Rules for deducting your cell phone
Deducting business use of your cell phone can provide a significant tax savings.
If you use your cell phone for business, you may be able to claim a business deduction. Therefore, it’s important to know the IRS rules for deducting cell phone usage so that you are taking the correct amount business expense.
If you use your own mobile device for business purposes, a cell phone business expense is based on the portion of the time that it is used for business. If 85 percent of your minutes in a given month are for business calls, for example, you can deduct 85 percent of your monthly bill on your taxes.
The best way to calculate and document this percentage is by using your cell phone bill, if it itemizes your calls. Many cellular provider bills aren’t itemized, but you can log on to the provider’s website to access a log of all your calls for the month. Then print out the logs and save them in case you are audited.
You can also try to prove business use through recording daily business logs that show phone conferences, but that’s a lot harder. However, if a question ever arises, daily logs may help establish that a call was made for a business purpose.
Some people use two phones, one for business and the other for personal use. If you do this and you’re strict about keeping them separate, you can normally deduct 100 percent of the cost of the business phone on your tax return.
If you have only one cell phone it’s a big mistake to claim you used it 100 percent of the time for business. That’s a red flag during an IRS audit, since they will assume that even phones that are used primarily for business occasionally are used to make a text or call for personal reasons.
In addition to deducting a percentage of your regular monthly bill, there may be other expenses which you can deduct.
Roaming or other long-distance charges that are required by your business may be deducted. You can also deduct the difference between a more expensive plan needed for business and a cheaper plan that would have been good enough for personal use.
Additional services such as call waiting and conferencing that are only used for business are deductible.
Phone apps that you use for business may be deductible. As an example, an app that tracks your business mileage would be deductible.
When an employer provides an employee with a cellphone primarily for business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. Therefore, this can be a great benefit for an employee. The IRS does not generally require recordkeeping of business use in order to receive this tax-free treatment.
David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at firstname.lastname@example.org