Cellphones have become as important to business as a land line, making them a genuine, tax-deductible business expense. However, because cellphones are intricately linked to our personal lives for most of us, the IRS scrutinizes this deduction closely to ensure that personal electronics aren’t claimed as a business expenditure.
Your cellphone as a small business deduction
You can claim the commercial usage of your phone as a tax deduction if you’re self-employed and use your mobile for business. You might properly deduct 30% of your phone cost if you spend 30% of your time on the phone on business. Writer Kristin Edelhauser of “Entrepreneur magazine” suggests acquiring an itemized phone bill so you may track your company and personal usage and justify your deduction to the IRS. You might also get a second phone number and use it solely for business purposes.
Deductions for employees
Even if you work for someone as an employee, you may be required to use your personal smartphone for business purposes for tax years prior to 2018. If you itemize your deductions, the IRS permits you to claim depreciation on your phone as a “unreimbursed business expense” if you use it for work on a regular basis and it’s a typical, accepted business practice.
Unreimbursed business expenses that total more than 2% of your adjusted gross income can be deducted. Professional association dues, legal costs, and other expenses indicated in IRS Publication 529 are included in this category.
These and other unreimbursed employee expenses are no longer deductible as of 2018.
According to Schneider Downs, the Small Business Jobs Act of 2010 affects the way you compute cellphone depreciation. If you used your cellphone for business less than 50% of the time, you could only depreciate it on a straight-line 10-year depreciation schedule under the prior regulations. However, the law now permits you to deduct depreciation (the decrease in value caused by wear and tear) over a seven-year period, as well as making bonus depreciation easier to claim.
Your cellphone as fringe benefit
If your company provides you with a cellphone as part of your job, your taxable income could increase. According to Schneider Downs, using your cellphone for personal calls even significantly counts as a fringe benefit that must be factored into your gross compensation.
If you can show that you use a personal cellphone during business hours and make all of your personal calls on it, the IRS may find that the business phone is used solely for business purposes, in which case your income will not be affected.
What category does phone usage fall under?
A cell phone is classified as a working condition fringe benefit by the IRS. “Property and services you supply to an employee so that the employee can accomplish his or her work,” says the definition. As a result, it is regarded as a typical and necessary corporate expense.
Is it possible to deduct your phone cost from your taxes?
When your cell phone is used solely for business, you may be eligible for a cell phone tax deduction. There is no specific IRS cell phone deduction for self-employed individuals. You can, however, deduct any additional business expenses you incur.
The normal monthly expense of using a personal cell phone for business will not qualify as a deduction. To deduct the expense, you must determine the cell phone’s business-use percentage on a month-by-month basis.
A log with the following items could be included in adequate documentation:
- Notes indicating whether the call was personal or professional.
- Each call has a business function.
Also, your cell phone cannot be used as your primary home phone. These kinds of extra cell phone costs are considered business expenses:
- Charges for long-distance calls for business
- Those commercial calls resulted in roaming charges.
- Due to business requirements, additional services have been offered.
- Due to business requirements, the plan has been increased.
Is the cost of a cell phone considered a utility expense?
Phone bills are included under “Types of Utility Bills” on MyEnergy, an online bill management service. A telecoms bill is the same as a phone bill. In most cases, a mobile or wireless bill is not considered a utility.
For the full tax year, gather all of your cellular bills and receipts. These documents are not required to be attached to your tax return. However, you should maintain them in your personal tax records as evidence of your deduction in case your return is audited by the IRS.
Fill out Part V of IRS Schedule C, “Other Expenses,” with your telephone expense. In the far right column of the expense line, write the total amount of your company cellphone expenses for the year. Add the cost of your phone to any other expenses you may have incurred, and total it on line 48.
For business purposes, keep a second cellphone. According to IRS rules, you must only use the phone for business in order to claim a deduction. Keep your personal and business phone bills separate if you utilize the same service provider.
What is the internet expense category?
Internet services that are only business support services and are not required for efficient operations are classified as office expenses.
What percentage of your Internet bill is tax deductible?
You must file Form 2106, Employee-Related Expenses, to deduct Internet expenses as an employee. Your deduction is limited to the amount that exceeds 2% of your adjusted gross income, according to the IRS. As a result, if you make $50,000, you can only deduct expenses that total more than $1,000. If you are self-employed or own a business, you can deduct all of your business-related Internet expenses from your gross income.
When it comes to taxes, how are cell phone expenses calculated?
If you use your phone only for business, you can deduct any relevant expenses. Otherwise, it’s a percentages game. For example, if the phone is 70% for personal use, you can deduct 30% of your monthly rates as a cellular tax deduction, plus any additional business expenses.
Is it possible for me to utilize my phone bill as a utility bill?
Is a telephone bill considered a utility bill? Phone bills are commonly classified as utility bills. However, this only applies to landlines, not mobile phones. Telephone companies’ invoices are utility bills, and they, like energy suppliers, provide a service to the general public.
What does the Internal Revenue Service consider utilities?
Housing and Utilities are two examples of local standards. Mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, waste collection, home telephone service, cell phone service, cable television, and Internet service are all examples of housing and utility standards.