Business Use of Personal Assets: Deducting Phone, Internet, Computer, and Vehicle Costs
Most small business owners use personal assets for business: their phone, internet connection, computer, vehicle, and sometimes their home. The IRS allows deduction of the business-use percentage of these mixed-use expenses. The challenge is determining and documenting the business-use percentage. A cell phone used 60% for business means 60% of the monthly bill is deductible. A laptop used 80% for business means 80% of the purchase price is depreciable (or expensable under Section 179 or the de minimis safe harbor). The percentage must be reasonable and documented. The IRS doesn’t accept 100% business use for a cell phone that’s also used for personal calls, texts, and social media.
Mixed-use asset deduction rules:
| Asset | Deductible Portion | How to Determine % |
|---|---|---|
| Cell phone (service) | Business-use % of monthly bill | Track business vs. personal calls/usage for a sample month |
| Cell phone (device) | Business-use % of purchase price | Same percentage as service |
| Internet (home) | Business-use % OR home office % | If home office: % of home used for business |
| Computer/laptop | Business-use % of cost | Track business vs. personal usage hours |
| Printer/scanner | Business-use % | Same approach |
| Vehicle | Mileage OR actual expenses (business %) | Mileage log (mandatory) |
| Home | Home office deduction (simplified or actual) | Square footage method or simplified ($5/sq ft) |
Cell phone deduction:
| Scenario | Business Use % | Monthly Bill | Deduction |
|---|---|---|---|
| Contractor (calls clients, GPS, photos of work) | 70% | $100 | $70/month ($840/year) |
| Freelancer (some client calls, mostly personal) | 40% | $80 | $32/month ($384/year) |
| Business owner (separate business line on same plan) | Line cost: 100%, shared data: business % | Varies | Varies |
The “second phone” strategy: Getting a separate phone line for business (or a second phone) makes the deduction cleaner:
- Business line: 100% deductible (dedicated business use)
- Personal line: 0% deductible
- No need to track percentages or justify to IRS
- Cost: $25-$50/month for a business-only line
Internet deduction (requires home office): Without a home office: internet is NOT deductible (personal expense) With a home office: internet is deductible at the home office percentage
| Method | Internet Deduction |
|---|---|
| Simplified home office ($5/sq ft) | Included in the $1,500 max deduction |
| Actual home office (% of home) | Business % of internet bill |
Example: 200 sq ft office in a 2,000 sq ft home = 10% home office Internet bill: $80/month x 10% = $8/month ($96/year)
Computer and equipment:
| Cost | Method | Deduction |
|---|---|---|
| Under $2,500 | De minimis safe harbor (expense immediately) | Business % x cost |
| $2,500-$10,000 | Section 179 or bonus depreciation | Business % x cost |
| Over $10,000 | Section 179 or bonus depreciation | Business % x cost |
A $1,500 laptop at 75% business use: $1,500 x 75% = $1,125 deduction (de minimis safe harbor) A $3,000 desktop at 80% business use: $3,000 x 80% = $2,400 deduction (Section 179)
Listed property rule (IRC 280F(d)(4)): Computers and vehicles are “listed property.” If business use falls below 50%, Section 179 and bonus depreciation aren’t allowed. The asset must be depreciated using ADS (Alternative Depreciation System) straight-line over a longer recovery period. If business use was above 50% in Year 1 (and Section 179 was claimed) but drops below 50% in Year 2, the excess depreciation must be recaptured as ordinary income.
What can a home-based business owner actually deduct?
Can you claim a home office deduction if you also rent office space?
Yes, having a separate office doesn’t automatically disqualify your home office deduction as long as your home office meets the regular and exclusive use test under IRC 280A. The home office must be your principal place of business or a place where you regularly meet clients, even if you also maintain another workspace. Under the Soliman test from the Supreme Court decision, a home office qualifies as your principal place of business if you perform substantial administrative or management activities there and have no other fixed location for those activities. The simplified method allows a $5 per square foot deduction up to 300 square feet ($1,500 maximum), while the regular method requires tracking actual expenses and calculating the business-use percentage of your home.
Start with a Diagnostic: a CPA licensed in the US and Canada reads your file and tells you in writing what's wrong and how to fix it, three to four business days after you finish the questions. The report is $250. If you hire us for any work after that, you get the $250 back as a discount on that work. Or send us your return or your letter and get a fixed price, free.
One or two plain-English guides a week on US-Canada tax. No spam, unsubscribe anytime.
Done. The next guide will land in your inbox.
Yarik Yarosh, CPA. "Business Use of Personal Assets: Deducting Phone, Internet, Computer, and Vehicle Costs." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-business-use-home-phone-internet-deduction
This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.