What to take away
- You deduct the business share of the airtime or plan, not the full bill, and you need a reasonable basis for the percentage.
- Buying a phone is a capital purchase, so the cost is claimed through capital cost allowance rather than as a current expense.
- If a corporation pays for an owner’s or employee’s phone or home internet, the personal share can become a taxable benefit.
What the CRA allows for phone and internet
For a sole proprietor, telephone and utility costs are claimed on the utilities line of Form T2125, as long as you incurred them to earn income. The CRA’s wording is specific about cell phones: you can deduct the percentage of airtime expenses for a cell phone that you use to earn business income. There is no flat amount and no automatic percentage.
The general rule for the whole form also applies. You cannot deduct personal expenses, so you enter only the business part. A bill that is paid from your business account is not automatically a business expense. What counts is how the service is actually used.
Working out the business percentage
The CRA does not prescribe one method for phones, so the aim is a basis you can explain and repeat. Many people review a few representative months of the bill, note business calls, texts and data use, and apply the resulting percentage to the year. Someone who answers client calls all day will land far higher than someone who only checks email on the way to a job site.
A cleaner approach is a second line or a separate business plan used only for work. The CRA notes that a separate telephone used only for business calls can be deducted at its basic monthly rate. Keeping personal use off that line removes the need for a percentage altogether, which is easier to defend if the claim is ever questioned.
An illustrative example
Suppose a self-employed electrician pays $90 a month for a cell phone plan, or $1,080 for the year. After reviewing several months of usage, the electrician reasonably concludes that about 70% of the use relates to the business. The deductible airtime for the year would be $756, and $324 would stay personal.
These numbers are illustrative only. If the electrician’s use changed mid-year, for example after taking on a second employee, the percentage might also change, and the notes behind each figure should say why. Without that record, a round number such as 100% is difficult to support.
The phone itself versus the plan
The plan and the device are treated differently. The CRA states that if you buy a computer, a cell phone or similar equipment, you cannot deduct the cost. You can instead deduct the portion of capital cost allowance and of interest on money borrowed to buy it that reasonably relates to earning your business income. Leasing is different: the business percentage of lease costs is deductible, alongside the airtime.
This matters when the device is bundled into a monthly plan. A plan that includes a financed phone has a service part and a purchase part, and they may not be claimed the same way. Keep the contract and ask your accountant how to separate them. The encyclopedia entry on capital cost allowance explains why equipment is claimed over time.
Home phone and home internet
For a home telephone line, the CRA says not to deduct the basic monthly rate, although business long-distance calls on that line can be deducted. The CRA pages on the utilities line say little about home internet specifically. The CRA’s utilities guidance adds that utility costs related to a workspace in your home must be claimed as business-use-of-home expenses, which have their own conditions and a loss limit.
In practice, home internet is often discussed with the home-office claim, using a reasonable basis for the business share. Whether yours belongs there or on the utilities line depends on your circumstances, so confirm it with your accountant before choosing. Our article on home office expenses for self-employed people covers the workspace rules.
GST/HST credits on phone and internet
If you are a GST/HST registrant, you may be able to recover the GST/HST on telephone costs through input tax credits, because the CRA lists telephone and utilities among common expenses that can qualify. The credit follows business use. For an operating expense, the CRA’s chart allows a full credit when business use is 90% or more, a credit equal to the percentage of use when it is more than 10% and less than 90%, and no credit at 10% or less.
The two sides connect. Your income tax deduction is reduced by any input tax credit you claim, so you should not deduct the same HST twice. A registrant who uses the quick method generally cannot claim credits on operating expenses such as phone bills, which is one reason to review the method each year.
When a corporation pays
If you own a corporation, the phone and internet are no longer your own business expenses. When the corporation pays for a plan used by an employee, including you as a salaried owner, the CRA treats employer-provided cell phone and internet services as generally taxable, with exceptions. A plan the employer requires for work, with a reasonable fixed cost and no extra charges from personal use, is not taxable under the administrative policy.
An allowance is always taxable. Home internet is different again: the business part is not a taxable benefit, but the personal use is. The CRA also works through a cell phone example in which an employer reimburses a plan that is not reasonable in the circumstances. An $80 monthly plan, or $960 a year, with 60% personal use produces a taxable benefit of $576. Your accountant can help set a reimbursement process so the personal share is repaid or reported.
Records and mistakes to avoid
Keep the monthly statements, the plan contract and a short note about how you set the business percentage. The CRA expects receipts to show the date, the supplier, the buyer and a description, and generally expects records to be kept for six years from the end of the last tax year they relate to.
The common mistakes are claiming 100% of a phone that the family also uses, deducting the basic home line, claiming the whole phone purchase as an expense and forgetting that a corporation’s payment for personal use is reportable. Bring last year’s claim and a few statements to your accountant, and ask whether the percentage still fits.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Business expensesCanada Revenue Agency
- Business recordsCanada Revenue Agency
- Where and how long to keep recordsCanada Revenue Agency
- Input tax creditsCanada Revenue Agency
- Calculate input tax credits – ITC eligibility percentageCanada Revenue Agency
- Completing Form T2125Canada Revenue Agency
- Business-use-of-home expensesCanada Revenue Agency
- Line 9220 – UtilitiesCanada Revenue Agency
- Other business expensesCanada Revenue Agency
- Cell phone and internet servicesCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.