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How to Deduct Your Cell Phone

By JLP | January 14, 2007

I posted a list of the 5o of the Most of the Most Easily Overlooked Tax Deductions back in November. The deduction for cell phones received a lot of attention. So, here’s what I found out about this particular deduction (NOTE: I am NOT a tax expert. I’m just sharing information that I have found):

First, from IRS Publication 17 (Chapter 28):

Depreciation on Computers or Cell Phones

You can claim a depreciation deduction for a computer or cell phone that you use in your work as an employee if its use is:

For the convenience of your employer, and

Required as a condition of your employment.

For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer or cell phone, see Publication 529.


Now, here’s what I found in Publication 529 under Unreimbursed Employee Expenses (I left out the parts that are repeats of the information found in Publication 17):

Depreciation on Computers or Cell Phones

For the convenience of your employer. This means that your use of the computer or cell phone is for a substantial business reason of your employer. You must consider all facts in making this determination. Use of your computer or cell phone during your regular working hours to carry on your employer’s business is generally for the convenience of your employer.

Required as a condition of your employment. This means that you cannot properly perform your duties without the computer or cell phone. Whether you can properly perform your duties without it depends on all the facts and circumstances. It is not necessary that your employer explicitly requires you to use your computer or cell phone. But neither is it enough that your employer merely states that your use of the item is a condition of your employment.

Example

You are an engineer with an engineering firm. You occasionally take work home at night rather than work late at the office. You own and use a computer that is similar to the one you use at the office to complete your work at home. Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it.

Which depreciation method to use. The depreciation method you use depends on whether you meet the more-than-50%-use test.

More-than-50%-use test met. You meet this test if you use the computer or cell phone more than 50% in your work. If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). In addition, you may be able to take the section 179 deduction* for the year you place the item in service.

More-than-50%-use test not met. If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). You also cannot claim the section 179 deduction. (But if you use your computer in a home office, see the exception below.)

Investment use. Your use of a computer or cell phone in connection with investments (described later under Other Expenses) does not count as use in your work. However, you can combine your investment use with your work use in figuring your depreciation deduction.

If it were me, I would check with a tax accountant BEFORE I tried to deduct a cell phone or computer. In most cases, the deduction doesn’t outweigh the risk of getting audited by the IRS. Oh, and here’s the records you should keep in case the IRS challenges your deductions:

Source: The Ernst & Young Tax Guide 2007

*IRC Section 179 Deduction

Some taxpayers can elect to recover all or part of the cost of certain qualifying property, up to a certain dollar limit each year, by claiming a Section 179 deduction. By taking the Section 179 deduction a taxpayer chooses to deduct depreciation up front rather than over the life of the asset. It is especially important to remember that the Section 179 deduction may be taken only on assets acquired for use in trade or business, not on property used for other income-producing activities, such as rental activities. See Publication 946, How to Depreciate Property, for detailed rules applicable to the Section 179 deduction. (I found this information here.)

Topics: Tax Planning, Taxes | 14 Comments »


14 Responses to “How to Deduct Your Cell Phone”

  1. AllFinancialMatters » Blog Archive » 50 of the Most Easily Overlooked Tax Deductions Says:
    January 15th, 2007 at 1:03 am

    [...] 7. Cellular telephones – more on this here. [...]

  2. Tax Tip: Deduct Your Cell Phone » Voice Out Your View Point Says:
    January 15th, 2007 at 10:06 am

    [...] Required as a condition of your employment. rsi_pub = ‘0F6C5351519D1891B9E74DB865E30237′; rsi_site = ’33C75F5545E0474F2F8B1B1463117087′; rsi_label =’weblog'; rsi_new_window =’1′; rsi_width = ‘300’; rsi_height = ‘250’; rsi_color_border = ‘ffffff'; rsi_color_cell = ‘ffffff'; rsi_color_link = ‘000000’; rsi_color_text = ‘000000’; rsi_color_url = ‘808080’; That sounds like quite a few of us, doesn’t it? AllFinancialMatters has loads more info, check it out and see if you qualify for this deduction. How to Deduct Your Cell Phone [AllFinancialMatters] [...]

