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Schedule C · Line 25

Utilities

Powering your business. Internet, phone, and electricity rules for office vs. home-based businesses.

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Office vs. Home Rules

Where you work determines what you can deduct on Line 25

Line 25 is for utility expenses related to your business property. However, the rules change drastically depending on whether you operate out of a rented commercial space or your home.

Commercial Space Rules

If you rent a separate office, shop, or warehouse, 100% of these utilities are deductible on Line 25:

  • Electricity & Gas
  • Water & Sewer
  • Trash Collection
  • Internet & Phone

Home Office Rules

If you work from home, you generally CANNOT use Line 25 for "structural" utilities (Heat, Light, Water).

  • Heat/Electric/Water: Deduct on Form 8829 (Home Office), NOT here.
  • Business Internet: Deductible here (Business %).
  • Cell Phone: Deductible here (Business %).

See also: Home Office Deduction rules and Line 30: Home Office on Schedule C.

The Cell Phone Strategy

Since 2011, the IRS has treated cell phones as a regular business deduction rather than "listed property," making it much easier to deduct. You have two main options:

Option A: The 100% Deduction

Buy a separate phone and plan exclusively for business.
Result: 100% of the cost is deductible with zero record-keeping headaches regarding personal use.

Option B: The "Business %" Estimation

Use your personal phone for business. Measure your usage (e.g., "I use this phone 80% for work email/calls").
Result: Deduct 80% of the monthly bill.

Key Insight
The IRS considers the First Landline in your home to be inherently personal. You can never deduct the base monthly charge of the first landline into your home, even if you run a business from your basement. You CAN deduct long-distance business charges on that line, or the full cost of a second dedicated line.

Audit Traps

Watch Out
The most common error is deducting home electricity on Line 25 AND claiming the Simplified Home Office deduction (which covers utilities).

Rule: If you claim the Simplified Home Office Deduction ($5/sq ft), you cannot deduct any home utilities on Line 25. Internet/Phone are exceptions because they aren't "structural."
Watch Out
If you have a family plan with 4 lines (You + Spouse + 2 Kids) costing $200/month, you cannot deduct 80% of the whole bill just because you use your line 80% for business.

The Fix: Allocate the cost per line first, THEN apply the business percentage to your specific line.

Documentation Checklist

Taxstra CPA Tip
To bulletproof Line 25, keep these records: monthly bills for Internet and Phone (digital PDFs are fine); utility bills for any separate commercial location; and a calculation worksheet showing how you determined the "Business Use %" (e.g., "Verified via screen time log — 40 hours/week business"). A one-page note in your files is enough.

Frequently Asked Questions

Yes, but only the business percentage. If you use it 50% for work and 50% for Netflix, you deduct half the bill. You do NOT need to take the Home Office deduction to deduct business internet, as the IRS considers internet a separate utility from the home structure.

Back to Schedule C Hub · See also Home Office Deduction Strategy

Home Office Confusion?

Calculating the Home Office deduction (Form 8829) correctly can save you thousands. We can handle the math.

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Disclaimer: This content is educational and does not constitute individualized tax advice. Tax rules change; verify all figures with a qualified CPA before filing. For personalized guidance, book a consultation.