Can I deduct my car, phone and internet? Mixed-use expenses

A cost that serves both your work and your life is deductible only for the business share of it. Everything else in this article is about how to find that share and prove it.

The rule behind all three

A car, a phone and an internet line usually do double duty, and the deduction follows the split. Total the use, identify the part that belongs to the business, and deduct that fraction of the cost. What the rule is not is a round number chosen in April because it sounds defensible. The percentage comes out of how the thing was actually used during the year, which means it comes out of a record kept while you were using it.

The car, method one: standard mileage

The first of the two car methods multiplies your business miles by a rate the IRS sets. For 2025 that rate is 70 cents per mile, and it stands in for fuel, repairs, insurance and depreciation together, so those costs are not deducted separately on top of it.

The conditions are the part people do not expect. You must own or lease the car. You must not operate five or more cars at the same time, as in a fleet. You must not have claimed a depreciation deduction on the car by any method other than straight line, a section 179 deduction on it, or the special depreciation allowance. And for a car you own, you have to choose the standard mileage rate in the first year the car is available for use in your business. For a car you lease, choosing the standard mileage rate commits you to it for the entire lease period, renewals included.

The car, method two: actual expenses

The other method deducts the business share of what the car really cost: gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation or lease payments, in proportion to the business miles out of the total miles driven. It can produce a larger deduction than the rate does, particularly for an expensive car or a heavy repair year, and it costs more to keep, because now every receipt matters as well as every mile. Switching methods later is restricted rather than free, which is why the honest move is to figure both ways before the first year closes.

Two things sit outside that choice. Parking fees and tolls attributable to business use are separately deductible whether you use the standard mileage rate or actual expenses. And two costs are never deductible under either method: commuting between home and your regular place of work, however far apart they are, and the fee you pay to park at your own place of business. Taking a business call on the drive in does not convert the trip.

The phone and the internet

There is one line, one bill and two uses, so the deduction is the business share of the bill and nothing more. A defensible allocation generally looks like one of three things: a month of actual usage data used as a reasonable sample for the year, a second line or connection dedicated to the business, or a documented ratio that plainly matches how the business runs.

An indefensible one is the whole bill for a phone that also carries your family, your messages and your evenings. If you cannot say where the percentage came from, it is not a percentage. It is a guess with a decimal point in it.

The log is the deduction

For the car, keep a contemporaneous record of the date, the miles and the business purpose of each trip. For the phone and the internet, keep the bills and the basis of the percentage you used. Publication 463 asks for adequate records, and a year rebuilt from memory in April is the weakest position you can bring to a question about it. Home office and mileage carries the log in more detail.

Employees get nothing

If you are a W-2 employee, this is the flat answer: unreimbursed employee expenses are miscellaneous itemized deductions subject to the two percent floor, and under current law that deduction is suspended permanently, not paused until some future expiry date. No car, no phone, no internet.

A few categories are still allowed to deduct unreimbursed employee travel expenses as an adjustment to total income rather than as an itemized deduction, among them Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials. If you are not one of those, the productive move is to ask your employer for reimbursement instead.

Where it goes

A sole proprietor puts all of this on Schedule C, with the car on its own lines and the phone and internet among the other expenses. Schedule C shows the shape of that form, and because a lower net profit is a smaller base, it also moves the qualified business income deduction that follows from it.