The Law Dictionary

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Deducting Business Use of Personal Cell Phones for Tax Purposes

The use of smartphones and other mobile devices for business purposes may sound like a common sense deduction for many taxpayers, but this is not always the case for the United States Internal Revenue Service (IRS). In fact, claiming the use of telephone and data lines as a business tax deduction prior to 2010 used to be tricky.

In 2014, self-employed professionals and company owners are likely to own a single device from which they conduct business and handle business affairs. The IRS does not have a problem with taxpayers who keep business and personal communications completely separate; for example, a sole business telephone line that is paid with a corporate credit card would make sense as a deduction. The problem would arise during an audit if an IRS examiner takes a look at the telephone records and sees many calls being made to the business owners’ home or to his or her spouse’s mobile phone number. This would indicate personal uses, which should be excluded from the deduction.

Self-employed Individuals

Since 2010, the IRS allows individuals who work on their own or who are sole proprietors to claim business use of their mobile devices. If, for example, a doctor looks at her itemized cell phone bill and determines that 35 percent of all calls are related to her practice, then she could reasonably claim that 35 percent as a deduction. In any case, it would be a better idea for the doctor to get a dedicated mobile line or use a dual sim card device. It is not a good idea to deduct the entire monthly expense unless exclusive business use can be proven with solid evidence.

Smartphones and Tablets as Business Assets

Here’s another good reason for purchasing mobile devices with company funds and keeping them exclusively for business use: Depreciation. Some high-end smartphones and tablets can be quite expensive and likely to quickly lose their value due to wear, tear and the fast pace of technology. The IRS allows bonus depreciation of mobile devices over a period of seven years under the Small Business Jobs Act of 2010. However, business owners must be very careful not to make personal calls or browse the Internet on a personal basis as this could be considered a fringe benefit that could potentially rise the amount of taxable income to report.


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