Schedule C

25 — Utilities Updated for tax year 2025

What this line means

The cost of utilities for your business premises — electricity, gas, water, sewer, trash removal, telephone, and internet service. This is for a separate business location (office, shop, studio, warehouse), not your home. If you work from home, utility costs related to your home office are part of the home office deduction on line 30, not this line.

Does this apply to you?

  • You pay utilities for a separate commercial space — office, retail shop, warehouse, studio
  • You have a dedicated business phone line or business internet service at a commercial location
  • You pay for water, electricity, or gas at a business property you own or rent

Easy to overlook

Dedicated business phone and internet lines A phone line or internet service used exclusively for business is 100% deductible on line 25. If you have a separate business cell phone plan, the entire cost goes here. If you use one phone for business and personal calls, only the business percentage is deductible — and that portion goes on line 25 (for a separate business location) or is included in your home office calculation (line 30). 1 [SOURCE: IRS Schedule C instructions — Line 25]

Utility costs at a home-based business go on line 30 If you work from home, your electricity, heat, and internet costs are deductible — but through the home office deduction (Form 8829 or the simplified method), not on line 25. Line 25 is only for utilities at a business location separate from your home. Putting home utilities on line 25 is a misclassification. 2 [SOURCE: General filing pattern — home utility deductions on wrong line]

Watch out for this

Deducting home utility costs on line 25 instead of including them in the home office deduction on line 30. If your business operates from your home, all home-related costs (utilities, insurance, rent/mortgage interest) are allocated through the home office calculation, not claimed directly on individual expense lines.

  • Line 30 — Schedule C — Business use of home; where home utility costs go
  • Line 20b — Schedule C — Rent; rent for the business space where these utilities apply
  • Line 18 — Schedule C — Office expense; overlaps with utility-like costs at an office

Footnotes

  1. IRS Schedule C (Form 1040) Instructions, Line 25. https://www.irs.gov/instructions/i1040sc ↩

  2. IRS Publication 587, Business Use of Your Home. https://www.irs.gov/pub/irs-pdf/p587.pdf ↩

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