Every small business owner today relies on cell phones and technology—communication, operations, billing, management, sales, marketing—everything. So, it’s about time I talked about how to deduct your cell phone as an expense.
You need to know the details to understand and implement cell phone deductions. So, we’ll move through definitions, rules, exceptions, and remote work.
Claim deductions for the use and value of your cell phone.
Let’s get to the big question: “Can I deduct my cell phone as a business expense on taxes?” The answer is “yes.”
You can claim deductions on “use” and “value.” Let me explain.
Here’s how deductions for business owners break down:
- Use: Talk and data costs that you see on your phone bill. “Business use” is the portion of the costs associated with business. Personal use is the portion not associated with business.
- Value: The purchase cost of a new cell phone. We don’t need to differentiate between business/personal and business-only. I’ll explain shortly.
So, we have the essential definitions covered. Let’s get into the rules.
What is the “business use” of a cell phone?
Any expense classified under “business use” will offer tax deductions, and that rule applies to cell phone usage.
In this context, business use means that the cell phone or technology is necessary for normal business operations and is directly related to business activities. Sales, client relations, and travel-related billing costs are included.
Business use cell phone expenses should also fall within industry norms to qualify as deductions. Cell phones are in every industry, so any cell phone that is available for public purchase and has not been modified or accessorized would pass the test.
Here’s what you can deduct if you use a cell phone for business and personal use.
I’m going to lay this out in bullet points. Right now, I’m talking about rules for business owners who pay self-employment taxes—sole proprietors, partnerships, LLCs.
- What can I deduct for cell phone use? You can 30% of the data, messaging, and talk costs related to business.¹ To deduct the expense, you would need to calculate the business-use percentage of the cell phone on a month-by-month basis.
- What can I deduct for cell phone value? You can deduct 100% of the purchase price of a new cell phone for personal and business use. If the cell phone is purely for business, you can also expense all costs of use (your phone bill).¹
Those are the details behind the question, “Can I deduct my cell phone as a business expense.”‘
So, for personal and business use cell phones, keep an itemized phone bill that differentiates between business and personal to prove your deduction to the Internal Revenue Service (IRS). Also, keep your receipt for the phone you purchased.
Consider investing in a business-only cell phone.
Why? It’s inconvenient and expensive. True, but consider this: If you’re not an active cell phone user for personal reasons but an active cell phone user for business purposes, then put your money into a more powerful business cell phone. All expenses—use (bills) and value (purchase price)—are 100% tax-deductible.
What if your business is 100% remote?
Computers, software, and online software applications are deductible—even for remote workers. But when the home is the office, and the office is the home, the line between personal and business use gets blurry. We want to make sure we’re diligent and compliant in these situations.
Ideally, I’d like to see a dedicated computer and dedicated software strictly for business. But is that practical? Not particularly. Remember that home office deductions also cover remote business owners and the associated expenses. So, we’d need to look at how we classify that expense. (That’s tax planning, ladies and gentlemen.)
Make informed choices on technology deductions.
Remember that an expense is an expense; the fact that it’s tax-deductible doesn’t make it free, and there will be complications. The tax code, after all, is not renowned for its clarity. So, if you’re looking at new technologies and are uncertain whether they are tax deductible, it might be time to give me a call.
Talk soon,
Jeremy A. Johnson, CPA
References
- Part III – Administrative, Procedural, and Miscellaneous [Internet]. [cited 2023 Feb 20]. Available from: https://www.irs.gov/pub/irs-drop/n-11-72.pdf
FAQs
You can 30% of the data, messaging, and talk costs related to business. ¹ To deduct the expense, you would need to calculate the business-use percentage of the cell phone on a month-by-month basis.
Can I write off my cell phone as a business expense? ›
Share: You can qualify for a cell phone tax deduction from cell phone charges incurred when the mobile phone is being used exclusively for business. There is not an IRS cell phone deduction for self employed people, exclusively. However, you can also deduct additional business expenses that you incur.
Can I put a phone as a business expense? ›
These expenses reduce your taxable income, thereby lowering your tax bill. Commonly claimed expenses include office supplies, travel costs, and yes, your phone. However, the key is that the expense must be “wholly and exclusively” for business use.
