Cellphone and internet: splitting business from personal use

Almost no one has a phone used only for business or an internet connection used only for work. That makes these two of the most commonly misclaimed expenses on small business returns — not because owners are being aggressive, but because the split is guessed at once and then repeated for years.

The basic rule

The CRA's guidance on business expenses states that you can deduct expenses for telephone and utilities if you incurred the expenses to earn income. That last phrase is the test. A bill that covers both business and personal use is deductible only to the extent of the business portion, which means the split has to be worked out rather than assumed.

The CRA also notes that utility costs relating to business use of a workspace in your home are claimed as business-use-of-home expenses rather than as a separate line — worth knowing if you are already claiming a home office, so the same cost is not counted twice.

What a defensible split looks like

There is no prescribed percentage. What the CRA expects is a reasonable basis you can explain and support. In practice that means one of:

• A usage sample. Review a representative period of itemised billing or call and data logs, work out the business share, and apply that percentage for the year — the same logic as keeping a mileage log for a vehicle.
• A line count. Where a plan covers several lines and one is used only for business, that line's cost is straightforward.
• Hours or devices for internet. A home connection shared by a household is rarely mostly business. Tie the estimate to something — work hours against total household use, or the share of the home used for work.

If your corporation pays the bill

For an incorporated owner who is also an employee of the company, a second set of rules applies. The CRA's guidance on cell phone and internet services sets out the administrative policy:

• The device. Where the employer provides a cell phone it owns and requires the employee to use it as part of their employment duties, the fair market value of the device is not a taxable benefit. If the employee buys the phone and the employer reimburses them, the administrative policy does not apply and the fair market value is a taxable benefit.
• The plan. A service plan is not a taxable benefit where all of the CRA's conditions are met: the employer requires the employee to use the plan as part of their duties, the plan has a reasonable fixed cost, and the employee's personal use does not result in additional charges beyond the plan cost. Extra charges caused by personal use are a taxable benefit unless the employee reimburses them.
• Home internet. Where the employer provides or reimburses home internet, the business-use portion is not a taxable benefit and the personal use is taxable.
• Allowances. A cash allowance for phone and internet is always a taxable benefit under the CRA's policy.

The CRA also says employers must be prepared to justify that the cost of a plan is reasonable, judged against the employee's employment-related needs. A more expensive plan can be reasonable where the duties require it.

Common mistakes

The recurring ones are claiming the full bill on a single personal phone, claiming a household internet bill in full, claiming the same utility cost twice through both a home office claim and a separate expense line, and running a personal plan through the corporate account with no benefit reported. None of these is a large amount on its own. All of them are easy for a reviewer to spot and to project across several years.

The bottom line

Phone and internet are deductible to the extent they earn income, and where a corporation is footing the bill for an owner-employee, taxable-benefit rules sit on top of the deduction question. Pick a supportable percentage, document how you got there, and keep the calculation. If you are incorporated and the company pays these costs directly, have a CPA confirm how it should be reported for your own arrangement before it becomes a multi-year pattern.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique — please speak with a CPA before acting on anything here.