Schedule C Line 25: Utilities Deduction Explained for Freelancers (2026 Guide)

Published: May 14, 2026 · Reading time: 8 min

TL;DR: Schedule C Line 25 (Utilities) is where freelancers deduct utilities for a separate business location (leased studio, office, store, salon booth, warehouse) plus the business-use percentage of cell phone. Home-residence utilities — electricity, gas, water, home internet — do not go on Line 25; they flow through Form 8829 to Line 30 (home office). Double-counting Line 25 and Line 30 is one of the most common Schedule C audit flags. A typical fully-remote freelancer reports $300–$1,200 on Line 25 (mostly cell-phone allocation); a freelancer with a commercial location reports $1,800–$8,000.

Line 25 sounds simple — utilities are utilities — but it's where freelancers most often double-deduct or mis-categorize an entire bill. The same electricity invoice cannot live on both Line 25 and Form 8829. The same internet line cannot be 100% on Line 25 if you also claim a home office on Line 30. This guide draws the boundaries so cleanly you can apply them in 60 seconds per receipt.

What Line 25 Is and Isn't

The Schedule C instructions for Line 25 are short:

Deduct on Line 25 your business utility expenses. Do not include amounts paid for telephone service that is paid for your residence, unless they are deductible as business expenses.

That phrasing carves out exactly four cases:

• ✅ Utilities at a separate business location (leased office, studio, store, salon booth, warehouse, food trailer pad)
• ✅ Business-use percentage of personal cell phone
• ✅ Dedicated business phone or VoIP line (Grasshopper, OpenPhone, Google Voice paid tier, RingCentral)
• ✅ Business-only secondary internet line never used personally
• ❌ Home electricity, gas, water, sewer, trash, residential internet (those go through Form 8829 → Line 30)
• ❌ The first residential landline at your home address (per the IRS instructions — never deductible, even partially)
• ❌ Coworking memberships (Line 20b instead)
• ❌ Auto-related utilities (gas, oil, EV charging) — Line 9 if actual-expense method, otherwise baked into $0.725/mile

What Qualifies: The Common Categories

Separate business location utilities

If you lease a non-residential space, every utility for that location is 100% deductible on Line 25 — no proration required because the location itself is entirely business:

A booth-renting hair stylist, salon-suite massage therapist, or studio-renting photographer with their own electric meter and internet drop puts those bills on Line 25 in full. Booth rent itself goes on Line 20b (Line 20 rent guide →).

Business-use percentage of cell phone

The largest Line 25 item for most freelancers is the prorated cell-phone bill:

• Plan cost — typical $60–$130/month including taxes and fees
• Business-use percentage — typical 50–80% for full-time freelancers
• Hardware — phone purchases over $2,500 go on Line 13 (Section 179); under $2,500 on Line 22 at the business-use %

Document the methodology. A defensible business-use percentage worksheet looks like:

"In March 2026, I logged 412 business call minutes and 178 personal call minutes — 70% business. I use this ratio across the year and re-audit each spring."

That one-paragraph methodology is the difference between an accepted deduction and a disallowed one in an audit.

Dedicated business phone and VoIP

100% deductible on Line 25 with no proration:

• OpenPhone, Grasshopper, RingCentral, Dialpad, Nextiva — virtual business phone systems
• Google Voice (paid Workspace tier) — when used exclusively for business
• Twilio numbers for client-facing IVRs or appointment lines
• eFax, MyFax, RingCentral Fax services

A typical full-time freelancer carries $120–$480/year in dedicated business phone services.

What Does NOT Go on Line 25

Residential utilities — always go through Form 8829 / Line 30

Home electricity, home gas, home water, residential trash, and the business-use percentage of home internet do not go on Line 25 — they flow through Form 8829 by your home-office business-use percentage and land on Line 30.

Putting your full $180/month residential electric bill on Line 25 because "the office is in my house" is one of the most common Schedule C audit flags. The same $180 cannot be on both Line 25 (Utilities) and Line 30 (Home Office) — that's the canonical double-count.

