Can You Deduct a Cell Phone for Business Expenses?

Business cell phone expenses require special treatment by the IRS.

You may decide to use a cellular telephone to conduct business so that you can keep connected with customers and employees while you are away from the office. Since your investment in a cell phone can be sizable, both for the phone and the monthly bill, you may wonder if you can deduct this expense for tax purposes. In most cases, you can with some special considerations.

Listed Property

Cell phones are listed property according to the IRS. This means that the costs associated with purchasing a cell phone generally must be depreciated over a period of several years, where you would be able to deduct a portion of the purchase of the cell phone each year. You may be able to deduct the purchase of a cell phone under Section 179 of the IRS code. Using section 179, you may deduct the whole purchase price in the year that you purchased it for business use. Section 179 is subject to limitations, such as how much money you are deducting for other business purchases.

Record Keeping

You must keep records on how you use all listed property. These records should include how often the item is used for business or personal use. For some listed property, this means that you would end up keeping a log book each time you used the item, but it is much easier with a cell phone. Make sure that your monthly cell phone bill itemizes your phone bill by each call made to meet your record-keeping obligations.

Business and Personal Use

You probably use your cell phone for business as well as personal use. According to IRS rules, only the business portion of your cell phone use is deductible as a business expense. To calculate the percentage of business use of your cell phone, figure out how many minutes you have used your phone for business use and divide it by the total amount of minutes that you have used the phone. The answer as a percentage is the business use of a cell phone and is the percentage of the total cell phone expense that is deductible.

Employee Business Expenses

Even if you do not own your own business, you can deduct a portion of your cell phone that you use in your job for your employer's convenience. You have to keep records of how much you use the phone for your employer and figure out what the business use percentage is. You can then deduct the amount of the business use on your tax return as an itemized deduction on your schedule A as a miscellaneous business expense.

References

• Kiplinger: Employee Business Expenses
• "Entrepreneur" Magazine: Top Tax Write-Offs That Could Get You in Trouble With the IRS; Kristin Edelhauser; November 2006
• Business.gov: Small Business Expenses and Tax Deductions