Who Can Deduct Home Internet

Self-employed filers (freelancers, 1099 contractors, sole proprietors, single-member LLCs) can deduct the business percentage of their home internet cost as an ordinary and necessary business expense on Schedule C. This is true whether or not you claim a home office deduction — though having a dedicated home office strengthens the case.

W-2 employees cannot deduct home internet costs federally, even if they work from home full time. The 2017 Tax Cuts and Jobs Act eliminated the unreimbursed employee expense deduction through 2025. Some states (like New York, California, and Illinois) still allow it on state returns — check your state’s rules.

How to Calculate the Business Percentage

The IRS doesn’t prescribe one formula — you need a reasonable method that you can defend if audited. The two most common approaches:

Time-based method: Estimate how many hours per week you use internet for business vs. personal. If you work 40 hours/week and estimate 10 hours of personal use, your business percentage is roughly 80%. This is the most common method for freelancers.

Home office percentage method: If you already claim a home office deduction, you can use the same square footage percentage for your internet. If your office is 15% of your home’s square footage, you’d deduct 15% of internet costs. This is more conservative but very defensible.

Example Calculation

This $663 goes on Schedule C as a utility or other expense. If you also claim a home office, coordinate the two — you can use the home office percentage for internet, or calculate it separately as a direct business expense. Don’t double-count.

Where to Claim It on Your Return

If you claim a home office using the actual expense method, internet goes on Form 8829 as an indirect expense (used for both business and personal). If you use the simplified method ($5/sq ft), you can’t separately deduct internet as a home office expense — but you can still deduct it as a general business expense on Schedule C, Line 25 (Other expenses).

If you don’t claim a home office at all, report the business portion of internet directly on Schedule C, Line 25.

What Counts as “Business Use”

Business use of internet includes: client communication (email, Slack, Zoom), research related to projects, uploading deliverables, managing invoicing/bookkeeping, marketing your business (social media, website), and any other activity directly tied to earning self-employment income.

Personal use includes: streaming entertainment, personal social media, online shopping, personal email. Even if you check a work email during a Netflix binge, that hour is personal.