If you're like many people, you use your cell phone more than your home telephone service. It just makes sense that something you use so much should be tax deductible. If you use your phone for business, either your own or an employer's, you can deduct expenses related to it. Unfortunately, personal calls don't count.
Strictly Business or Just Personal
Much to the dismay of people across the country, the IRS will only allow a tax deduction for a cell phone if the cell phone is used for business. If you use your cell phone to text your sweetheart or call your Aunt Martha, there's no hope of a tax deduction. If, however, your cell phone is necessary for conducting your business, you can deduct related expenses on your tax return.
You may use your cell phone for both business and personal use. In such a case, you won't be restricted from deducting cell phone expenses on your tax return as long as it is primarily used for business. Instead, you'll have to deduct the portion of your cell phone expenses that are tied to your business. For example, if your cell phone is used for your business 60 percent of the time, you can deduct 60 percent of your expenses.The 40 percent you spend communicating with friends and family is off limits.
Deductible Cell Phone Expenses
You can deduct the total amount of your cell phone bills, including any activation fees, on your tax return as long as the calls were business related. Include calls in which you spoke with customers, employees and co-workers, inquired about supplies and handled business-related disputes. Calls made to talk to potential clients, set up meetings, check your business account balance and learn about new business opportunities count as well. In addition, you can even deduct the money you paid for a new cell phone.
You can also deduct the business use of a cell phone if you are an employee rather than a business owner. You will only qualify, however, if your employer requires you to maintain a cell phone for business use. Calls you make after normal business hours do not count toward this deduction.
In the event of an audit, your cell phone expenses may be scrutinized. In such a case, you will need to show that your expense deductions were legitimate. Maintain copies of your cell phone bills and keep receipts for new cell phones, cell phone accessories, batteries and chargers as well. In addition, keeping an itemized call list may help you prove you were dialing a customer rather than ordering pizza.
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