Tuesday, February 17, 2015

Deducting your internet service costs



Deducting your internet service costs

We all pay a substantial amount every month for internet service, and actors use the Internet for lots of business purposes. I subscribe to a couple of online casting services; I get theatre audition postings from a local website; I get my radio audition copy by email and submit my voice auditions by MP3; I submit my pic and résumé to producers and directors electronically; I even use online maps to figure out where an audition is! So it's legitimate to claim part of your internet bill as a business expense.

Now -- your internet access is basically a communication device, right? So I would tend to think of it somewhat like your telephone service. In the Instructions for Schedule C, it says that you can’t deduct the base rate of your first phone land line. But you can deduct costs over and above the base rate of the first line, such as call waiting, voice mail, and other service enhancements, or the business use of a second line, including its base rate. Therefore, it’s reasonable to look at your internet service as a "second line."  Alternatively, you could think of it like your cell phone -- a separate communication device.  So you should be able to claim a reasonable portion of your internet bill as a business expense. 

The trick is, what's reasonable?  You also use your internet service for personal emails, playing games, wasting time on social media sites, etc.  It would be impossible to figure the amount of time you spend in personal vs. business activity.  In terms of time spent, I'd bet it's more personal, but in terms of individual internet searches and log-ons, I would think the business percentage would rise substantially.  I suppose you could look at your email records and figure out the percentage of personal vs. business and extrapolate from that.  But let's just go half and half, which is what I advise for deducting the cost of telephone service enhancements. 

Start with half of your 2014 internet bill.  Deduct the portion of that expense that’s attributable to your self-employment (1099) work on Line 25 (Utilities) of Schedule C, and include the W-2 portion with “Other” expenses on Line 4 of Form 2106. 

There’s a complete discussion of other allowable deductions (and my unique system for allocating this type of expense between 1099 and W-2 work) in Chapter Eight of The Actor’s Tax Guide, available at www.ActorsTaxGuide.com.

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