These days many individuals have more than one phone for personal and for business use. Many households have a combination of a landline and several cell phones or possibly just numerous cell phones. Having multiple phones if you have a business does make preparing for income tax preparation more time consuming and potentially trickier unless you keep very accurate records of your phone usage.
The Internal Revenue Service (IRS) is very specific on what is deductible and what is not. Here are some points to consider when deciding what may be deducted:
- Any phones you use strictly for personal use are never deductible
- The IRS considers your primary landline always personal. Therefore, it is not deductible as the IRS will not allow you to allocate the cost of a single phone in your home to your home office for business expenses.
- A second phone or a fax line within your phone may be deductible if you use it for business and can substantiate its business usage.
- If you co-mingle personal and business use of a cell or second landline, you must divide the total cost between the two based on your usage. You can only deduct the portion attributable to your business as a business expense. Therefore, if you use your phone 60% for business you may only deduct 60% of the phone’s total cost on the Schedule C for your business.
- Make sure you keep excellent records along with the actual itemized phone bill demonstrating its business usage versus its personal usage.
As can be garnered from the above, for you to be able deduct phone expenses you must have at least two phones and keep very accurate records. Many tax experts state that because of the way a cell phone can be used, it has come under scrutiny, so taxpayers must keep good records and keep their actual phone bill so they can demonstrate that a majority of the calls were business calls. (LeValley, D., 2014).
The ability to deduct your business phone expenses can be very beneficial and ultimately save you money but only if you follow the IRS rules and maintain very accurate records!
Submitted by Kathy Shrader
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