Claiming Phone and Internet Expenses – A Complete Guide by a Montreal CPA Firm Near You

Introduction

For self-employed Canadians, cellphone and internet costs are essential business tools—but claiming these expenses incorrectly is one of the most common reasons CRA reviews a T2125 return. Because phone and internet services are often used for both business and personal purposes, CRA requires that deductions reflect only the reasonable business-use portion, supported by proper documentation. Overclaiming these expenses, claiming 100% of your home internet or phone bill, or failing to calculate the percentage correctly can immediately trigger a CRA review. Understanding how to deduct phone and internet expenses properly is essential for freelancers, gig workers, contractors, and small business owners who want to maximize legitimate deductions while avoiding audit risks.

Legal and Regulatory Framework

Phone and internet deductions are governed by the Income Tax Act, particularly:

• Section 18(1)(a) – expenses must be incurred to earn business income
• Section 67 – expenses must be reasonable
• Recordkeeping Requirements (section 230) – receipts and documentation must be kept for six years
• CRA T2125 Instructions – shared expenses must be allocated based on actual business use

CRA allows deductions for:
• cellphone service plans
• data usage
• home internet service
• long-distance charges
• business apps and communication tools
• phone hardware (deductible as CCA if purchased)

However, CRA prohibits:
• claiming 100% of a phone or internet bill unless the connection is used exclusively for business
• deducting family phone plans as business expenses
• deducting streaming services or personal internet add-ons
• deducting the personal-use portion of any shared service

These rules create the legal foundation for claiming phone and internet expenses as a self-employed individual in Canada.

Key Court Decisions

Courts have repeatedly ruled in favour of CRA when deductions are unsupported or unreasonable.

In Michaud v. Canada, CRA denied 100% of cellphone expenses because the taxpayer could not prove exclusive business use. The court accepted only a partial deduction.

In Singleton v. Canada, although focused on interest deductibility, the court emphasized the need to demonstrate a direct link between the expense and earning income—a principle applied broadly by CRA.

In Black v. Canada, the court rejected undocumented shared-use expenses, reinforcing the requirement for receipts and calculations.

In Desmarais v. Canada, CRA denied excessive internet deductions where the taxpayer failed to track usage; the court upheld CRA's estimation of a much lower business-use percentage.

These cases show that the burden of proof rests fully on the taxpayer.

Why CRA Targets This Issue

Phone and internet deductions are high-risk because many taxpayers:

• claim unrealistic business-use percentages (e.g., 90–100%)
• deduct their entire home internet bill
• fail to allocate between personal and business usage
• deduct multiple family cellphones
• lack documentation or usage logs
• claim expensive devices as “supplies” instead of capital assets
• inflate deductions to reduce taxable income

CRA also compares typical usage patterns by industry. A graphic designer may reasonably claim more internet usage than a landscaper, for example. Discrepancies raise red flags and often lead to audits.

Mackisen Strategy

At Mackisen CPA Montreal, we ensure your phone and internet deductions are maximized, compliant, and fully defensible. Our structured approach includes:

• analyzing each client’s industry, workflow, and actual communication needs
• determining a reasonable business-use percentage for both phone and internet
• preparing an allocation worksheet documenting:
– total monthly cost
– business-use activities
– percentage calculation
• advising on which apps, software, and communication services qualify as expenses
• identifying when phone hardware qualifies for CCA
• reviewing shared family plans to isolate allowable business amounts
• ensuring proper GST/HST ITC allocation
• preparing audit-ready documentation to defend the deduction

This ensures your deductions are supported by CRA-recognized methods and reduce audit risk significantly.

Real Client Experience

A freelance consultant claimed 100% of cellphone expenses. CRA denied half during a review. We documented her usage through call logs and email activity and reinstated a higher—but reasonable—percentage.
Another client deducted his entire home internet bill even though multiple family members used it. CRA reassessed him. We recalculated a fair business-use portion and corrected future filings.
A rideshare driver used his phone extensively for apps and navigation but kept no documentation. CRA initially denied much of the deduction. We reconstructed usage patterns and restored most eligible expenses.

Common Questions

Self-employed individuals often ask whether 100% of cellphone costs can be deducted. Only if the phone is strictly used for business.
Others ask whether internet is deductible. Yes—the business-use portion only.
Some ask how to calculate business usage. Based on call logs, data usage, time spent, or reasonable allocation.
Another question: Can a family plan be deducted? Only the business portion attributable to the taxpayer.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps freelancers and small business owners properly claim phone and internet deductions while remaining compliant with CRA. Whether your business is digital or field-based, our expert team ensures precision, documentation, and audit-proof tax filings.