The deductibility of certain expenses can be called into question come tax season. And a question we get a lot revolves around whether a small business owner can deduct the cost of their cell phone.
Just to specify, we will be discussing whether you can deduct the cost of your cell phone for those individuals that are self-employed, not for those that are employees. The reason being is that employees are no longer able to deduct their unreimbursed business expenses on their tax return as of 2018.
So Can I Deduct the Cost of My Cell Phone on My Tax Return?
For those that pay a monthly service fee for their cell phone’s data plan plus the cost of the cell phone, they can deduct a certain percentage of these monthly costs on their tax return.
How Do I Know How Much to Deduct?
The answer to this is somewhat subjective, given that the general rule is that the taxpayer has to estimate the amount of time that he or she uses their cell phone for personal use and how much time they use their cell phone for business use.
This is done by picking a reasonable percentage that they believe they used the cell phone for business. They then apply this percentage to the cell phone data cost. This amount is then included as an expense on their tax return.
Is There Any Way I Can Prove That My Percentage Is Accurate?
The way in which you record the amount of time you spend on your phone is going to be different than how another self-employed individual does it.
You could create a complex spreadsheet and track your time you spend on your phone, you could use an app that tracks your time, or you could just use a percentage that sounds pretty good.
In any case, when it comes to taxes it is best to have some type of record or back-up, even if it is something rudimentary. This comes into handy especially if you are picking a high percentage for your estimated business percentage use of your cell phone, like 90%.
This article does not constitute legal, tax, or financial advice. For information regarding your specific situation, please consult your local professional.