How Much of My Cell Phone Can I Deduct for Business?

Many individuals use their personal cell phones for work, making it important to understand how to properly deduct these expenses. Business expenses, including cell phone costs, can be deducted from taxable income if they are ordinary and necessary for a trade or business. An expense is ordinary if it is common and accepted in your industry, and it is necessary if it is helpful and appropriate for your business. This deduction typically applies to the portion of the cell phone expense directly related to business activities.

Determining Business Use of Your Cell Phone

Only the portion of cell phone use directly attributable to a trade or business is deductible. Business use includes activities such as making client calls, scheduling appointments, checking work emails, utilizing business-specific applications, and communicating with employees or vendors. For example, a content creator might use their phone to record and post content, take business calls, and manage ideas, all of which count as business use.

Conversely, personal activities like social media browsing, entertainment, personal calls, or casual internet use do not qualify as business use. If a cell phone is used for both personal and business purposes, the expense must be allocated between the two.

While a phone used solely for business can be 100% deductible, proving exclusive business use can be challenging, as some personal use often occurs. Accurately determining the percentage of business use is essential for any deduction. This distinction ensures that only legitimate business costs reduce taxable income.

Calculating Your Deductible Cell Phone Expense

The amount of your deductible cell phone expense is based on the percentage of time the phone is used for business purposes. To determine this percentage, you can track your business usage over a representative period, such as a continuous four-week period. This tracking can involve maintaining a call log, using call tracking applications, or reviewing itemized phone bills.

Eligible expenses include monthly service plan charges, the cost of the phone itself, and related accessories like headsets or cases if primarily used for business. If your monthly bill is $100 and you determine 60% business use, you could deduct $60 for that month. For the cost of the phone, if it is used more than 50% for business, it may qualify for a Section 179 deduction, allowing you to expense the cost in the year of purchase rather than depreciating it over several years. If the phone costs less than $2,500, you might also be able to expense it using the de minimis safe harbor election.

If the business use percentage is 50% or less, the phone must be depreciated using the Alternative Depreciation System (ADS). This typically involves straight-line depreciation over 10 years.

Keeping Proper Records

Maintaining accurate and detailed records is important for substantiating cell phone expense deductions. The IRS mandates adequate records to support all claimed deductions. These records should include itemized cell phone bills that clearly show charges, data usage, and call details.

You should also keep logs or other documentation, whether digital or physical, that differentiate between business and personal use. This documentation might include dates, times, and the specific business purpose of calls or data usage. Receipts for the purchase of the cell phone, along with any related accessories or repair costs, should also be retained.

Generally, tax records should be kept for at least three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. However, it is advisable to keep records for six years if you underreport income by more than 25%.

Reporting Your Cell Phone Deduction

Self-employed individuals, including sole proprietors and independent contractors, report their deductible cell phone expenses on Schedule C, Profit or Loss From Business (Sole Proprietorship). This expense is typically listed under “Utilities” or “Other Expenses” on Schedule C, depending on the tax software or form line used. Claiming this deduction directly reduces the business’s gross income, thereby lowering taxable earnings.

For employees, the ability to deduct unreimbursed business expenses, including cell phone costs, has changed. Under current tax law, miscellaneous itemized deductions subject to the 2% adjusted gross income (AGI) limit were suspended. This means that employees cannot deduct the cost of using their personal cell phones for work if their employer does not reimburse them. If an employer provides a cell phone for business reasons, or reimburses employees for work-related use of a personal phone, this can be a non-taxable benefit to the employee, provided certain conditions are met.