Phone and Internet Expenses

by Karen B
(Brampton, ON)

--------------------

Editor's Note February 2024: You can get the most up-to-date information on what CRA's current position is on cell phones and home internet service at my sister website Bookkeeping-Essentials.ca. Some of the information in this post may be out of date.


--------------------


Split phone line and internet expenses for home office

I am a sole owner who works from home and am set up with a single phone line with two numbers (one personal and one work), as well as internet charges.

From what I have read, these are not deductible under home office expenses, yet I use the second phone number exclusively for work and I use the internet primarily for work.

These bills, however, are in my personal name. Normally, when I have business expenses incurred out-of-pocket, I charge them back to the business (i.e. office supplies, etc.)

Can I do the same with my phone/internet expenses that apply to the business?

Many thanks for your help!







Hello Karen,

The good news is ... yes you can!

Your business line is claimed on line 9220 of tax schedule T2125 ... but your personal line is not tax deductible.

You can deduct a portion of your internet connection as well. You will need to find a reasonable method of estimating the personal portion to back out ... as it is not tax deductible. I would claim the business portion for your internet expenses on line 9220 as well ... or line 9270.

The general rule for claiming business expenses is ... it must be reasonable and made with the expectation of profit. All business expenses must be supported by original source documents.

As far as I know, it is okay that they are in your personal name ... because you are a sole proprietor and you are your business.

I do recommend that you limit purchasing business expenses with your personal funds. Learn why in my article on How to Create an Audit Trail.

You may also like to read my Home Business Taxes series found under "The Tax" button on the left hand side of the site.

I wish you much success in your business. :0)

Cell Phones and CRA

by Kaila
(Fort McMurray)

Editor: links updated 2019-08

Are cell phones fully deductible?

My client is using 2 cell phone and I am not sure if they are both fully deductible. Is there a rule on this?

If using only one cell phone, is that fully deductible?

Hi Kaila,

CRA's postion on cellular phone use is found at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/provided/cellular-phone-internet-services.html .

I discuss briefly land line phones at T2125 Line 9220 and also when discussing what expenses are not deductible.

The key to deductibily when you are a business owner is incurring the expense to earn income.

You might want to take at look at the CRA publication Excise and GST/HST News No. 61 from the summer of 2006 - Ordinary location of mobile phones.

It discusses that there "are special rules for determining whether a particular call is subject to GST/HST in the situation where a cellular service provider charges a subscriber for calls made on his or her cell phone on a pay-per-use basis."

The CRA publication T4130 Employer's Guide Taxable Benefits and Allowances discusses cellular phone service.

The Canadian Tax Resource published an article in March 2010 on Deductions From Employment Income. Salesperson expenses were discussed.

Under expenes permitted as salesperson expenses, it says, "Supplies used directly in your work. This includes office supplies, cellular phone airtime, and long distance (your normal monthly charge for cellular or telephone cannot be deducted)."

Jones & O'Connell posted an excellent article in September 2016 entitled Employer-provided cell phones - the potential tax cost. Updated March 2017 - be sure to read this article

While these references / articles are discussing employees, some of the logic could be applied to the sole proprietor when trying to determine "What is a reasonable expense?"

So, are two cell phones deductible?

I think it would be pretty tough to explain why the business owner needs 2 business cell phones for himself. He can only use one at a time. Any individually charged calls would certainly be deductible if they were related to business and were not personal in nature.

Is one cell phone fully deductible?

Again it depends. Is it used 100% for business with no personal useage? Is the plan a basic one? Does the owner's personal use of the cell phone result in charges over the basic plan?

You can always phone CRA and ask their opinion.




P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.