  3. Kevin Says:
    January 17th, 2007 at 10:25 am

    My wife has a traveling speech therapy job. Her phone is used mostly for work, I would say over 65% of her usage is work related. It sounds like she could write off the depreciation of the phone, but what about the monthly subscription costs? Is there any way to write that off?

  4. Paul Says:
    February 2nd, 2007 at 6:41 am

    Kevin, The IRS will allow you to deduct a percentage of your cellular bill as a business expense, but only the percentage that it is used for business. (You mentioned 65%, so take your total bills for the year times .65 and deduct that amount.) If you are ever audited (god forbid), hang onto the monthly statements for proof of the 65% usage. This has happened to me and they were OK with that method.

  5. Ryan Says:
    March 8th, 2007 at 6:09 pm

    In regards to the computer depreciation and home office. Can I claim the 179 if I use my pc in my home office for on-call pages that require immediate attention for my employer? They would have no problem showing paperwork stating its usage. The employer is a hospital. Thanks

  6. Finance Service Direct » Blog Archive » I Will Teach You To Be Rich Says:
    March 29th, 2007 at 6:34 pm

    [...] [...]

  7. Julie Lorber Says:
    February 18th, 2008 at 5:22 pm

    This is unrelated but I have a question related to expenses incurred as an out of town physician.

    I am required to stay within 20minutes of the hospital that I am on call for, this occurs for several days to a week at a time. During that time I stay in a local hotel. I am a surgical resident and live between two cities, my primary employer is about 35 miles from my home and this other site where I am on call is 35 miles the other direction. Is this a deductible expense. It was a huge expense for me and my only other option was to have an apartment for three months.
    Could you advise or refer me – having a difficult time determining what the “tax home” issue is and how it applies.
    thanks.
    Julie Lorber

  8. Sara Says:
    April 24th, 2008 at 8:21 pm

    Hello,
    I have started selling Avon in my home. I have been using the internet primarily for Avon lately. I feel this is a deduction I should take advantage of if allowed. Do I just log the times and reasons the internet was used, just like my cell phone? I would really appreciate your input.
    ~Sara

  9. links for 2007-01-17 | Thought Stream: Nitin Badjatia's Weblog Says:
    July 30th, 2008 at 11:00 am

    [...] AllFinancialMatters » Blog Archive » How to Deduct Your Cell Phone (tags: taxes tax finance cellphone mobile) Tagged as: ,Link Stream by Nitin Badjatia @ 1:19 am | January 17, 2007 | | Top    [...]

  10. Rita Says:
    August 7th, 2008 at 1:27 pm

    I have been looking for a really nice cell phone case for my phone at a decent price but there is so much out there I don’t know where to start. I think my best bet is to just do some work online and compare prices on different sites. I need to find a site with a lot of other cell phone accessories as well. Does anyone have suggestions?

  11. Ben Griffiths Says:
    May 19th, 2010 at 10:08 pm

    sometimes it i have a hard time selecting which mobile phone to buy. there are too many options to choose from.*;;

  12. Aaron Bennett Says:
    September 12th, 2010 at 11:28 am

    i guess mobile phones in the future will feature more processing power and great graphics”~

  13. Chair Pads · Says:
    November 13th, 2010 at 3:56 am

    there are many cellphone accessories that you can use to enhance your mobile phone. i always get my cellphone stuff on ebay “,:

  14. Matt Says:
    December 29th, 2010 at 3:26 pm

    Uhh. This page is a helpful resource to use for deducting cell phones from your IRS income tax. How did you geniuses shift gears to cell phone accessories?

    To the original author of this page – THANK YOU for your efforts, much appreciated.

Comments