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Is My Internet Bill Tax-Deductible?
There’s really nothing better than working from home. You can roll out of bed and be at work without needing to commute and worry about traffic or bad weather. The pandemic played a huge role in shifting how people worked, showing us that running a business doesn't always have to be from a storefront. What's made this possible, of course, is digital technology. It has completely changed our lives in every possible way, especially how and where we conduct business. The internet provides anyone access to a network of possibilities, including freelancers and small business owners. If access to the internet is necessary for your work as a self-employed person, you might wonder whether you can write off your internet bill or at least a portion of it. You might also have questions like “Does the internet count as part of a utility bill?” or “Are utilities even tax deductible?” Read on and find out!
Table of contents
Key takeaways...Read more
If I work from home, can I deduct internet costs?...Read more
When is my WiFi bill nondeductible?...Read more
Can a W-2 employee deduct their internet costs?...Read more
Does the home office write-off cover all internet costs?...Read more
How to write off WiFi for business...Read more
What else can I claim on my taxes?...Read more
Key takeaways
- Internet costs are no longer a type of remote worker tax deduction and are only available to self-employed individuals.
- A portion of your internet can be a home business tax deduction.
- Utilities are tax-deductible if you work from home.
If I work from home, can I deduct internet costs?
The answer to this question depends on whether you’re self-employed or work for an employer. Before 2018, full-time employees could write off internet costs as a remote worker tax deduction on their income tax returns. This is no longer the case. For most self-employed people, the internet is necessary to conduct business. You might have an online clothing store, teach piano lessons to students across the country or stream on Twitch. The internet makes it possible for you to run your own business, and without it, your business wouldn’t exist. You can deduct internet costs if you work from home or regularly do business online. Running a business online can include:
- Acquiring new business or customers through various platforms
- Online banking for your business
- Sending emails to customers or vendors
- Monitoring analytics
- Researching new products or pricing information
This deduction can lower your 1099 income, which helps you pay less in SE tax. A self-employed tax calculator can help you calculate this.
When is my WiFi bill nondeductible?
Let’s say you work for Instacart and manage most of your business on the road. You receive assignments, use the maps feature and check on your payments. Once home, you use your personal internet to create a monthly budget. Your monthly budget isn’t technically related to your job, so you couldn’t write off a portion of your WiFi for business. But if you were sending work emails or reviewing your Instacart finances using your home internet, a portion of your home internet bill would be tax deductible. You can always use a 1099 tax calculator to find all the deductions you can claim.
Can a W-2 employee deduct their internet costs?
Sadly, no. Working from home as a W-2 employee doesn’t qualify you for any work-from-home tax deductions. Some employers will reimburse employees for their interest costs, but that’s totally up to the employer. Before 2017, employees could actually write off the expenses if they were 2% greater than their annual gross income. After the Tax Cuts and Jobs Act, the IRS scrapped this rule until 2025.
Does the home office write-off cover all internet costs?
Like most self-employed individuals, you probably use your home internet for both personal and business purposes. You can only deduct the portion of your bill that's used for work, so you need to calculate your business-use percentage. This can be a bit tricky and requires some math, but at least it saves you money when paying estimated quarterly taxes. For example, if you run your own business from 9 am to 5 pm every business day and you’re awake from 7 am to 9 pm, you'll need to:
- Calculate the hours you’re awake
- Calculate how many of those hours you use for business
- Divide the answer from step two by the answer in step one
- Arrive at your business-use percentage
So, in this case, your business-use percentage is 41%, which means you can write off 41% of your WiFi bill.
How to write off WiFi for business
You have two options for how to deduct your internet bill, either as a work-from-home tax deduction or separately on Schedule C. If you have a dedicated space in your home for your home office that you use often and it’s your primary place of work, you’re eligible to claim the home office deduction. You’ll need to calculate the deduction for your home office using IRS Form 8829. If you choose the regular method, you can include other working-from-home tax deductions like:
- Office plants
- Rent
- Utilities
- Renter or homeowner insurance
- Office furniture
- Phone bill
- Laptop (through depreciation)
Or, you can choose the simplified home office deduction if you want to deduct your entire home office without a lot of calculations and just deduct $5 per square foot of your office or workspace. If you’re not taking the home office write-off, you’ll need to report your internet deduction on Schedule C and attach it to your Form 1040. With this option, you can write off part of your WiFi for business even if you are experiencing a loss, unlike with the home office deduction. A loss can help lower your taxable income. So which option should you choose? Generally, reporting your internet costs on Schedule C is the safer choice. The reason is quite straightforward – you can only use the internet for the working-from-home tax write-off when you have income left over after covering all your other work-related expenses. If your income doesn't outweigh your total expenses for the year, you won't be able to claim a home office deduction in that tax year.
What else can I claim on my taxes?
When you work for yourself, you can take advantage of many self-employed tax deductions to help lower your taxable income and save some money. When paying income tax, you can also claim the standard or itemized deduction for your personal expenses. The obvious way to go is whichever route gives you the most tax savings.
The IRS also sets a standard deduction amount each year to match rising costs and inflation. How much you get to deduct with the standard deduction depends on your filing status (single, married filing separately or married filing jointly). This option is convenient, saves time and anyone can take it, even if you don’t have any deductions to itemize. Unlike the standard deduction, itemizing your personal expenses requires some recordkeeping. But you can claim more deductions and potentially save more money. It takes more time and effort, though, and not every item qualifies for a deduction. You can write off expenses like dental costs and charity contributions. If you're already claiming the internet deduction, you may be asking yourself, “Are utilities tax deductible?” You can deduct a portion of your home utility bill as a working-from-home tax deduction as long as your home serves as your business HQ. Does the internet count as a utility bill? Well, it depends. Claiming internet costs as part of the home office deduction, it is a separate cost to utilities. If you’re not claiming the home office deduction, you should report the internet on Line 25 on Schedule C under “Utilities.” You can also include any work-related gas, water and electricity costs. It would be nice if you could just record these business expenses and be on your way. But things are never that simple with the IRS, who require proof that you actually had a business need for the expenses you claimed. So start saving receipts and other proof of purchase statements. Business expenses need to be ordinary and necessary to qualify as a self-employment deduction. Suppose you’re a social media influencer. You can deduct internet costs if you work from home as it's a necessary expense. You can also write off buying a high-quality camera as taking photos is an ordinary part of your work.
Examples of ordinary and necessary expenses :
- Work uniforms
- Courses for a certification or license renewal
- Repairs and maintenance of business equipment
- Office supplies
- Advertising
- Office utility bills
Tracking income and expenses is a tedious process. But with FlyFin, income and expense tracking happens automatically. A.I. finds every possible deduction, so you never have to worry about receipts or spreadsheets again. An expert team of CPAs is always available to help answer any question you have about deductions, and they file your taxes for you when the time comes. Tax filing has never been this easy.
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