The IRS is generally friendly toward the deduction of business expenses from your taxable income, and phone use is no exception. You may deduct certain business telephone expenses regardless of whether you're an employee or self-employed, on a cell phone or a land line.
Home Office Deduction
If you use a certain area of your home exclusively for business purposes, you may claim the home office deduction. Although the home office deduction is designed primarily for the self-employed, you may use it as an employee if your employer requires you to work at home for his convenience rather than yours. If your home has only one land line, you can deduct only the cost of the long-distance calls you make for business. However, if your home office includes a second line dedicated exclusively to business purposes, you may deduct your entire phone bill for that phone from your taxable income.
The Business Use Deduction
If you don’t maintain a home office, you may still deduct business telephone expenses as a miscellaneous expense, on the same terms as you would if you maintained a home office, with one major exception – your total miscellaneous expenses must exceed 2 percent of your adjusted gross income, and you may deduct only that portion that exceeds 2 percent. Examples of miscellaneous expenses include tax preparation fees, membership dues for professional societies, and, in some cases, job search expenses.
If you use your cell phone for business purposes, you may deduct the cost of unreimbursed business telephone calls from your taxable income, even if you use your cell phone for business less than half of the time. You may also depreciate the cost of the cell phone assuming a 7-year useful life and a 200 percent declining balance method. If you use your cell phone for business purposes more than 50 percent of the time, you may take accelerated depreciation -- in some cases as much as 100 percent in the first year -- under Section 179 of the Internal Revenue Code. You may depreciate the cost of your cell phone even if your employer provided it to you.
Two major limitations apply to all of the foregoing deductions. You must itemize your deductions-- meaning that you cannot take the standard deduction -- and if you're employed, you may claim only those expenses that were not reimbursed by your employer. Keep careful records of your expenses, especially if you claim the home office deduction, in case of an IRS audit.
- Schneider Downs: Congress Simplifies Cell Phone Deduction and Depreciation Rules
- Nolo: The Home Office Tax Deduction
- Internal Revenue Service: Deducting Business Expenses
- Internal Revenue Service:Miscellaneous Deductions
- Internal Revenue Service: Employer-Provided Cell Phones
- Ice Miller: Cell Phone Relief and Other Provisions in Small Business Jobs Act
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.