*I am not a tax professional. This is meant to be an educational tool and NOT a recommendation. Each personal situation is different and there’s a lot of grey area in self-employed deductions. If you have questions (even just little ones) … talk to a tax expert.*
‘I need a phone for business’ he said.
‘But don’t you use it for non-business stuff?’, I wondered in his general direction.
‘ Ya. But business made me get it. So. Business.’What could I say. The facts were ironclad.
I watched him walk away and hoped one day I would know as much as him. Argue so well. And look half as good in a sweater vest.
– excerpt from my new screenplay ‘Deduct This’ (It’s going to be kind of an Argo meets Analyse this… I have some interest from Danny DeVito’s people).
Screenplay aside… let’s talk about the rules for deducting internet and phone.
Even though the above scene is dramatized to fully take advantage of DeVito’s acting chops, I’ve heard the argument before.
And I shared that argument with an accountant friend of mine recently. His response sealed the deal.
“But would you not have a phone if you didn’t have a business?”
If the answer is yes… then maybe we have something to talk about. If not… only a percentage of that phone (and internet) is going to be allowed as a business expense.
How much of your phone/internet can you deduct?
The wonderful Canadian personal finance blog ‘Give me back my five bucks’ has a timely quote:
“If you only have one internet connection or phone line into your home, you cannot claim the whole cost as a business expense. The Canada Revenue Agency (CRA) expects you to have some personal use of a single connection, so you may claim the percentage used for business purposes. If you have an exclusive-use business phone line or internet connection, then you can claim the entire bill.”
So if you have a private business line… it gets simple. But if you just have one cell phone and one internet package how much do you use your phone/internet for business?
There’s no set answer. Every business is going to be different. I definitely use my phone less than I use the internet for my work.
It’s tempting to just claim 50%… seems like a fair and round number, but when I ran that by a few accountants I got some raised eyebrows
“Seems a little high” said one.
Figuring out my phone and internet deduction
Forcing me away from a default answer made me give a little thought to how much I actually use those things for business.
What seems reasonable?
I ended up with this:
- Phone: 30%
- Internet: 50%
When I browsed my call logs and data usage on my phone… it really did seem more personal than the more even split on internet (that’s my home internet plan).
In the end, those percentages are what felt reasonable so I’m running with it.
If you’re not sure, I’d chat with your accountant and see what they think makes sense for a business like yours.. and in light of all your other deductions.
