How do I deduct shared business and personal use expenses, like cell phone and internet?
Most small business owners don’t get a separate internet setup, or a unique cell phone specifically for business. Instead, we generally see business owners use the same cell phone and internet for both personal and business purposes.
That’s okay, but it’s important to understand how this is best handled for tax purposes.
We recommend taking a deduction, but only to the extent the item is used for business purposes.
Let’s look at a common scenario using Jack & Jill Smith as an example...
- Jack & Jill are married and on the same cell phone plan with a $200 monthly bill, each of their phones is $100.
- Jack uses his phone for business; and Jill does not.
- Jack estimates that his business usage is 75% of his overall phone usage.
So in this example, Jack would take his $100 of the total cell phone bill and multiply it by 75% in order to arrive at a $75/month tax deduction, or $900 for the year.
There you have it! The key is deducting only the business portion of the total bill. You would use the same process for an internet expense, or any other item that is used for both personal and business.
Feel free to contact us with any questions...we’re here to help!