If you use the simplified home office method ($5/sq ft up to 300 sq ft / $1,500), residential utilities are already baked in — you cannot also break them out on Line 25.

Walkthroughs: Schedule C Line 30 Home Office → and Form 8829 Explained →.

The first residential landline — never

The IRS Schedule C instructions are explicit: even if you use your home landline 100% for business, the first phone line into your residence is never deductible. The fix is to set up a dedicated second line (residential or VoIP) for business — that one is fully deductible on Line 25.

Coworking memberships — Line 20b instead

WeWork, Industrious, Regus, Spaces, Industrious On-Demand, and equivalent memberships are rent, not utilities — they go on Schedule C Line 20b (Rent or lease — other business property). Utilities are bundled into the membership fee. Only separate utility add-ons (extra-cost conference rooms, premium internet drops, dedicated lines) break out onto Line 25.

Auto-related utilities — Line 9

Gasoline, EV charging, oil changes, and vehicle maintenance are car and truck expenses on Line 9, not utilities. Under the standard mileage method at $0.725/mile in 2026 these are already baked into the rate. Under the actual-expense method, they go on Line 9 (Line 9 standard vs. actual guide →).

The Allocation Worksheet for Mixed-Use Utilities

For utilities you actually share between home and a separate business location, or between business and personal use, document your method once and apply it consistently:

The defensible methodology is what survives an audit. The IRS does not require a specific allocation formula — but it does require you to apply one and to keep records that justify it.

Real-World Examples

Example 1 — Fully remote freelance writer

A freelance writer working from a 110 sq ft dedicated home office in a 1,200 sq ft apartment, using the actual-expense home office method:

• Home electricity ($120/month × 12 × 9.2% home-office) → $132 on Line 30 via Form 8829
• Home internet ($85/month × 12 × 60% business use × 9.2% allocation alternative) — usually the entire residential internet is run through Form 8829 by square footage % too, not a separate cell-style business-use %. $94 on Line 30 via Form 8829 if using square footage.
• Cell phone ($95/month × 12 × 65% business use) → $741 on Line 25

Result: Line 25 = $741, Line 30 utilities = bundled into Form 8829.

Example 2 — Real-estate agent with leased office

A solo realtor leasing a $1,400/month office:

• Office electricity → $2,200/year on Line 25
• Office internet → $1,440/year on Line 25
• Cell phone ($120/month × 12 × 80% business use) → $1,152 on Line 25
• Office water/trash → $540/year on Line 25
• Total Line 25 = $5,332

Example 3 — Booth-renting hair stylist

A salon-suite stylist whose booth rent ($800/month) includes utilities and Wi-Fi:

• Booth rent itself → $9,600 on Line 20b (Line 20 guide →)
• Personal cell phone, 70% business → $1,008 on Line 25
• Total Line 25 = $1,008

The utilities bundled into booth rent don't double-up on Line 25 — they're already in Line 20b.

Documentation Rules for Line 25

The IRS expects three things if Line 25 is audited:

1. The bills themselves. Monthly invoices for every utility, retained for the standard three-year statute of limitations (six years if you under-report income by 25%+). Digital images are accepted under Rev. Proc. 97-22.
2. The allocation methodology. A one-page worksheet documenting how you arrived at each business-use percentage. Re-run the methodology annually if usage patterns change.
3. Consistency. Use the same method year over year. Switching from 60% business use one year to 90% the next without a documented reason invites an examination.

For a tracker that captures every utility receipt and applies your business-use percentages automatically, see Schedule C Expense Tracker →.

Authoritative References

• IRS — Schedule C (Form 1040) Instructions
• IRS — Publication 535: Business Expenses
• IRS — Publication 587: Business Use of Your Home
• IRS — Form 8829 and Instructions
• IRS — Topic 509: Business Use of Home

For the full Schedule C line-by-line map, see Schedule C Lines: The Complete 2026 Guide → and How to Categorize Expenses for Schedule C →.