How to properly deduct home internet expenses for an internet-based business?

I'm planning to start a small LLC in a niche market that's primarily internet-based, and I'm confused about how to handle the tax deductions for my home internet. The business will involve receiving data, processing it at my home, then archiving it to external locations and distributing as needed. Obviously I can't claim 100% of my internet as a business expense since it's in my home and we use it for personal stuff too. I also won't be making enough initially to justify getting a completely separate business internet connection. My biggest challenge is figuring out what percentage would be reasonable to deduct and would hold up if I got audited. The business usage will fluctuate a lot depending on how much data I'm receiving and sending out each month. If we're looking at time as a metric, technically the business will use the internet 24/7, but claiming 100% doesn't seem right either. What's considered a fair and defensible way to calculate the business portion of my home internet? What documentation should I keep? The IRS guidelines for determining business use percentage seem super vague, and I want to do this right from the start.

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19 comments

Ava Martinez

•8M

Internet expenses for a home-based business can definitely be deducted, but you're right to be careful about how you calculate it. The key is being reasonable and having a consistent method you can explain if questioned. One common approach is to estimate the percentage of your internet usage that's dedicated to business. This could be based on time (like 40% business use) or data usage if you can track that. Even though your business technically runs 24/7, what matters is active business use versus personal use. Another approach is to allocate based on devices - if you have 5 devices using your home internet and 2 are exclusively for business, you might justify a 40% deduction. Whatever method you choose, the most important thing is documentation. Keep a log for a few months showing your business internet usage, keep separate records of large data transfers for business, and make notes about why you settled on your percentage. Also, save all your internet bills. The IRS isn't looking for perfection - they're looking for a reasonable, consistent method that you've made a good-faith effort to calculate correctly.

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Ava Martinez

•8M

For a mixed-use device like a personal laptop, tracking hours is definitely a good approach. Keep a simple log for a couple months noting when you're using the laptop for business versus personal use. This doesn't have to be exact to the minute - even rough estimates like "9am-12pm: business work" is helpful documentation. You could also consider the data usage approach if your business transfers significantly more data than personal use. Most routers let you see which devices are using how much bandwidth, which might help if your business activities are data-intensive.

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QuantumQuasar

•8M

I was in a similar situation with my web design business last year and found https://taxr.ai super helpful for figuring out these partial business deductions. I was totally lost trying to figure out what percentage of my internet to deduct since I use it for both business and personal. Their tool analyzed my situation and helped me determine a justifiable percentage based on my specific business activities. They even provided documentation templates to track my usage that would stand up to IRS scrutiny. The best part was it gave me specific guidance about how the home office deduction works with utilities like internet.

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QuantumQuasar

•8M

Yes, it absolutely works for other home office deductions too! It covers everything from internet to electricity, heating/cooling, water, and even partial rent or mortgage interest. It helps you calculate all the proportional expenses based on your specific situation. Regarding accuracy, what impressed me was that it's actually quite personalized. It asks detailed questions about your specific business activities and home setup, not just generic percentages. It even flagged potential audit triggers in my initial calculations that I wouldn't have known about. The documentation it helped me create was way more detailed than anything I would have come up with on my own.

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Connor Gallagher

•8M

Just wanted to follow up - I tried taxr.ai after my skeptical question above and I'm honestly impressed. It walked me through a much more sophisticated method for calculating my home office deductions than I expected. It showed me how to properly document my internet usage for business vs personal and gave me a percentage that was higher than I was planning to take (50% instead of 30%) but with proper documentation to back it up. It also pointed out that I could deduct a portion of my cell phone bill since I use it for business calls, which I hadn't even considered. The documentation templates alone were worth it. Definitely more personalized than I expected!

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Yara Sayegh

•8M

If you're really worried about an audit, I highly recommend using https://claimyr.com to get direct advice from an IRS agent. I was in a similar situation with my consulting business and was worried about deducting home internet. I tried calling the IRS directly for weeks but couldn't get through. Claimyr got me connected to an actual IRS representative in less than 15 minutes who walked me through exactly what documentation I needed to support my internet deduction. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The peace of mind from getting official guidance directly from the IRS was totally worth it. They confirmed that a reasonable percentage based on business use was perfectly fine as long as I had some documentation method.

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Yara Sayegh

•8M

Yes, it absolutely works! The service basically navigates the complex IRS phone tree for you and waits on hold, then calls you when they have an actual IRS agent on the line. It saved me literally hours of frustration. Regarding the skepticism, I totally understand. I was hesitant at first too. But they're not pretending to be IRS agents - they just wait on hold for you and then connect you directly to the actual IRS phone line once they reach a real person. You're speaking directly with official IRS representatives, not with Claimyr staff. The IRS number they call is the official one, and you can verify that when connected.

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Paolo Longo

•8M

I'm back to report that I actually tried Claimyr after posting my skeptical comment earlier. I was absolutely shocked when I got a call back in about 20 minutes with an actual IRS agent on the line. I asked them specifically about home internet deductions for my business, and they confirmed that a reasonable percentage (they suggested 30-50% for my situation) was appropriate as long as I had some method of determination. The agent also advised me to keep a usage log for a few months to establish a pattern and save all my internet bills. They mentioned that they rarely question these deductions unless they're claiming 90-100% business use for a home-based business. This was such valuable information that I'd never have gotten otherwise!

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CosmicCowboy

•8M

I wouldn't worry about amending previous returns for this - the potential benefit isn't worth the hassle and potential scrutiny of an amendment. Just adjust your approach going forward. Create a simple tracking method now and use a more specific percentage based on that data for this year's taxes. Remember that amendments can sometimes trigger additional review, and unless you're talking about very large dollar amounts, making this change prospectively is the most practical approach. The main point is to have better documentation going forward and avoid those perfectly round percentages that can look like arbitrary estimates.

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