The IRS assumes that the first phone line coming into your house is your personal phone and won't let you write it off. However, if you have a second line coming in, or if you use a cellular phone as your second line, you might be eligible to write it off on your taxes. The key to claiming the write off is that you must use it for job- or business-related purposes.
If you have a dedicated phone line that you use to work from home and your employer doesn't pay for it, you can deduct it as a part of your unreimbursed employee expenses. To qualify for the deduction, you will need to itemize your deductions on Schedule A. Your write-off for the phone line gets grouped with all of your miscellaneous deductions. This group of deductions includes your unreimbursed work expenses, tax preparation fees, investment expenses and others, and can only be deducted to the extent that it exceeds 2 percent of your adjusted gross income. In addition to the 2 percent exclusion for regular income tax payers, miscellaneous deductions are also cancelled out if you are subject to the alternative minimum tax.
Business or Real Estate
If you use your phone line to conduct business from your house or if you use it as a part of managing your real estate investments, you can claim the expense on the Schedule C or Schedule E forms you file for those ventures. Filing on Schedule C and E lets you use the cost of your phone line to offset your gross income, reducing your taxable profit. Expenses on these forms aren't subject to the same limitations as itemized deductions so, if you're eligible to use them, you'll still be able to write off your phone line even if you pay the AMT or if your expenses are less than 2 percent of your AGI.
Home Office Deduction
If you maintain a home office that meets the IRS' stringent criteria, you can include your telephone line with your other home office expenses. However, you don't have to claim the home office deduction to claim your phone line. As long as your phone line is used for job-related, business or allowed investing purposes, you can claim the expense. Since claiming a home office write-off can be an IRS audit trigger, claiming the phone line by itself could be a wise strategy.
Allocating Dual-Use Phones
While you can't write off the first phone line coming into your house, you can write off any other phone line that you use for business or job-related purposes. However, if the line isn't exclusively used for business, you will have to allocate the cost. For instance, if you have a cellphone that you use 30 percent for yourself and 70 percent for your job, you can claim 70 percent of your cell phone bill as an employee expense.
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