If you have a job or run a business, it's hard to go without a cell phone. The Internal Revenue Service has acknowledged the growing importance of personal cell phones in work or business by making it easier to deduct at least part of the bill at tax time. You can only deduct the portion of cell phone usage related to work or business.
To calculate how much of your cell phone bill you can deduct, you need to figure out what percentage of the time you used the phone for business calls versus personal calls. You could log all your calls, but it is easier to request a call history from your cell phone service provider. Many providers allow you to check the history online. Simply count up the number of business calls and divide it by the total number of calls. The result is the percentage of business use for your cell phone.
If you use the cell phone to run a small business or you are self-employed, the entire business portion of cell phone expenses is deductible on Schedule C. The phone can be a business phone or personal phone. In 2010, Congress removed restrictions that limited cell phone deductions only to phones that were used 50 percent or more for business.
If you are an employee and use your personal cell phone for work-related calls, you can still deduct the business portion of your bills, but you must itemize your deductions and claim the expense as an unreimbursed employee expense on Schedule A. In addition, you must file Form 2106 and can only deduct the portion of your total unreimbursed employee expenses that exceed 2 percent of your adjusted gross income. Other expenses in this category include overnight travel, home offices, job-related education and professional journals.
If you operate a business and provide cell phones at no cost to your employees for business use, you can deduct 100 percent of the costs, even if the employees are allowed to use the phones for personal calls.
In addition to the phone bills, you can deduct the business percentage of other associated costs such as the cost of the phone and accessories. The IRS no longer requires that cell phone equipment costs be depreciated over several years.
- IRS: Publication 535, Business Expenses
- IRS: Publication 529, Miscellaneous Deductions
- IRS: IRS Issues Guidance on Tax Treatment of Cell Phones
- IRS: Instructions for Form 2106, Employee Business Expenses
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- Experian. "When Does the 7 Year Rule Begin for Delinquent Accounts?" Accessed July 7, 2020.
- Experian. "Add Your Cell Phone Payments With Experian Boost." Accessed July 7, 2020.
Alan Sembera began writing for local newspapers in Texas and Louisiana. His professional career includes stints as a computer tech, information editor and income tax preparer. Sembera now writes full time about business and technology. He holds a Bachelor of Arts in journalism from Texas A&M University.