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Every business, today, must have a phone and the Internet to operate. Smart phones are becoming an integral part of every entrepreneur’s life. They keep us organized, allow us to answer emails on the go, allow us to take notes, allow us to checkup on the competition, and basically look up anything and everything we might need to know. And with cell phone companies constantly releasing newer and better technology, it’s tempting to always want the latest and greatest phone. However, updating to the newest cell phone isn’t cheap. If you don’t have an upgrade system with your carrier you could be paying $500 for that new phone.
Use Taxes to Pay for My Phone?
But what if there was a way to alleviate some of that cost using something you already pay? Like lets say your taxes? And we’re not talking using your precious tax refund in January. We are talking about leveraging your deductions. Because so many people use their cell phone as their primary phone for personal and business use, the IRS has changed the rules for how you can deduct phone usage on your taxes.
There are 3 basic ways to deduct phones:
- Using a Phone for a Business: If your business (Corporation or LLC) pays for your cell phone, you can deduct the entire bill and the cost of the phone off your taxes. That doesn’t mean you save dollar for dollar. But you can save in taxes between 22% and 50% of the cost of your phone. So, lets say you purchase a new phone for $299 and your monthly bill is $70.00, you could save as much as $569.00 per year (About the cost of a new phone without an upgrade!). That is cash in your pocket. If you need a new phone (or want the latest phone) and you operate a business, it will definitely save you money.
- Using a Personal Phone for Business: If you use your personal phone for business, the IRS will require you to look at your bill and divide the personal calls from the business calls. They will also require you to determine how much of the internet and other services are for business vs. personal. This is still a savings, but more like 10% to 25%.
- Using a Personal Phone but Not Self-employed: If you use your personal phone for your W2 job, you can only deduct the portion you use for business as in example 2. Plus, you will need to have something in writing, such as company policy, that says you are required to use your cell phone for your job and that you do not get reimbursed. If your employer doesn’t require you to have a cell phone then you cannot deduct any portion of it.
Phones are an ordinary and necessary part of doing business. Be sure to set up your phone so that you can deduct the most of your phone expense as possible.
Have questions? Contact us at soulence.com.
Master Your Taxes 