Cell Phone, Home Office: Tax Deductions

Whether you're checking Slack messages, calling a client, or navigating to an Uber passenger, you likely use your mobile device for work at least some of the time. However, many people forget to deduct their cell phone bills on their taxes. This is because they use their phones for both personal and business purposes, and these are bundled together into one monthly bill.

Here's how to get around that problem and write off your cell phone bill as a work expense.

Calculating the business-use percentage of your phone

• Determine Business and Personal Use Hours: Start by figuring out the hours you typically spend on business-related activities on your phone during a week. Include activities such as business calls, emails, and work-related research or tasks. Next, determine your total waking hours for the same week. This will give you an idea of the time spent on both business and personal use.
• Calculate the Business-Use Percentage: Divide the number of hours spent on business activities by your total waking hours. For example, if you work 40 hours per week and your total waking hours are 98 hours, your business-use percentage would be approximately 41%.
• Apply the Percentage to Your Phone Bill: Now, take your monthly phone bill and multiply it by the business-use percentage. For instance, if your bill is $100 per month and your business-use percentage is 41%, you can claim a tax deduction of $41 per month.
• Consider Other Business-Related Expenses: Besides your monthly phone bill, there might be other expenses related to your cell phone usage for business. These could include roaming charges during business trips, long-distance calls from hotel rooms, or the cost of apps and accessories specifically used for work. Keep track of these additional expenses as they can also be deducted.
• Document Your Calculations: It's important to maintain proper records to support your tax deductions. Keep a log of your business and personal use hours, as well as any additional business-related expenses. You may also want to retain itemized phone bills or credit card statements to justify your calculations.
• Understand the Rules: Tax regulations vary by country and can change over time. Familiarize yourself with the specific rules and requirements of the tax authority in your region. For example, in the United States, the IRS requires that you only deduct the business-use portion of your cell phone expenses unless the personal use is considered "de minimis" or trivial.
• Consult a Professional: While these steps provide a general guide, tax matters can be complex. Consider consulting a tax expert or accountant to ensure you're calculating your deductions accurately and taking advantage of all eligible deductions. They can provide personalized advice based on your specific circumstances.

Deducting the cost of a new phone

If you're looking to deduct the cost of a new phone from your taxes, there are a few things to keep in mind. Firstly, you can only deduct the cost of the phone if it is used for business purposes. This means that if you use your phone for both personal and business reasons, you can only write off the business-use percentage of the phone's cost.

For example, if you use your phone for work 60% of the time, you can write off 60% of the cost of the phone. This also applies if you are on a family plan – you can deduct the portion of the plan that you use for work. It's important to note that you can only deduct phone expenses that you personally pay for.

Additionally, if your new phone costs less than $2,500, you can use the de minimis safe harbor election to write off the entire cost of the phone in the first year you use it for work. This is a simple method as you don't need to calculate depreciation. However, you will need to include this election with your tax return and make it every year.

If you are self-employed, you can claim the business use of your phone as a tax deduction. This also applies if you are an employee who had to use your personal phone for business before 2018. However, beginning in 2018, unreimbursed employee expenses are no longer deductible.

Lastly, remember that good record-keeping is important. While you don't need to keep ultra-detailed logs of your cell phone usage, having documentation of your monthly cell phone charge and the split between business and personal use will be helpful for tax purposes.

Using the de minimis safe harbor election

The de minimis safe harbor election is a provision that allows you to deduct the full cost of certain business-related expenses in the year they were incurred, rather than having to spread the cost over several years. This can include the cost of business equipment, such as a cell phone, as long as it falls below a certain threshold.

The threshold for the de minimis safe harbor election is $2,500 per item or invoice for most taxpayers. This means that if you purchase a piece of equipment, such as a cell phone, for your business that costs $2,500 or less, you can deduct the full amount as an expense on your tax return for the current year. This can be particularly beneficial as it simplifies your bookkeeping and may result in a larger deduction for the current year.

To qualify for the de minimis safe harbor election, there are a few requirements that must be met. Firstly, the expense must be for tangible property, such as a physical asset like a cell phone, that is used in your business. The expense must also be less than or equal to the threshold amount of $2,500 per item or invoice. Additionally, you must have an accounting procedure in place at the beginning of the tax year that specifies how you will treat these types of expenses.

To make the de minimis safe harbor election, you need to create a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" and attach it to your tax return. This statement should include your name, address, Taxpayer Identification Number (TIN), and a declaration that you are electing the de minimis safe harbor. It is important to note that this election must be made annually and applies to all expenses that meet the requirements.

By utilizing the de minimis safe harbor election, you can simplify your tax record-keeping and potentially reduce your tax liability. However, it is important to keep accurate records of all claimed expenses and ensure that you are complying with all applicable tax laws and regulations.

Deducting your family plan

You can deduct the portion of your family plan that you use for work. Here's how to do it:

Itemise your monthly bill

Ask for an itemised version of your monthly cell phone bill. This will allow you to identify which charges are directly related to your phone, and which are associated with your family members.

Split the shared charges

Once you've identified individual costs, split up the shared charges (like sales taxes and fees) between everyone on the plan.

Calculate your individual cell phone cost

After you've figured out your individual cell phone's cost, you can split that between your business and personal use. For example, if your phone bill is $100 per month and your business-use percentage is 41%, you can take a tax deduction of $41 per month, or $492 per year.

Only deduct expenses you personally pay for

Remember, you can only deduct cell phone expenses that you personally pay for. So if a family member is paying for your cell phone and you're not reimbursing them, you can't write off that cost.

Deducting cell phone expenses on a business trip

Cell phones have become an essential tool for work, whether it's checking messages, calling clients, or navigating. If you're travelling for work, you may find yourself spending more on your phone bill due to roaming charges, and these extra trip-related fees are considered a business expense and are fully tax-deductible. This also applies to other communication expenses incurred during your trip, such as long-distance calls from your hotel, hotspots, and in-flight internet access.

If you use your phone for both personal and business purposes, you can only deduct the percentage of the cost that applies to business use. For example, if 30% of your time on the phone is spent on business, you can deduct 30% of your phone bill.

Documenting Your Deductions

It's important to keep good records of your deductions. For trip-related phone expenses, your credit card and bank statements should suffice as documentation.

Deducting Accessories and Apps

Phone accessories and apps purchased exclusively for work are also tax-deductible. Examples of deductible accessories include phone mounts, ring lights, and protective cases. Deductible apps include those that are used for business purposes, such as mileage trackers and receipt scanners.

Frequently asked questions