Small business owners and freelancers can deduct their cellphone expense. Deducting 100% of the bill is allowed but only when the cellphone is used 100% for business. When a specific phone is used for personal and business matters, the correct proportion of the bill needs to be calculated.
- Determine the percentage of the overall bill as data use and phone use.
- Review the monthly activity, both data and phone calls, to determine what portions are for business.
- Calculate the deduction.
For example, a monthly bill is $100, of which 60% is the data cost and 40% is the phone cost. It is determined that 30% of the data and 80% of the phone are used for business. The deduction is then calculated as:
Deduction = ($100 x 60% x 30%) + ($100 x 40% x 80%) = $18 + $32 = $50