Can I Write This Off?

can i deduct internet

TL;DR

Internet expenses can be deductible if they are necessary for business purposes, but personal use must be excluded from the deduction.

Detailed Answer

Internet expenses are deductible when they are necessary for conducting business activities. For small business owners and freelancers, this means you can deduct the portion of your internet bill that is used for business. If you use the internet for both personal and business purposes, you must allocate the cost between the two. For example, if you use the internet 60% of the time for business and 40% for personal use, you can only deduct 60% of the internet expenses. It's important to maintain records that justify the business use percentage, such as logs or usage reports. Home office users may also include internet expenses as part of their home office deduction, provided they meet the home office deduction criteria.

Where to Put It on the Tax Form

Schedule C, Line 25 for utilities, or include as part of home office expenses on Form 8829 if applicable.

Real World Example

A freelance graphic designer works from home and uses the internet for client communications and uploading design files. If their monthly internet bill is $100 and they determine that 70% of their internet use is for business, they can deduct $70 per month, totaling $840 annually.

Calculation Required

A calculation is required for this deduction.

To calculate the deductible amount, determine the percentage of internet use that is for business purposes. Multiply the total internet bill by this percentage. For example, if your internet bill is $100 and 70% is for business, your deduction is $100 x 0.70 = $70.

Audit Risk & Documentation Tips

Moderate audit risk. Keep detailed records of your internet usage, including logs or reports that show business versus personal use. Save copies of your internet bills and any documentation that supports your business use percentage, such as a work schedule or client communication logs.

IRS Reference

IRS Publication 535, Business Expenses; IRS Publication 587, Business Use of Your Home.

Relevant Industries

FreelancersConsultantsOnline RetailersGraphic DesignersIT Professionals