Is internet a utility expense?

Internet expenses

Internet service is generally considered a utility expense because it’s a recurring cost essential for running day-to-day business operations. Like electricity or water, internet access supports communication, data transfer, and overall connectivity, making it a standard part of a company’s utility or overhead expenses.

What is an internet expense?

Internet expenses include the cost of providing broadband, Wi-Fi, or other data services to your business. These services enable communication, cloud access, software usage, and customer interactions. Because internet is used continuously to support operations, it’s categorized alongside utilities on the income statement.

How to categorize internet expenses

Record as a Utility Expense or under a combined “Utilities and Internet” account in your chart of accounts.
If billed together with phone or cable services, allocate costs between categories for clarity.
For home offices, deduct only the business-use portion of internet service.
Treat one-time installation or equipment setup fees as operating expenses unless they create long-term assets.
Include internet under Operating Expenses in your income statement.

Examples of internet expenses

Monthly broadband or Wi-Fi service.
Fiber or cable internet for business locations.
Mobile hotspot or data plans for employees.
Cloud hosting or connectivity services.
Internet hardware rentals (e.g., modems or routers).
Satellite or rural business internet access.

Tax implications for internet expenses

Internet used for business is tax-deductible as an ordinary and necessary operating expense.
For home-based businesses, deduct only the portion used exclusively for work, typically based on square footage or time of use.
Personal internet usage is not deductible.
Installation or upgrade costs may also qualify as deductible business expenses if directly related to operations.
Keep monthly statements and invoices to document business usage for tax purposes.