The Canada Revenue Agency (CRA) lets small business owners, self-employed individuals, and freelancers deduct business-related cell phone expenses. You can claim up to 100% of your cell phone bill, but only when you use the device solely for business purposes.
Calculating Your Cell Phone Bill Tax Deduction
When you use a cell phone for both personal and business purposes, you must calculate the correct portion of your bill to claim this deduction from the CRA. To do this, you must:
- Determine the percentage of the overall bill as data use and phone use.
- Review the monthly data and phone call activity to determine the portions you used for business.
- Calculate the deduction.
For instance, you have a monthly cell phone bill of $100, and 60% of the bill stems from data usage, while you pay the other 40% as installments on your device’s original price. Analysis of your bill shows that you use 30% of the data and 80% of the phone for business purposes.
By using these figures, you can calculate the proper deduction by multiplying $100 by your 60% data usage and 30% data usage for business, which comes to $18. You then multiply your $100 payment by the 40% you spend on installment payments and the 80% of phone use for business, which comes to $32. You then add these figures together for a deduction of $50 per month. This calculation looks like: ($100 x 60% x 30%) + ($100 x 40% x 80%) = $50 in tax deductible cell phone expenses.
Deducting Your Cell Phone Bill
Fill out the costs associated with your cell phone on Form T2125, Statement of Business and Professional Activities, to help determine your business income. When you purchase a new cell phone, you may deduct that cost over several years as the value of the phone depreciates, or goes down, in subsequent years as the phone gets older.
Use your accounting and financial software to manage and track expenses for your cell phone as you look for tax deductions every year. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.