Utilities as Business Deductions for Income Tax Purposes
Utilities include gas, water, sewer, electricity, and heat. These utilities will go on form 8829 as they are deductions through the business use of the home.
When you are filing for a business use of your home, there is a space to place your utilities. Then, there is a space that asks the total square footage of your home and then the total square footage of the designated home office space. Once you put all this information in their appropriate spaces, the tax program will calculate the percent used for the business use of the home. This percent will then be used to determine the amount of utilities that will be used as a business deduction.
Internet and Cell Phone
Internet and the cell phone will go on Schedule C, line 25, as a deduction for the business.
When it comes to taking a legitimate business deduction for internet and cell phone expenses, one must have proof (receipts, bills) that show proof of business use. It is not likely the IRS is going to prove 100% business deduction for your cell phone (unless you have two separate cell phones) and internet. Believe it or not, we are all smarter than that.
You have two choices. You can keep a log of your internet use. Figure the percentage and use that percentage of use to determine your business cost every month. At the end of the year, add all twelve months, and that will give you the cost of your business internet deduction.
If that is too bothersome, let’s face it, who really has time to do that when we are trying to run a business? Then do what I myself do and have done for my clients—take a 50/50 split. Unless you know for sure your business is part-time, and it’s more of a 25/75, the 50/50 is the easiest and might very well be the safest.
When it comes to cell phone usage, it is a little easier to take care of. Make sure you opt to have the billing method that will list the time, date, call duration, the number dialed, and the price. This will allow you to go through the billing statement at the end of the month, marking the ones that are business calls. Add these, and this will be your monthly business deduction for your cell phone.
A Note About the Home Phone
If your home phone is used for business purposes, do not deduct the base rate (including taxes) of the first phone line into the house. Any additional costs that exceed the base rate are deductible.
Translation: If there is only one phone in the house, and you are using it for business purposes, you cannot deduct the cost of the telephone each month.
You can, however, deduct long-distance phone calls made for the business, features that have to be added to the phone for a business, or a second line brought in to the home (so long as that phone is used for business purposes only).
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.