Deducting internet and computer costs for your home-based business

Many small and home-based business owners use their home computer for both work and personal use.  As a result, many clients ask me, "Can I deduct my internet and computer costs if I use my computer for both my home-based business and for personal use"?

Yes, you can deduct a portion of your computer and internet costs.  You deduction is based on the percentage of time you use your computer and internet for your business. Technically, you should keep a log of your internet usage to determine how much is business and how much is personal, but that isn’t very practical for most people.

My best advice is to just use common sense and good judgment when determining how much to deduct on your tax return. Try keeping a log for a week or a month to see how much you really use your computer for your business vs. personal use. 

Whatever method you choose, make sure that your deduction is reasonable in case you ever get audited.  For example, if you only have one computer, but you have children and a spouse who uses the internet, don’t try to deduct 90 or 100% of your internet charges - the IRS will not believe you and you will lose the deduction.

Tags: business deductions, tax deductions small business