Is a telephone bill a utility expense?

Is a Phone Bill a Utility Expense for Tax and Accounting Purposes?

Yes — a phone bill can be a utility expense for business tax and accounting purposes.UnderIRS Publication 535, telephone service is treated as a deductible utility expense and is generally reported onSchedule C, Line 25 (Utilities)for sole proprietors.

This applies to:

• Landline service
• Mobile phone plans
• VoIP service
• Internet-based calling services used for business

The key rule is that the expense must be related to business use, and only the business-use portion is deductible where personal use is mixed.

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What Counts as a Utility Expense in Business Accounting?

For accounting and IRS purposes, business utilities commonly include:

• Electricity
• Gas
• Water
• Telephone
• Internet

That definition is broader than how “utilities” is often used in personal budgeting or lease agreements, where phone service is often excluded. In business accounting, however, telephone expenses are commonly treated as utilities or recorded in a dedicated telecommunications expense category.

What IRS Publication 535 Says About Telephone Service

IRS Publication 535specifically includestelephone serviceamong deductible utilities, alongside expenses such as heat, lights, power, and water.

For sole proprietors filingSchedule C, these expenses are generally reported onLine 25 (Utilities). That gives telephone service a recognized and explicit expense category under IRS rules.

Personal Budgeting vs. Business Accounting: Two Different Answers

Whether a phone bill is a “utility” depends on context.

Inpersonal budgeting or lease agreements, a cell phone is usually not considered a utility.

Inbusiness accounting and tax filing, it often is.

Both answers can be correct in their own context. For tax reporting—especially for Schedule C filers—the IRS definition is the one that matters.

Mobile Phones: How to Allocate Business vs. Personal Use

For mixed-use mobile phones,only the business-use portion is deductible.

Common allocation methods include:

• Itemized call or usage logs
• A reasonable percentage based on business use or business hours
• A dedicated business-only device (often potentially100% deductibleif used exclusively for business)

Whatever method you use, apply it consistently and keep documentation.

If an employer reimburses employee phone expenses, reimbursements are generally non-taxable only when made under anaccountable planwith documented business use.

The Home Landline Rule: What Cannot Be Deducted

There is one important exception.

UnderIRS Publication 535andSchedule C instructions,the first basic telephone line into your home is not deductible, even if you have a home office.

However:

• Business long-distance charges on that line can still be deductible
• Asecond line used exclusively for businessmay be fully deductible

This is a longstanding IRS rule that may surprise home-based business owners.

Bundled Plans (Phone + Internet): How to Split the Expense

If your provider bundles phone and internet together, both may be deductible to the extent used for business.

A common approach is to allocate the bill using areasonable, consistently applied method, such as:

• Using itemized provider pricing if available
• Splitting based on service value
• Applying a documented business-use percentage

The method matters less than being reasonable and keeping documentation in case of an audit.

How to Record Telephone Expenses in Your Books

For bookkeeping, create either aTelephone Expenseaccount or include it underUtilities, depending on your chart of accounts.

Then:

• For business-only lines, record the full monthly bill
• For mixed-use phones, record only the business-use portion
• Document the allocation method you used

As a general recordkeeping practice, retain monthly bills and supporting documentation forat least three years, which aligns with standard IRS record retention guidance.

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How Slash Helps Businesses Track Communication Costs

Slash is a business banking platform that can identify charges from mobile carriers, VoIP providers, and internet service providers then automatically route them to Utilities or Telephone expense categories. Employee phone reimbursement claims lacking business-use documentation are flagged automatically.

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