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Can I deduct the purchase of my cell phone or tablet?

Article ID: 139
Last updated: 30 Oct, 2012
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By Jason Watson ()

Perhaps. There are three options-

Section 179: There is a provision in the tax code allowing you to deduct the entire purchase provided the property was new when purchased and you used it more than 50% of the time for business. You can take a Section 179 deduction for property that is used in income-producing activities such as rentals and investments.

Bonus Depreciation: Since cell phones (and only cell phones) have been removed from the “listed property” provisions of IRC Section 280F(d)(4)(A)(v) which is quite the mouthful, you can deduct the purchase price under the bonus depreciation rule even if business use is less than 50%. It must be a new purchase, and not just new to you. Tablets, computers, laptops, iPads, etc. still require over 50% business use to qualify for Section 179 or Bonus Depreciation. The ability to deduct 100% as bonus depreciation reverts to 50% at the end of 2012, unless Congress again extends this tax cut.

Depreciation: You may also depreciate the purchase price over 7 years. Your tax benefit will be about $3 per year considering a $200 phone, and it might not be worth it to carry this entry on your tax return year after year. Then again, there’s no harm in doing so but it can be messy when you sell your phone or dispose of it.

Other tax professionals are inclined to immediately deduct a cell phone purchase as an expense, and bypass the depreciation angles (all three above). The value is small and the useful life is short. Therefore we are also inclined to do the same from a practical perspective if the client desires.

We also invite you to read our Cell Phones, Tablets and Internet Tax Article at www.watsoncpagroup.com/CellPhone.pdf.

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