Home Business - Internet & Cell Phone

Can’t do business without the cell or the internet. Does CRA have a guideline for % of deduction for cell phone and internet for operating a home business/office such as my bookkeeping/tax practice?

Stay Safe out There

I just use a justifiable % of cell/home phone/internet charges on a monthly basis. I can’t say this generates exact deductible expense amounts but close enough to satisfy me and any audit process.

My cell phone is 100% business, but my home phone and internet are on the same bill. I also use what I consider a justifiable amount - internet as 100% business and land line all personal. I know - there are those here who would have reasons why we can’t do that but… :grinning:

My cell phone is 100% business but my internet is shared with my family. Hard to rationalize a large percentage with all the Netflix this past year.

Income Tax Folio S4-F2-C2: Business use of home expenses, paragraph 2.32 and 2.33

Just to further clarify Cory’s reference,

“This Chapter is applicable to individuals who are a sole proprietor or a partner in a partnership .”

Great answers, information and insight.

YES, hard to justify NETFLIX, Disney, etc., but YouTube for educational purposes & videos??? just kidding.
Stay Safe out There!!!

I tell all my clients that the business should have a cell phone and internet in the business name and keep the usage separate.

I have Telus and Shaw internet at my home. Shaw internet is accessible only by my business computers; my personal computers can not see my business server or computers. Shaw gives me a static IP so my employees can VPN to the data.

I have two cell phones, business and personal. The two do not meet at all; they don’t even have the same apps on them. My friends and family get my personal phone number, business clients my business cell phone. I don’t even forward between the two. My business line over VOIP, if ever forwarded, goes to my business cell phone and my business cell phone rings if my business VOIP line rings.

It costs about 3k over the year in extra expenses, but the peace of mind is worth it. This way, it is not business use of home expenses. It is Telephone and internet expense.

Other ways you can do this:

Company issues a T2200 to yourself (or client) and you follow the employee rules for Office in home.

Or the employee rents and files a T776 with their T1 a room in their home to the business. Making sure the gross rents = expenses so they have a net zero income on their T776.

Both of these work but you have to come up with a reasonable basis for the allocation of expenses. The extra time (cost) to do so is going to easily come close to the 3k a year just to get a seperate cell phone and a seperate interenet connection.

My cellphone bill is only $50 a month and internet is $75, of which I deduct maybe 20%. Although I agree with Cory that keeping things separate is preferred, it’s hardly worth going through all that trouble for $800 in business expenses. If you’re business is larger, then it makes more sense.

I’m currently in a battle with CRA where they denied 100% of my client’s cell bills because he didn’t have a log of business calls, much like the log you need for Auto expenses. An electrician that works miles from his employer and goes to remote sites to do installs and trouble shooting. Without the cell he has $0.00 employment income. And yes, the T2200 says he is required to have and pay for a cell phone. We claimed a below average %age (determined by the call by call analysis we did for CRA)

That’s really odd @dklassencga. Doesn’t the cell phone bill include a log of all calls? These days the cost of cellular data is the biggest expense anyway and not the individual telephone calls.

I’m surprised CRA is looking for a log of business/employment use for a phone. The last one I dealt with on an audit was back in the late '90’s (with a real estate agent). The Tax Court has dealt with this issue a number of times and they do look for some documentation to show business/employment use of the phone. The Courts appear to be more lenient towards the taxpayer where other records back up the taxpayer’s claims and where the taxpayer claims at least some personal use. Your client may also benefit by showing how he needs data to do his job as opposed to just the telephone part of the expense.

For several years I had a public service position. I was provided with a cell phone and, initially, each month I received a copy of my cell phone bill so I could identify my personal calls and reimburse the employer. Then, they stopped doing that because “it wasn’t worth the effort”.
I liked not having to carry 2 phones, the employer and his people could get me any time they wanted.
I have since observed that virtually every employee carries an employer-provided cell phone. No taxable benefit is recorded.
Since then, as a practitioner, I have a cell phone with a contract that has no limit to talk or text at a flat price. I write it all off.
My wife has a cell phone and we have a home phone we pay for.
When the CRA auditor calls on you, do they have a cell phone? I wonder who pays for it?

@neal Exactly!

@kevin @Versa - back in the late 90’s not as many relied only on cell phones as they do today, hence the crackdown. We provided 6 months of statements with all work calls notated which proved that we had actually claimed less (by percentage) than we could have. Their response was that we could claim only the long distance calls made on behalf of the employer, which, of course are zero because of the calling plan.

I have a client who services oil and gas wells from Nebraska to Oregon north in Us and western Canada from Manitoba to BC and north. CRA denied the cell phone bills. I argued and won on the basis of using the use of a company vehicle that you can take home. I now routinely allocate a 10% TB to the clients T4 and claim the 90%. For the past five years no problems or audits with CRA.

Yes, I realize cell phones in the late '90’s were less common (I didn’t realize working in the '90’s made me old) but my client was a real estate agent who lived on his phone. It sounds like you have a difficult auditor and a reasonable client. No sense arguing with the auditor. Save it for an appeal. I would have thought that even CRA considers cell phones pretty much mandatory for many people these days. That argument about only allowing long-distance calls is antiquated.

Sorry @kevin, but I’m afraid I come from the days of the phone being attached to the wall, so…
Yes @Versa the cell bill has all calls, but my client didn’t keep his and only highlighted the business calls AFTER the request from CRA came in - they didn’t appreciate that we only gave 6 months

Glad to see the arguments used by others and hoping our Notice of Objection saves us the trip to Tax Court (we’re talking over $30K of denied expenses - not only phone of course)

As there are no distance calls, it would seem logical that the % of business calls would apply to the cost of the phone and monthly charges; the argument being that he would not need a cell phone if not for the employer. The CRA’s position is nor defendable. Looks to me as an overzealous auditor or tax office pushing their authority (seen that before) Surely a an eventual appeal (higher level of comprehension) or tax court will establish policy.

This CRA site confirms Home internet access fees – Starting in 2020, employees who work from home can include reasonable monthly home internet access fees as part of their work-space-in-the-home expenses.

So what’s reasonable? cost times Work-space-in-home divided by total space in home?