How Much of Your Cell Phone Bill Can You Claim as a Tax Write-Off?
Having a cellular phone has become a vital tool in business, probably more common now than a landline, which makes the costs of having a cellphone a legitimate, deductible business write-off. But for most of us, having that cell phone is also being used for personal use.
If you are full-time self-employed in your home business and you use your cellphone for business, you can claim 100% of the phone bill as a tax write-off.
Both the Canada Revenue Agency (CRA) and the Internal Revenue Service (IRS) allows those who are self-employed to write-off cell phone expenses reasonably incurred while pursuing profit for your business. Your cell phone expenses must meet these criteria:
- The plan’s cost is reasonable.
- The plan is a basic plan with a fixed cost.
- Your use of the service for personal does not result in charges that are more than the basic plan cost.
What about a Part-time Home Business?
If you are part-time in your home business and also have a full-time career, it is not recommended that you claim the full 100%. However, if you are part-time and you can show that your cell phone is strictly used for business, and you have very little or no personal use, then you could legitimately claim 100%, as long as you are bulletproof in your record-keeping.
Some tax professionals recommend keeping an itemized phone bill, so you can measure your business and personal use, and claim the actual use percentage of your monthly bill. The itemized list would include:
- Notes that indicate whether each call was personal or business
- Business purpose of each call
The other suggestion given by tax professionals, to avoid the extra work, is to get a second cellular phone number that you would use exclusively for business.
For those who are part-time in their home business and they use their cell phone is used for both business and personal, I recommend keeping it simple by claiming 50% of your phone bill. By using the same guidelines for those who are full-time (e.g. monthly cost is reasonable) and you can show you are actually using your phone for business a 50/50 split of the bill is reasonable.
How would you show you are using your cell phone for business?
Simple ways to show you are using your cell phone for business is that you are actively using your number for current and prospective clients to call or text you. This could include having your number listed on your website, social media pages, brochures, business cards, email signatures, and any other marketing literature you use in your part-time home business.
Take the Mystery Out of Home-Based Business Tax Write-Offs!