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Deducting Telephone Expenses from your Taxes

Posted by Range Officer Rhonda on October 19, 2009

The telephone, while annoying in its ability to interrupt you at the most inopportune moments, can be a useful tool and an expensive one as well. This is one tool that you must absolutely deduct from your tax return!antique phones 

Is it deductible? Of course it is deductible, but there are many little hoops you have to jump through in order to establish that it has a business use. Many people often ask me if they can deduct ‘part’ of their telephone bill from their taxes. A lot of the times, I have to say ‘No’ because all they have had in the past is one single phone line in their house. The law states that if you only have one phone line that is partially available for personal use, then you can deduct none of it unless you document every single phone call to determine which portion is business related and which is personal. I do not know many people who can do this or is willing to try. No, you are NOT supposed to use a percentage of your personal phone bill. You say you have been doing this for years? Generally, this will not stand up in an audit and it will be thrown out as an unusable deduction. There are always exceptions to the rules and I could probably argue this in your favor if you got called on it, but the ‘letter of the law’ can go either way. 

What you CAN deduct, if you only have that one line – is any long distance charges that are separate from the standard phone bill. That is easy enough to substantiate if you gather an entire year’s worth of bills, add them up and deduct the basic rate charges. Also, if you have a separate DSL or Dial Up charge for your internet service that is included on your personal phone, you may deduct it also. 

Now. This is the future. Most people have not only the one basic phone line, but a second line in their homes, either for their computer, their fax machine, a teenager or otherwise. If you have TWO or more lines in your home, then all except for the basic rate of the first line is deductible. Hopefully your phone company has the snap to list the two charges separately, although they do sometimes get a little confusing with all the taxes and surcharges they throw in there. Some people even go so far as to have two [or more] different phone bills sent to them.

Now for the cell phone. Let’s just say for general purposes that you have a home phone AND a cell phone; although people are starting to give up their home phones completely. If you go by the letter of the law and have only one phone and it is your cell – then you cannot deduct it. However, if there is another phone in the household, it does not matter if it is in your name or that you are paying the bill – you can deduct the cost of the cell phone service. No, you are not supposed to deduct just ‘half’ the bill because ‘I use it half the time’ for business. You deduct all of it. The only time you would deduct only a portion of the mobile provider bill instead of the full amount is if you are sharing one of the multi-plans with a significant other or child. Usually, you would deduct the cost of the full base rate for service and omit the second and third add-on charges for the spouse, child or whatever. For example, one plan that is quite popular costs approximately $100 per month and includes unlimited texting, photo sharing, turn on your coffee pot and more bells and whistles. Then, for an extra $10 a month, you get a second line for that other person, maybe even a third! Remove the $10 and you have your deductible amount.

Where do I put all this on my tax return? There are several ways and locations where this deduction can go – on a Schedule C, on form 2106, directly on the front page of the 1040 and also directly onto the Schedule A for itemized deductions. Those are not the only places where phone charges can be deducted, but generally they are the ones that would affect this target audience. As always, each person has an individual case and this information is to be used for discussion purposes only. Please do not use this information as substantiation for a deduction you are taking on your tax returns; but do contact your own personal tax person for proper placement of any deduction that you would use on a legal tax document.


One Response to “Deducting Telephone Expenses from your Taxes”

  1. Hi Rhonda:

    Thanks for sharing the information with us. It really helps to have a person who is on top of the latest slant on taxes. I especially appreciate you heads-up about this article to SCN members.


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