The rule: only the business part
A business expense has to be ordinary and necessary for your work. For a driver who gets every order through an app, or a freelancer who talks to clients all day, a phone clearly is.
The limit is personal use. The IRS rule for any expense that is partly for business and partly personal is to separate the two parts: you deduct the business part, and the personal part is generally not deductible. That is why almost nobody can deduct a whole phone bill.
How to figure your business percentage
The IRS does not give a formula for phones or internet. What it asks is that you can show how you got your number. Pick a reasonable method, write it down and use it the same way all year:
- By time. Compare the hours you use the phone for work, such as the hours you are online in the delivery or rideshare apps, with the total hours you use it.
- By usage. Your phone shows screen time and data by app. A few typical weeks give you a percentage you can document.
- A line only for work. A second phone or line that you use only for your business is 100% deductible.
If it is your only phone, a claim of 100% is hard to defend, because you also use it for personal calls and messages.
What you can deduct
Cell phone plan. The business share of what you pay each month, with its taxes and fees. Mounts, chargers and cases that you buy for work are supplies.
Home landline. The basic charge for the first telephone line into your home, including taxes, is a personal expense and is not deductible, even if you use it for work. Two things on a landline are deductible: business long-distance calls on that first line, and a second line used only for your business.
Home internet. The same general rule applies: you deduct the share you use for your business. The IRS publications for small businesses do not mention home internet by name, so there is no special percentage or form for it. Figure a reasonable business share and keep the bills.
Mobile data and hotspots. A data plan or hotspot you use to work on the road follows the same rule as the phone plan.
Phone, internet and the home office deduction
You do not need a home office to deduct your phone. The IRS says business phone charges are not a cost of using your home, and that you deduct them separately.
Home internet needs more care if you also claim the home office deduction:
- Do not count it twice. If you include internet in the utilities of your home office on Form 8829, do not deduct it again on another line.
- With the simplified method, the flat rate of $5 per square foot takes the place of the actual expenses of your home, such as utilities. The IRS says phone charges stay separate, but it does not say so for home internet. If internet is a big cost for you, check with a tax professional before you deduct it on top of the simplified method.
Buying a phone, tablet or computer
- Up to $2,500 per item or invoice, you can generally deduct the cost in the year you buy it under the de minimis safe harbor, if you treat it the same way in your books. You make the election by attaching a statement to your return.
- Only the business share counts. A phone that costs $900 and is used 60% for work gives you a deduction of $540.
- More expensive equipment is depreciated over several years, or deducted with section 179, on Form 4562. Section 179 requires that you use it more than half the time for your business.
An example
A single filer with $40,000 of profit before these expenses uses a phone 60% for work and home internet 25% for work.
| Paid in the year | Business share | Deduction | |
|---|---|---|---|
| Cell phone plan, $70 a month | $840 | 60% | $504 |
| Home internet, $60 a month | $720 | 25% | $180 |
| Total | $684 |
That $684 lowers the federal tax bill by about $158, between income tax and self-employment tax. It is not the biggest deduction, but it comes back every year.
Where it goes on Schedule C
- Line 25, Utilities, is where the IRS puts business telephone charges. You can also list the business share of your cell phone plan and internet as “other expenses” in Part V, which carries to line 27b. Choose one place and use it every year.
- Part V, other expenses, is also where equipment deducted under the de minimis safe harbor goes.
- Line 13 is for depreciation and section 179, with Form 4562.
Our Schedule C walkthrough covers the rest of the form.
Records to keep
- Your monthly bills or the statements that show each payment.
- A note of your method: how you figured the business percentage, with the weeks or numbers you used.
- The receipt for any phone or computer, and the date you started using it for work.
Our guide on what tax records to keep explains how long to keep them.
If you also have a W-2 job
Unreimbursed employee expenses are generally not deductible on a federal return. If you have a W-2 job and a 1099 gig, only the share of the phone that you use for the gig counts as a business expense.
For the rest of the expenses you can deduct, see 1099 deductions by profession, and enter your totals in our 1099 tax calculator to see what they save you.