Can I claim my phone for business? ›
Tax Return, Bookkeeping and BAS experts. Can I claim my mobile phone as tax deduction? The answer is YES. However, you must genuinely use your mobile phone for work purpose to be eligible to claim a tax deduction.
How much of my phone bill can I claim? ›
If you occasionally use your mobile phone for work purposes, and the total deduction you're claiming for the year is less than $50 – you can claim the following flat rate amounts: $0.25 for each work call made from your home phone. $0.75 for each work call made from your mobile.
What percentage of my cell phone bill can I deduct? ›
If you're self-employed and you use your cellphone for business, you can claim the business use of your phone as a tax deduction. If 30% of your time on the phone is spent on business, you could legitimately deduct 30% of your phone bill.
Can I deduct my internet as a business expense? ›
If you regularly conduct business on the internet, then you can write off part of your bill. If you're a freelance writer, for example, your business clearly requires the internet to function. It also counts if you're a self-employed kayak instructor or construction worker who: Books clients through a website.
How to expense a phone? ›
You can calculate your mobile phone and data use expenses for a work purpose by: claiming incidental use ($50 or less), with basic records to show how you calculated your claim, based on a cost of: $0.75 for work phone calls made from your mobile phone. $0.10 for text messages sent from your mobile phone.
Can I use my personal phone as a business phone? ›
And yes, this is legal. If your company requires this level of control over your device, it may be in your best interest to avoid using your personal phone number for work.
What is the accounting treatment of mobile phones? ›
Mobile phones are considered to be fixed assets as they usually last for more than a year. Like any other long-term asset, the value of phones depreciates under the provisions of the Income Tax Act, 1961 and Companies Act, 2013. Any property that generates value over time falls in the category of a capital asset.
Share: If you're a sole proprietor, you can deduct ordinary and necessary business meals and entertainment expenses. However, these expenses must be directly related to or associated with your business. If you're an employee, you can deduct these only to the extent your employer doesn't reimburse you.
What deduction can I claim without receipts? ›
What does the IRS allow you to deduct (or “write off”) without receipts?
- Self-employment taxes. ...
- Home office expenses. ...
- Self-employed health insurance premiums. ...
- Self-employed retirement plan contributions. ...
- Vehicle expenses. ...
- Cell phone expenses.
If you use the photography equipment both for your business and for personal use, you can only deduct the business use percentage. For example, if you use a $1,000 camera 75 percent of the time for business, and 25 percent for personal use, your deduction is $750.
Can I write off my cell phone for work? ›
What can I deduct for cell phone use? You can 30% of the data, messaging, and talk costs related to business. ¹ To deduct the expense, you would need to calculate the business-use percentage of the cell phone on a month-by-month basis.
What percentage of your phone can you claim for work? ›
Over a typical work month, David works out that 25% of his phone use is work-related (25 work calls ÷ 100 total calls). After taking a month of leave across the year, David calculates 25% × $50 × 11 months = $138. David can claim that amount as a phone expense on his tax return this year.
What is a reasonable cell phone reimbursem*nt? ›
In the US, the average cell phone reimbursem*nt for employees is $30 per month. However, this amount varies throughout the states, as well as the employees' specific requirements. Typically smaller companies will reimburse their employees in the $30-40 per month range.
Can my LLC pay my phone bill? ›
While it's great that your Limited Liability Company can cover the cost of your cell phone if it's used for business, you should remember to keep your tax obligations in mind. Only reasonable and necessary expenses can be claimed, and documentation is key to ensuring compliance with tax regulations.
Is a cell phone expense taxable income? ›
Is cell phone reimbursem*nt taxable by the IRS? Reimbursem*nts made for work-related personal cell phone use aren't taxable.
Can I write off a TV for my business? ›
For example, if you purchase a new computer for your business, the cost of the computer would be a deductible expense. However, if you purchase a new TV for your home office, the cost of the TV would not be a deductible expense. Deductible business expenses are those that are directly related to your business.
