Shared Expenses: How to Split Business vs. Personal
Shared Expenses: When Business and Personal Mix
That phone bill you paid - was it a business expense, or just a personal one?
If your answer is “both,” you’re not wrong… but you’re not off the hook either.
Blurring the lines between business-use and personal-use is incredibly common, especially for small business owners and self-employed folks. It’s part of the deal when your office is your kitchen table, and your cell phone is both your client hotline and your group chat HQ.
But here’s the thing: the CRA doesn’t do “gray area.” If you’re claiming an expense as a tax deduction, they expect you to know (and be able to prove) what portion was actually for business.
This is one of the most misunderstood parts of managing business finances - and it’s also one of the riskiest if you get it wrong.
Why the CRA Cares About Expense Splits
To be considered a legitimate tax deduction, an expense must be:
Reasonable, and
Directly related to earning business income
This means that if you’re using something for both personal and business reasons - like your internet, your vehicle, or your cell phone - you can’t just write off the whole thing and call it a day.
You have to make a reasonable allocation for the business-use portion. And the keyword here is reasonable, because if you’re audited and the CRA finds that you’ve overclaimed, even by accident, you could be on the hook for penalties, interest, or a complete reassessment.
Let’s go back to that cell phone example.
If you have a second phone just for business, you don’t need to worry about calculating a split, you can deduct its entire cost.
However, if you use your personal phone to conduct business calls, texts, and emails, that’s a legitimate business expense, right? Yes - but not the entire thing.
Since you also use that phone to scroll Instagram, call your mom, and send memes to your friends, you’ll need to calculate the percentage of your usage that was personal vs. business-related.
And yes, you need to be able to explain how you arrived at that number.
Common Examples of Shared Expenses
Here are some of the most common business expenses that often have a personal component:
Cell phone plans: One of the most frequently overclaimed expenses. If you’re using one device for both business and personal use, split the bill accordingly.
Internet bills: If you work from home, you’re probably using your internet for Zoom calls, uploading client files, or running e-commerce. But you’re also streaming Netflix and checking the weather. Same deal - split it.
Vehicle expenses: Whether it’s gas, maintenance, or insurance, if you’re using your car for client meetings or supply runs, you can claim a portion of the costs. But personal trips to the grocery store or daycare? Not deductible. (Check out my Business Use of Personal Vehicle Workbook to make this one easier.)
Rent or mortgage (for home office): If you work from home, you may be able to claim a portion of your housing costs. But it’s based on square footage, use, and other factors - not just a wild guess. (My Home Office Expense Tools will help you with these!)
Software subscriptions: Tools like Zoom, Canva, Adobe, or Dropbox are often used for both personal and business purposes. Keep track of which ones are used in your work.
Meals and travel: Grabbing lunch with a client? That’s a business meal. Grabbing lunch alone while running errands? Not so much. The context matters - and so does your receipt.
Some of these categories are trickier than others. That’s why having tools that help you calculate and document your expense splits is so essential. (More on that in a second.)
Why the “Guess and Hope” Method Doesn’t Cut It
I get it. You’re busy. You’ve got a million things going on. You make a mental note - “I use my phone for business, I’ll just expense it.” And you move on.
But here’s where that gets risky:
If you’re ever audited, the CRA won’t just shrug and say, “Fair enough.” They’ll ask for your phone bills. They’ll notice that you expensed 100% of it. Then they’ll ask for your second (personal) phone bill. And when you say you don’t have one… they’ll know.
They’ll know that you’ve over-claimed - and from there, it’s not hard for them to go digging deeper.
Guesswork isn’t a strategy.
Not only does it leave you exposed in an audit, but it also doesn’t give you an accurate picture of your business’s finances. Including the personal portion of an expense as a business expense overstates your business’ expenses and consequently lowers your taxable income. (This is the specific part that the CRA takes issue with)
Introducing the Personal vs. Business Expense Split Calculator
Okay, so how do you split these shared expenses in a way that’s reasonable, accurate, and audit-proof?
That’s where my new Personal vs. Business Expense Split Calculator comes in.
This digital tool was built specifically for entrepreneurs like you - folks who wear multiple hats and need clear, simple ways to stay on top of their finances.
With this calculator, you can:
Estimate fair and reasonable splits based on actual usage
Document your methodology so you can explain it in the event of an audit
Stay organized with all your expense data in one place
Build better habits for tracking shared expenses in the future
Whether you’re allocating part of your rent for a home office, tracking mileage for client meetings, or splitting your internet bill, this tool helps you get it right without the stress or second-guessing.
What “Reasonable” Looks Like (and How to Back It Up)
Remember, the CRA isn’t expecting perfection, but they are expecting a good faith effort.
If you tell them you're expensing 45% of your internet bill for business use, and you can explain how you arrived at that number, you’re in a strong position.
If you tell them you guessed, or “just expensed the whole thing,” you’re probably getting a reassessment.
Here are some tips for determining a fair percentage:
Keep a usage log for a week or two: Track how much time you spend using a tool for business versus personal use.
Consider the time of day: If your business activities primarily occur during specific hours, factor that into your planning.
Review data usage or screen time reports: Many apps and phones automatically track this information for you.
Document your methodology: Even if it’s just a few bullet points or a spreadsheet, that record is gold.
Final Thoughts: Get Ahead of the Gray Areas
Running a business is messy. The lines between personal and professional life often become blurred. That’s not something to be ashamed of - it’s just part of the reality of entrepreneurship.
But the more proactive and intentional you are about tracking, documenting, and allocating your expenses, the better off you’ll be.
You’ll:
Stay on the CRA’s good side
Get a clearer picture of your business’s financial health
Build trust in your decision-making
And let’s be real - sleep better at night
Every dollar you write off should have a paper trail and a reasonable explanation. This new tool helps simplify that process, allowing you to focus on running your business without worrying about your receipts.
Check out my Personal vs. Business Expense Split Calculator!
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Running a business can feel overwhelming, but handling your finances doesn’t have to be. Check out myEntrepreneur Essentials, which are packed with practical tools to help you stay on top of your numbers and feel more in control!