Monthly cellphone bills can add up, so it's worth claiming a cellphone tax deduction when you can. Business owners and contractors who use a cellphone exclusively for business can write off the entire cost of equipment and service charges. Business owners who use the same phone for personal and business calls can write off a portion of the expense. Employees who aren't reimbursed for calls can also take a deduction, but the deduction is limited.
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Guidelines for Small Business Owners
Expenses involving cellphones, including the cost of the phone, monthly service charges and any tangential fees, are a viable tax deduction for business owners and self-employed individuals. As long as the phone is used 100 percent for business, you may deduct all cellphone expenses on the business tax return. There isn't a specific line item for cellphone expense, so add the total to "Other Deductions." On the supporting tax schedule, refer the accounts as "cellphone expense" or "telecommunications expense."
Mixed Usage Cellphones
If you make personal calls on your business cellphone, you technically can't write off the entire cost of the phone and monthly bill. The IRS only allows taxpayers to deduct business expenses to the extent that they were used for business. That means that if you used your cellphone 90 percent of the time for business calls and 10 percent of the time for personal calls, you can deduct 90 percent of the expense. To calculate the percentage and substantiate the expense, review the monthly call logs from your bill and tick off all the personal calls.
Usage for Your Job
If you use your cellphone at work and your employer doesn't reimburse you, you're eligible for a tax deduction. Unreimbursed cellphone expenses can be deducted as an employee business expense on Form 2106. Taxpayers may deduct the difference between the expense they incurred and what their employer actually reimbursed them. To figure the expense, calculate the percentage of calls you made for work-related business and take a prorated amount of the monthly bill.
Limitations to the Deduction
If you want to deduct the expense of calls that you made for your job, you will encounter a few limitations. To claim employee business deductions, taxpayers must forgo the standard deduction and choose to itemize deductions. The standard deduction for an individual is $6,200 at the time of writing, so it may not make sense to itemize if your total itemized deductions are less than that amount. Also, taxpayers can only get a deduction for miscellaneous expenses that exceed 2 percent of their adjusted gross income.