How to Deduct Mixed-Use Business Expenses Without Raising Red Flags

As a business owner, it’s common for certain expenses to overlap between business and personal use. The challenge? Figuring out what portion is actually deductible.

Done right, mixed-use deductions can save you money at tax time. Done wrong, they can trigger audits or red flags with the tax office. Here’s a breakdown of common expenses and how to handle them correctly:

Home Office Costs

If you use a dedicated space in your home for business, you can deduct a percentage of household expenses like rent/mortgage interest, utilities, internet, and insurance. The percentage is typically based on the square footage used for business compared to your entire home.

Mobile Phone & Internet

Phones and internet are often mixed-use. Deduct the percentage tied to business calls, emails, and work-related activities. For example, if 70% of your phone use is business-related, 70% of the bill is deductible.

Travel Expenses

When a trip includes both business and personal activities, only the business portion is deductible. For instance, airfare to attend a conference qualifies, but vacation days or family outings do not. Meals and lodging are deductible only for the days you’re working.

Vehicle Expenses

Using your car for both personal and business purposes? Deduct only the business portion, typically tracked by mileage or percentage of use.

Equipment & Software

Purchases like laptops or design tools can be partially deductible. If you use a laptop 80% for business and 20% personally, you can only claim 80% of the cost.

Utilities & Subscriptions

Shared subscriptions (cloud storage, streaming services, or design tools) must be allocated between business and personal use. For example, if Canva is used solely for your business, it’s 100% deductible—but if it’s shared, you’ll need to split the percentage.

✅ Key takeaway: You can absolutely deduct the business portion of mixed-use expenses—but you need solid records (logs, receipts, usage estimates) to back up your claims.

👉 Ready for clarity and peace of mind? Let us review your books, organize your accounts, and set up a system that makes mixed-use deductions simple and stress-free.