Tax Deduction for Smart Phones

This forum made possible through the generous support of SDN members, donors, and sponsors. Thank you.

southerndoc

life is good
Volunteer Staff
Lifetime Donor
20+ Year Member
Joined
Jun 6, 2002
Messages
13,856
Reaction score
4,389
Is anyone deducting smart phone expenses?

I have an iPhone that I use a LOT at work (ePocrates, PEPID, calculator, even work-related calls for patient follow-up). I'm trying to decide if I can deduct the cost of the phone off my taxes as a business expense (I'm an independent contractor).

Will ultimately find out when I meet with my accountant in a few weeks, but curious if anyone is deducting their smart phones.

Members don't see this ad.
 
Is anyone deducting smart phone expenses?

I have an iPhone that I use a LOT at work (ePocrates, PEPID, calculator, even work-related calls for patient follow-up). I'm trying to decide if I can deduct the cost of the phone off my taxes as a business expense (I'm an independent contractor).

Will ultimately find out when I meet with my accountant in a few weeks, but curious if anyone is deducting their smart phones.

Any time a tax topic comes up, I get all excited. I assume you are filing as a boring individual employee rather than as self-employed. If you are self employed, there are some other options available.

The actual cost of the phone must be depreciated rather than deducted in full, the IRS treats the phone like a computer in this regard (Publication 529).

Regarding the actual phone use, my guess is that you'd have to pro-rate your plan fee based on business versus personal use and then could deduct the portion of phone use that is due to business purposes.

Of course the big problem for most in the forum is that there is a 2% floor on this type of deduction. However, you can lump these together, so it might make a difference if you itemize.

Finally, there had always been a rule that the first telephone line into a home can never be deducted, I'm curious to know whether the IRS will ever realize that many people don't have any land line. In that case, it may extrapolate this rule to say that an individual's first line isn't deductible, but there's nothing to suggest that this has happened yet.

I'm curious as what you accountant will tell you.

Ed
 
I'm an independent contractor, so I file as a self-employed individual. I don't think the 2% rule applies to me since I can deduct things as business expenses instead of unreimbursed employment expenses that a typical employee deducts.
 
Members don't see this ad :)
I'm an independent contractor, so I file as a self-employed individual. I don't think the 2% rule applies to me since I can deduct things as business expenses instead of unreimbursed employment expenses that a typical employee deducts.

That's true, if you are filing a schedule C, you should be able to avoid this because it becomes a business expense rather than an unreembursed employee expense. I'm pretty sure you'd still be stuck depreciating the cost of the phone, though.

I did some other checking and per the regs, it does appear that I am right about the prorating the cost based on personal vs. professional use. Apparently, some have tried to argued that the entire bill should be deductible if you are paying a flat rate because you "always have to be available". Apparently, the IRS has flatly rejected this in favor of the actual use (bummer).

If you have enough of these type of expenses, there can be an advantage to forming a corporation, but this is really beyond my tax knowlege base.

Ed
 
My accountant has recommended forming a corporation, but I'm reticent to do so because I'm unsure of my long-term plans (employee as an academic physician, MSF work, etc.).

There certainly are many advantages. What's the disadvantage other than the cost of setting it up (which should also be deductible)?
 
Reading this thread, I'm struck by the absurd complexity of the rules. This is only a teensy piece of the tax code, yet all kind of arbitrary rules apply and depend in turn on decisions you make as to how you file.

I'm also thinking that new communication tech gives you more options. There are extremely cheap VOIP phone plans you could purchase to get around the "first line into the house" rule. You could also get a separate phone account for personal calls, by getting one of those family plans and adding that account.

So many choices...and if you misinterpret one of the rules, they can ruin your life...
 
Reading this thread, I'm struck by the absurd complexity of the rules. This is only a teensy piece of the tax code, yet all kind of arbitrary rules apply and depend in turn on decisions you make as to how you file.

I'm also thinking that new communication tech gives you more options. There are extremely cheap VOIP phone plans you could purchase to get around the "first line into the house" rule. You could also get a separate phone account for personal calls, by getting one of those family plans and adding that account.

So many choices...and if you misinterpret one of the rules, they can ruin your life...

You bring up several issues. First, the rule about the first phone line into the home being non-deductible is old. When it was drafted, I'm sure no one dreamed that people would have ZERO phone lines in their homes. I'm sure the IRS will catch onto this one soon. Of course you raise an interesting point, if you only have one pipe into your house supplying personal voice, professional voice, personal data, professional data and TV, would it really be fair to make that all non-deductible?

Second, the rules are somewhat intricate, but if you taxes are complicated you need to get professional help. I happen to be an attorney who has always been interested in taxes. I have no problem doing personal tax for myself or friends. However, when you start talking about business taxes, that gets beyond my knowledge base.

Finally, if you want to do your own taxes, grab a copy of turbo tax and publication 17. This will cover most things, unless you have a business. I am amazed at the number of smart people with simple taxes who pay a store front tax place $250 to do taxes they could have done on a 1040A.

Ed
 
I am amazed at the number of smart people with simple taxes who pay a store front tax place $250 to do taxes they could have done on a 1040A.
Ed

Do you get any kind of protection from civil or criminal liability if you use a professional tax accountant? It would seem as though you would not be criminally liable if your accountant made a mistake or choose an illegal deduction.
 
Usually you aren't charged with a crime for deductions (as far as I know) unless you do things like get social security numbers for your pets. Usually you'll just get audited and will have to pay back owed taxes, plus penalties and interest.
 
Top