You probably can’t run your business smoothly without the use of cell phone or tablets as mobile devices. It is clear that the monthly fees for the mobile devices is tax deductible if you use the phone exclusively for business when this expense is ordinary and necessary. Who wants to keep two phones though?

The common mystery is if you also use the phone for personal use, do you need to prorate and deduct the business portion only?

The answer is NO as long as you are the employee of your business.

That means if you just occasionally use the phone for business, you can deduct 100% as business use as long as you are employed by your corporation as employee and you can satisfy the requirement described below.

To achieve this deduction goal, you have to structure this arrangement as non-compensatory . You can’t do it as additional wage or to increase the morale of the employee, you can only do it as long as you or your clients need to contact your employee in case of work related emergency, or the employee needs to talk to clients when he or she is away the office , or you have clients in different time zone which may require your employee to talk to them during non-office hour.

This non-taxable fringe benefit is not subject to discrimination rule which means you can only provide this benefit to yourself only.

However, if you can’t hire yourself as employee of your business (e.g. Your business is sole proprietorship or single member LLC), you have to deduct the phone expense up to business portion only. Since celk phone is no longer a listed property, you can reasonably estimate the business portion by the usage in a few months.

 

 

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