If you’re self-employed, you can claim a home internet tax deduction for the share of your bill used for work. If you’re a W-2 employee, you can’t — the federal deduction that once covered unreimbursed employee expenses is gone, and the One Big Beautiful Bill Act, signed July 4, 2025, made that permanent. The rest of this guide is written for freelancers, contractors, sole proprietors, and single-member LLC owners who file a Schedule C.
Who Can Claim It
The deduction is available to anyone who reports self-employment income on Schedule C: sole proprietors, single-member LLC owners, independent contractors, and 1099 workers. The internet has to be “ordinary and necessary” for your business, meaning common in your line of work and helpful for producing income. It doesn’t have to be indispensable.1Internal Revenue Service. Publication 535 – Business Expenses
W-2 employees are shut out at the federal level. Before 2018, employees who itemized could deduct unreimbursed business expenses subject to a 2% adjusted gross income floor. The Tax Cuts and Jobs Act suspended that category, and the One Big Beautiful Bill Act removed the sunset date, so the ban now applies to all future tax years.2Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions If your employer won’t reimburse you, the federal code offers nothing.
A few states, including California, New York, and Minnesota, still let employees deduct unreimbursed business expenses on the state return. Worth checking your state’s rules, but it won’t change your federal bill.
Figuring the Business-Use Share
Almost no home connection is used only for work, so you can only deduct the business portion. The IRS wants a reasonable allocation applied consistently.3Internal Revenue Service. Topic No. 509, Business Use of Home
The usual method is time-based. Count your work hours online, divide by the household’s total usage hours, and apply that percentage to the bill. Thirty work hours out of a hundred household hours is 30%. On an $80 monthly bill, that’s $24 a month, or $288 a year. Simple math, but you need a log or record to back up the percentage if anyone asks.
If you pay for a second internet line used only for business, deduct the full cost. The IRS treats a dedicated business phone line the same way: the first home phone line is always personal, but an exclusively-business second line is fully deductible.4Internal Revenue Service. Publication 587 – Business Use of Your Home A dedicated business internet line follows the same logic and goes on Schedule C line 25 rather than through the home office calculation.
Where It Goes on Your Return
For most sole proprietors, the business share of home internet goes on Schedule C (Form 1040), line 25 (Utilities).5Internal Revenue Service. Schedule C (Form 1040) – Profit or Loss From Business That path works whether or not you claim a home office, and it’s the simplest.
The other path runs through the home office deduction, and here your choice of method matters.
Simplified Method
The simplified method pays a flat $5 per square foot of dedicated office space, capped at 300 square feet and $1,500 a year.6Internal Revenue Service. Simplified Option for Home Office Deduction That flat amount covers home-office overhead, but internet service can still be claimed separately on Schedule C line 25 as a business utility. Publication 587 tells taxpayers to put business phone charges on line 25 rather than fold them into the home office calculation, and internet gets the same treatment.4Internal Revenue Service. Publication 587 – Business Use of Your Home
Actual Expense Method
The actual expense method uses Form 8829. Internet goes on line 21 (Utilities) as an indirect expense, and the form multiplies it by your business-use percentage of the home — office square footage divided by total home square footage. The result flows to Schedule C line 30.7Internal Revenue Service. Form 8829 – Expenses for Business Use of Your Home This route is worth the recordkeeping when your real home office costs run well above $1,500 or your office takes up a large share of the house.
Why This Deduction Is Worth More Than It Looks
A Schedule C deduction cuts two taxes at once. It reduces your income tax, and it reduces the net earnings that self-employment tax is calculated on. Self-employment tax runs 15.3%: 12.4% Social Security on earnings up to $184,500 in 2026, plus 2.9% Medicare on all net earnings.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Using the $288 figure from earlier, the SE tax savings alone come to about $44 (15.3% of $288). On top of that, whatever your income tax bracket is, apply it to $288 for the additional income tax savings. You also get to deduct the employer-equivalent half of SE tax when computing adjusted gross income, which adds a small further benefit.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) Dollar for dollar, a Schedule C deduction is worth more than the same deduction would be for someone who only reduces income tax.
Routers, Modems, and Other Equipment
Hardware you bought to get online — routers, modems, mesh systems, Wi-Fi extenders — is deductible if the purchase was ordinary and necessary for the business. You have three ways to handle the cost.
The de minimis safe harbor is the simplest. For any item costing $2,500 or less, you can expense the full amount in the year you bought it instead of depreciating it. You make the election by attaching a statement titled “Section 1.263(a)-1(f) de minimis safe harbor election” to that year’s return. Taxpayers with audited financial statements can use a $5,000 threshold.
Section 179 lets you deduct the full price of qualifying equipment, including networking hardware, in the year you buy it. The dollar caps are far above anything a home-based worker would spend, so the limit rarely comes into play here.
Bonus depreciation is the third option. Under the One Big Beautiful Bill Act, 100% first-year bonus depreciation is now permanent for qualified property acquired after January 19, 2025.9Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill For most home offices, the de minimis safe harbor is the easiest route since few networking purchases run past $2,500.
Records You Need
Every deduction has to be substantiated. The IRS wants documentary evidence — receipts, billing statements, canceled checks — showing payee, amount, date, and business purpose.10Internal Revenue Service. What Kind of Records Should I Keep For an internet deduction, keep four things:
- Monthly billing statements from your internet provider showing amounts and service dates.
- A usage log recording your work hours online. Time-tracking software, calendar entries, or a spreadsheet all work; this is what supports your business-use percentage.
- Purchase receipts for any router, modem, or other networking hardware you deducted.
- Your allocation math, written down so you can reproduce it years later.
Hold all of this for at least three years from the date you filed. That’s the standard IRS assessment window.11Internal Revenue Service. How Long Should I Keep Records
The deduction itself is not what causes trouble in an audit. Missing records are. A reasonable business-use percentage you can explain and document will hold up. A round number pulled out of the air with no log behind it probably won’t. The IRS doesn’t demand scientific precision, but it does expect you to show the work.12Internal Revenue Service. Burden of Proof