The internet has become an indispensable tool for both personal and professional endeavors. For self-employed individuals and small business owners, internet expenses often constitute a significant portion of their operating costs. Fortunately, the Internal Revenue Service (IRS) recognizes the necessity of internet connectivity in today’s business landscape and allows for the deduction of a portion of these expenses. However, determining the deductible percentage can be a complex task, as internet usage often encompasses both business and personal activities.
Eligibility for Internet Expense Deduction
Self-Employed Individuals and Small Business Owners:
- Individuals who are self-employed or own small businesses may deduct a portion of their internet expenses if they use the internet for business purposes.
W-2 Employees:
- W-2 employees who work remotely are not eligible to deduct internet expenses. However, they may be able to request reimbursement from their employers.
Calculating the Deductible Percentage
The deductible percentage of your internet bill is determined by the proportion of time that you use the internet for business purposes. This percentage can be calculated using various methods, including:
- Time Tracking: Keep a detailed log of your internet usage, noting the specific times and duration of business-related activities.
- Estimated Usage: If time tracking is not feasible, you can estimate the percentage of business use based on your typical work schedule and internet usage patterns.
Example:
If you use your home internet for business purposes 40% of the time, then you can deduct 40% of your monthly internet bill.
Exclusions
Certain internet-related expenses are not deductible, including:
- Personal use of the internet
- Activities that are not directly related to your business
- Expenses that are reimbursed by your employer
Maximizing Your Deduction
To maximize your internet expense deduction, consider the following tips:
- Keep Accurate Records: Maintain detailed records of your internet usage, including dates, times, and business purposes.
- Use a Dedicated Business Connection: If possible, establish a separate internet connection for your business to avoid commingling personal and business usage.
- Utilize Business-Specific Devices: Use a dedicated computer or mobile device for business purposes to simplify tracking and avoid personal use.
- Consider Home Office Deduction: If you use a portion of your home exclusively for business purposes, you may be eligible to deduct a portion of your home internet expenses through the home office deduction.
Deducting a portion of your internet expenses can significantly reduce your tax liability. By understanding the eligibility requirements, calculating the deductible percentage, and maximizing your deduction, you can ensure that you are taking advantage of this valuable tax savings opportunity.
Here’s How To Write-Off Your Internet And Phone Expenses (Home Office Deduction!)
FAQ
How much internet can I claim for work?
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Electricity for computer
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1c per hour for 10 hours per week for 48 weeks
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Electricity for heating/cooling
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9c per hour for 10 hours per week for 48 weeks
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Telephone
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$600 per year x 48 weeks / 52 weeks x 40%
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Internet
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$720 per year x 48 weeks / 52 weeks x 25%
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Are Internet bills tax deductible?
Note: If your only reason for claiming the internet is a bit of spreadsheet use, your deduction is unlikely to be very much. That’s because you can only claim part of your total internet bill. (More on this later!) If you’re a W-2 employee and work from home, your internet bill is not tax-deductible.
Can a taxpayer deduct the cost of home internet service?
A taxpayer may deduct the cost of home internet service pursuant to section 162 if the expense is ordinary and necessary in the taxpayer’s trade or business. See Fessey v. Commissioner, T.C. Memo. 2010-191, slip op. at 13.
What percentage of Internet costs are deductible?
For instance, if you only work from home 25 percent of the time, only 25 percent of your costs are deductible. Work out how much you actually use the Internet for work purposes and then assign a daily or monthly value to get a more accurate cost of use for work purposes.
What is the home internet deduction?
Because of the Tax Cuts and Jobs Act (TCJA), the only way for you to reap the benefits of the home internet deduction is to have your corporation reimburse you for the deduction. In the case of a reimbursed employee expense, the corporation deducts the expense as a utility expense, and