How to Deduct Communication Expenses on Taxes

To deduct communication expenses on taxes, self-employed filers and business owners write off the business-use portion of phone service, internet, software, and related costs on Schedule C as ordinary and necessary business expenses. W-2 employees generally cannot claim these costs on a federal return: the Tax Cuts and Jobs Act suspended the unreimbursed employee expense deduction in 2018, and the One Big Beautiful Bill Act of 2025 made that suspension permanent.¹ Which category you fall into decides almost everything that follows.

What Counts as a Deductible Communication Expense

The IRS allows deductions for expenses that are “ordinary and necessary” to your trade or business, meaning the cost is common in your industry and helpful to your work.² For communication costs, that typically covers:

Monthly charges for a business mobile line, a dedicated business landline, or the business portion of a personal line
Home broadband, mobile data plans, or co-working Wi-Fi fees used for work
Video conferencing platforms, business email hosting, team messaging tools, CRM systems, and project management software
Roaming charges, international calling plans, and data fees incurred during business travel³

The qualifier that matters is business use. A Slack subscription used only for client projects is fully deductible. A home internet connection you also use to stream movies has to be split between business and personal use.

How Self-Employed Filers Claim the Deduction

If you’re self-employed, a sole proprietor, or a single-member LLC, communication expenses go on Schedule C (Form 1040) as direct business expenses. They reduce your net profit before you calculate both self-employment tax and income tax, so each deductible dollar cuts roughly 15.3 cents in self-employment tax on top of your income tax savings.⁴

These are “above the line” deductions. You claim them whether or not you itemize, and no minimum threshold applies. You also don’t need to qualify for the home office deduction to write off the business portion of your phone or internet bill. The two deductions are independent.

The First Phone Line Rule

One trap catches people regularly. Federal tax law treats the base cost of the first telephone line into your home as a personal expense, even if you use that line partly for business.⁵ The Schedule C instructions confirm it: you cannot deduct the base rate, including taxes, of the first phone line provided to your residence.⁶

What is deductible on that first line are incremental costs above the base rate, like long-distance business calls, added data for business use, or call-waiting features you need for client calls. A second line used for business is a different story. The entire cost of that line, base rate included, is deductible based on the percentage of business use. This is where a dedicated business number earns its keep at tax time.

Writing Off Phones, Routers, and Other Hardware

Service costs follow one set of rules. The purchase price of the hardware itself, such as smartphones, routers, laptops, and headsets, follows another. In 2026, those rules are generous.

Cell phones are no longer “listed property” under federal tax law. Congress removed that designation in 2010, eliminating the detailed logging requirements that once applied to every business phone.⁷ You now substantiate a business phone the same way you would any other business equipment.

For the hardware itself, you have three main options:

Section 179 expensing lets you deduct the full purchase price of qualifying business equipment in the year you buy it, up to $2,560,000 for tax years beginning in 2026. Most communication hardware sits well under that ceiling.
100% bonus depreciation was permanently restored by the One Big Beautiful Bill Act for qualified property acquired after January 19, 2025. A router, phone, or laptop bought for business use can be fully written off in year one.⁸
The de minimis safe harbor lets you expense items costing $2,500 or less per item without capitalizing them if you don’t have audited financial statements. With audited statements, the threshold rises to $5,000 per item.

If a device sees both business and personal use, only the business-use percentage qualifies. A phone used 70% for business means 70% of the purchase price is deductible.

Splitting Business and Personal Use

Most people use the same phone and internet connection for work and personal life. You need a reasonable allocation method, and you need to apply it consistently.

For phone service, track business call time as a percentage of total call time, or count business calls as a share of total calls. If 60% of your call time is business, 60% of the bill is deductible. For internet access, a time-based split is simplest. Use your home connection 100 hours a month for business out of 200 total hours, and 50% of the bill is deductible.

