Business-use percentage is the share of total use of an asset (vehicle, phone, home office) that's for business purposes. It scales down any actual-expense deduction so you're only deducting the work-related share.
For a vehicle:
- Business-use % = (business miles for the year) ÷ (total miles for the year)
- Example: 18,000 business miles ÷ 24,000 total miles = 75% business use
- Applied to: actual vehicle expenses, depreciation, lease payments
For a phone or laptop:
- Estimated time / data spent on business calls and apps ÷ total use
- Drivers commonly claim 50–80% business use on a phone used primarily for rideshare/delivery
For a home office:
- Square feet of dedicated business space ÷ total home square feet
- Applied to: rent/mortgage interest, utilities, insurance
- Simplified method: $5/sq ft up to 300 sq ft ($1,500 cap) — no tracking required
The IRS expects you to maintain records supporting the business-use percentage. For vehicles, that's a mileage log. For phones, a reasonable estimate based on data/call patterns is usually accepted. Inflating the percentage is an audit risk if challenged.