When it comes to managing your finances, it is important to understand how much of your monthly expenses are tax deductible. Cell phone bills are no exception and it can be confusing to figure out how much of your cell phone bill is actually deductible. To help you understand your tax obligations, this blog post will explore the question of “how much of cell phone bill is tax deductible?” We will provide an overview of the tax rules surrounding cell phone bills and discuss how different deductions may or may not apply to you. This post is particularly relevant for businesses and individuals who are self-employed, as they have additional opportunities to deduct their cell phone bills and other expenses. By the end of this blog post, you will have a better understanding of when and how you can deduct some or all of your cell phone bill from your taxes.
If 30% of your time spent on your cell phone is used for business, you can deduct 30% of the cost of your cell phone bill from your taxes. To do so, you will need to prove the amount of time spent.
Divide the total bill by three if your cable company won’t break out the cost of the phone lines. Next, multiply the number of phone lines by the third of the bill that represents the telephone lines. then subtract the portion of the second or third line used for your business that is business-related. Calculate your business use using the percentage of business minutes used if your bill tracks the minutes used on each phone line.
If you use a second phone line exclusively for your business you can deduct 100% of the cost. If you use it for business and personal purposes, you can use your Time-Space Percentage to determine the business portion. Actually, a more accurate measure of the business use of your second phone line might be your Time Percent.
Some childcare providers contend that because they must have a phone to comply with licensing requirements, their phone bill should be deductible. I once tried to assist a Minnesotan child care provider who didn’t have a phone until she had to get one to obtain a license. The IRS told us clearly that she couldn’t deduct it.
Understand How The IRS Views Cell Phones Use In Business
Although the modern-day cellphones are an extremely new offspring of technological advancement, the IRS did not wait too long to address their use when it comes to taxation and deductibility. In 2011, Congress officially declared cell phones eligible for a 100% deduction on your taxes if you meet certain requirements. Expectedly, the IRS published additional guidance that helps taxpayers understand what Congress intended to do with the resolution. The guidance came in the form of Notice 2011-72, which breaks down the Section 2043 of the Small Business Jobs Act of 2010 as well as many other sub-sections that the taxpayers who use their cell phones during business should understand.
Simply put, the IRS quickly changed its treatment of these devices and began seeing them as any other device that people use for their business after Congress approved the deduction for cell phone use on your taxes. For instance, the IRS does not object if you claim a deduction when you must use your personal cell phone for work, just like you are permitted to do when you must use your personal vehicle for business.
And while most people rely on the percentage-of-use deduction for cell phones, the IRS learned back in the early 2010s that this is not the most straight-forward approach. Namely, it is virtually impossible to prove that someone did or did not use their cell phone for a certain percentage of the time. For example, if you decided to claim an 80% deduction on your annual cell phone bill, the IRS would be at a serious disadvantage had they decided to audit you and track down if that figure is accurate. Instead, the IRS now simply lets taxpayers deduct the entirety of their cell phone bill as long it was primarily used in business. If you also use it for a large number of personal reasons, the deduction will not be permitted. In addition, you have to ensure that the amount you are claiming is not exceeding the average expected in your industry. For example, if you work as an independent contractor who drives for a large ride-share organization like Uber or Lyft, it is well within reason to expect that your cell phone bill will be one of the main expenses in your venture since you have to use it to access the app. If, however, you work as a painter and decide to claim a deduction for your entire annual cell phone expenditure based on a half-dozen, business-related calls you made, the IRS could come to conduct an audit. Hence why understanding the industry in which you operate is crucial to being able to accurately forecast your odds of successfully claiming a cell phone deduction.
Also, your cell phone can’t be your primary residential phone. Additional cell phone charges like these are considered business expenses:
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When a mobile phone is used solely for business, you may be able to deduct certain cell phone expenses from your taxes. IRS cell phone deductions are not available to self-employed individuals only. However, you can also write off any further business expenses you have.
How to LEGALLY Write Off Your Cell Phone [UPDATED Tax Write Off Tips]
What percentage of my phone bill can I claim on tax?
You could legally deduct 30% of your phone bill if 30% of the time you spend on the phone is for business. Author Kristin Edelhauser of “Entrepreneur” magazine suggests obtaining an itemized phone bill so you can distinguish between your personal and business usage and demonstrate your deduction to the IRS.
Can I deduct my entire cell phone bill?
The majority of the time, your cell phone bill is only partially deductible because you’ll use it for personal purposes at least occasionally. You can only deduct your business-use percentage, much like when you deduct computer expenses.
Can I write off a new cell phone purchase 2022?
If you use your smartphone exclusively for work-related purposes, you can write off the full cost of the device as well as your monthly bill. You determine how much of your use is personal and how much is related to business if you also use your business phone for personal purposes.
Where do you deduct cell phone expenses?
- Use IRS Form 1040 and Schedule A for itemized deductions if you’re an individual. write-offs.
- Use IRS Form 1040 and Schedule C form or Schedule C-EZ for business income and expenses for those who are self-employed, independent contractors, or freelancers.