The IRS doesn’t require a specific method, but whichever one you pick has to be logically defensible. A consultant claiming 95% business use on a phone that also runs Netflix and personal social media will draw skepticism. Keep a contemporaneous log, meaning you record usage at or near the time it happens, not reconstructed from memory in April.

Records You Need to Keep

The IRS expects substantiation for any communication expense you deduct. For service, that means itemized bills showing the amount, date, and nature of each charge. For hardware, keep the receipt and a note of the business purpose. Digital records are fully acceptable: the IRS has recognized electronic storage systems as equivalent to paper records since 1997, provided copies are accurate, legible, and retrievable on request.⁹

Hold onto those records for at least three years from the date you file the return claiming the deduction. A return filed early counts as filed on the due date.¹⁰ Three years covers the standard audit window. The IRS gets six years if you substantially underreport income, so holding records longer is sensible for more complex years.

Options for W-2 Employees

If you receive a W-2, you cannot deduct unreimbursed business communication costs on your federal return. The suspension that started in 2018 is now permanent.¹ Narrow exceptions remain for Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses, who can still use Form 2106.¹¹ Everyone else is shut out federally.

The practical path to tax-free relief runs through your employer. Reimbursements made under an accountable plan are excluded from your taxable income and don’t appear as wages on your W-2.¹² An accountable plan has to meet three requirements:¹³

A business connection, meaning the expense relates to services you performed as an employee
Substantiation of the expense with receipts or records within a reasonable time
Return of any reimbursement that exceeds the substantiated expenses within a reasonable time

Miss any one of those, and the IRS treats the arrangement as a non-accountable plan: the reimbursement becomes taxable wages subject to income and payroll taxes. A flat communication stipend with no documentation requirement and no obligation to return unused funds is taxable income.

Employer-provided phones get their own favorable treatment. When an employer provides a phone primarily for business reasons, personal use is treated as a tax-free de minimis fringe benefit. The employer doesn’t track personal calls, and the employee doesn’t report any personal-use value as income.⁷

State Reimbursement Laws

Several states require employers to reimburse employees for business use of personal devices. California, Illinois, Montana, and Iowa are among the states with broad mandates. Others, like New York and Massachusetts, impose requirements with narrower conditions, such as income thresholds or contractual obligations. If your employer asks you to use your personal phone or internet for work and declines to reimburse you, check whether your state’s labor laws require it. A handful of states also still permit employees to deduct unreimbursed business expenses on state income tax returns, independent of federal rules.

What Happens If You Get It Wrong

Claiming personal communication costs as business expenses is not a gray area. The IRS imposes a 20% accuracy-related penalty on the portion of any tax underpayment caused by negligence or a substantial understatement of tax.¹⁴ Failing to keep adequate records counts as negligence. For individuals, an understatement is “substantial” when it exceeds the greater of $5,000 or 10% of the tax you should have reported.

Claiming $200 a month in phone expenses with no documentation can cost you the deduction plus 20% of the resulting shortfall. Intentional fraud, such as deducting an entirely personal plan as a business expense, can push the penalty to 75% of the underpayment. Accurate records and an honest split between business and personal use are the simplest protection.

1
Office of the Law Revision Counsel. 26 U.S. Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions
2
Office of the Law Revision Counsel. 26 U.S. Code 162 – Trade or Business Expenses
3
Internal Revenue Service. Topic No. 511, Business Travel Expenses
4
Internal Revenue Service. Instructions for Schedule C (Form 1040) – Section: Part II. Expenses
5
Office of the Law Revision Counsel. 26 U.S. Code 262 – Personal, Living, and Family Expenses
6
Internal Revenue Service. Instructions for Schedule C (Form 1040)
7
Internal Revenue Service. IRS Notice 2011-72
8
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
9
Internal Revenue Service. Revenue Procedure 97-22
10
Internal Revenue Service. How Long Should I Keep Records
11
Internal Revenue Service. Instructions for Form 2106 (Employee Business Expenses)
12
Internal Revenue Service. IRS Publication 5137 – Fringe Benefit Guide
13
eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements
14
Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments