If you purchase a new smartphone or business-related technology, you might qualify for an immediate deduction under Section 179, which allows the full expensing of certain capital assets.
Conditions:
- Used more than 50% for business
- Placed into service during the tax year
- Not acquired from a related party
Instead of depreciating the cost over several years, you deduct the full business-use portion in the first year.
Bundled Services: How to Split Phone, Cable, and Internet Bills
If your provider bundles phone, cable TV, and internet services into a single bill, you’ll need to allocate the portion attributable to each. Review your invoice for a breakdown or contact your service provider for clarification. Only the business-use portion of the phone and internet can be deducted.
Documenting and Justifying the Deduction
The IRS requires that you maintain documentation to support any business deduction. For phone and internet, keep the following:
- Monthly billing statements
- Call logs or screenshots of usage
- Business-use calculations
- Receipts for devices or accessories
- A written policy or log of business use (for S Corps or partnerships)
If audited, being able to justify your claimed percentage is key to avoiding disallowance or penalties.
Phone and Internet Deduction Tips for S Corps
If you operate as an S Corporation, you cannot directly deduct phone or internet expenses on your personal return. Instead, follow one of these methods:
- Reimbursement Plan: Use an accountable plan to reimburse yourself from the business for substantiated phone and internet expenses.
- Deduct at corporate level: If the S Corp pays the bills directly, the deduction is taken on the corporate return.
Make sure you document everything and provide receipts to the corporation for any reimbursements.
Common Mistakes to Avoid
- Deducting 100% of your personal phone when it’s also used for non-business purposes
- Failing to document your business-use percentage
- Forgetting to deduct equipment like business phones and modems
- Overlooking tax benefits available through Section 179
Conclusion
Phone and internet are indispensable tools for the self-employed—and they can be powerful tax deductions when used correctly. By calculating your business-use percentage, keeping solid records, and following IRS guidelines, you can confidently deduct these expenses and reduce your taxable income. Whether you’re a freelance designer, online seller, or consultant, claiming these deductions can lead to hundreds or even thousands in annual tax savings. Don’t leave money on the table—document and deduct wisely.
