Cell Phone Tax Deduction and Internet for the Self-Employed

The cell phone tax deduction for self-employed people covers the business-use share of your phone plan, the phone itself and accessories, and the same logic applies to home internet. If you use your phone 60% for work, you deduct 60% of the costs on Schedule C. You do not need a call-by-call log, but you do need a reasonable, documented method for your percentage.

This guide explains how to calculate business use, how the rules differ for a second business line, a new phone purchase, internet and employees, plus a worked example and the mistakes that cause trouble. It is general information, not tax advice; check with a tax professional for your specific situation.

Who can claim the cell phone tax deduction?

Taxpayer	Phone and internet deductible?	Where
Sole proprietor or single-member LLC	Yes, business-use share	Schedule C
Partner in a partnership	Through the partnership, or as unreimbursed partnership expenses if the agreement requires you to pay them	Form 1065 or Schedule E
S corporation owner-employee	Not on your personal return; have the company reimburse you	Company's return, via accountable plan
W-2 employee	No federal deduction; ask for reimbursement	Not applicable
Freelancer with 1099 income and a day job	Yes, for the share used in the freelance business	Schedule C

Unreimbursed employee expenses were suspended from 2018 and the One Big Beautiful Bill Act made that permanent, so employees and S corporation owner-employees should use an accountable plan for tax-free reimbursement instead. For a full picture of what you can claim as a freelancer, see our list of self-employed tax deductions.

How to calculate your business-use percentage

Cell phones are no longer listed property, which once required detailed logs. That change came from the Small Business Jobs Act of 2010, and the IRS later issued Notice 2011-72 on employer-provided phones, as summarized by Morgan Lewis. The business-use percentage still has to be reasonable and supported.

1. Pick a representative period. Two or three typical months, not your busiest launch week.
2. Measure use. Use itemized call logs, screen time reports by app, or a simple tally of business versus personal calls and data.
3. Calculate the percentage. Business minutes or data divided by total. If your plan is unlimited, a time-based estimate is usually more meaningful than data volume.
4. Write it down. A one-paragraph note with the method and result, saved with your tax records.
5. Apply it consistently to monthly bills and to the phone purchase, and review it each year or when your work changes.

Realistic percentages for a freelancer who uses one phone for everything often fall between 30% and 70%. Claiming 100% on your only phone is hard to defend, because almost everyone makes some personal calls.

Second line, landline and business phone numbers

A phone or line used only for business is fully deductible. IRS Publication 587 adds a specific rule for landlines: the basic local service charge for the first landline into your home is a nondeductible personal expense, even if you have a home office. Business long-distance calls on that line, and a second line used exclusively for business, are deductible, and they are deducted separately rather than as part of your home office costs.

Virtual business numbers and VoIP services used only for work, such as a business number app, are generally fully deductible too.

Deducting home internet

Internet follows the same business-use logic. Estimate the share of your connection used for business, based on hours worked online versus household use, and deduct that share. Two points trip people up:

• Internet is separate from the home office deduction. You can deduct business internet even if you do not qualify for a home office. If you do claim one, keep internet out of the home office calculation so you do not double-count; see our home office deduction guide and the Form 8829 guide for the actual-expense method.
• Household size matters. If four people stream and game on the same connection, a 90% business claim will not hold up. Adjust for everyone who uses it.

Buying a new phone, laptop or hotspot

Equipment you buy for the business is deductible in proportion to business use. You have three main options:

Method	How it works	Best for
De minimis safe harbor	Elect to expense items costing $2,500 or less per item or invoice in the year bought	Phones, tablets, hotspots and most laptops
Section 179	Elect to expense the business share in the year placed in service, limited to business income	Higher-cost equipment
Depreciation	Spread cost over the recovery period (5 years for computers and similar equipment)	When you prefer smaller deductions over several years

Accessories such as cases, chargers, earbuds and screen protectors follow the same percentage. A business-only device can be deducted in full. For how to classify these costs in your books, see our guide to business expense categories.

Worked example: a freelance designer's phone and internet

These numbers are illustrative. Lena is a freelance designer working from home. She reviews three months of screen time and call logs and finds about 60% of her phone use is client work. Her household of two uses the internet, and she works online about 40 hours a week; she settles on 50% business use.

Expense	Annual cost	Business %	Deduction
Phone plan ($85 a month)	$1,020	60%	$612
New phone (de minimis safe harbor)	$1,100	60%	$660
Case, charger and earbuds	$180	60%	$108
Home internet ($70 a month)	$840	50%	$420
Business number app (business only)	$240	100%	$240
Total	$3,380		$2,040

At an assumed 22% federal income tax rate plus about 14.1% effective self-employment tax on net earnings, the $2,040 deduction saves her roughly $740 a year. Not life-changing, but it adds up, and it costs only a short note and a folder of receipts.

What if you never tracked business use?

You can still claim a reasonable percentage for past or current years. Rebuild it from what exists: past itemized bills, your calendar of client calls, project management or time-tracking records, and messages with clients. Choose a conservative figure, document how you reached it, and start a proper sample period now so future years rest on better evidence. If a return you already filed missed the deduction entirely, you can generally amend it within the normal time limits.

Records to keep

• Monthly phone and internet bills, or annual statements.
• The sample-period usage data and your written business-use calculation.
• Receipts for phones, devices and accessories, showing date and price.
• Your de minimis safe harbor election statement if you use it (attached to your return each year).
• For reimbursed employees or S corp owners, the expense reports submitted under the accountable plan.

A simple system such as the one in our guide to tracking business expenses keeps all of this in one place.

Common mistakes with phone and internet deductions

• Deducting 100% of a shared phone or family plan. Deduct only your line, and only its business share.
• Deducting family members' lines unless they are employees using them for the business.
• Double-counting internet in both utilities and the home office calculation.
• Forgetting the phone purchase because it was bought on a payment plan. The device cost is deductible based on when it was placed in service; the monthly device installments are not a separate service expense.
• No method on file. A percentage you cannot explain is a percentage an examiner can replace with zero.

Phones for your employees and contractors

If you have staff, you have two clean options. You can provide a company-owned phone used primarily for business, which Notice 2011-72 lets you treat as a tax-free working condition fringe benefit even with incidental personal use. Or you can reimburse employees for business use of their own phones, with a reasonable reimbursement tied to actual business need, paid under an accountable plan. Simply adding a flat phone allowance to paychecks without any business connection is generally taxable wages. Independent contractors are different: they pay for their own phones and build the cost into their rates, and you should not reimburse them as if they were employees unless your contract calls for specific pass-through costs.

For a family business, the same rules apply to a spouse or child on payroll. Our guide to hiring your spouse explains the employment side.

Passing phone costs to clients

Normal phone and internet costs are overhead, built into your rates. But if a client contract covers specific costs, such as international roaming for an on-site project or a dedicated hotspot rented for an event, you can bill them as reimbursable expenses. Show them on a separate invoice line with the receipt, as explained in our guide to reimbursable expenses on invoices. Remember that reimbursements you receive are income, and the cost is your deduction.

Your phone can also be your billing office. Our guide to making an invoice on your phone shows how to send professional invoices between client calls.

Other small deductions freelancers miss

Phone and internet sit alongside software subscriptions, cloud storage, professional dues and business mileage. If you rent your home to your own corporation for meetings, the Augusta Rule is a separate strategy worth reading about. Reviewing these each year as part of year-end tax planning keeps you from leaving money on the table.

Turn the phone you just deducted into your billing tool: create and send invoices with our free invoice generator, with no sign-up required, and download each invoice as a PDF for your records.