How to Write-Off Your Technology Expenses and Cell Phone?

As a small business owner or self-employed individual, you likely rely heavily on technology and your cell phone to run your business operations. The good news is that many of your technology purchases and cell phone expenses may qualify as business deductions, allowing you to recoup some of these costs and lower your tax bill. As you prepare this year’s taxes, here is what you need to know about writing off technology and cell phone expenses.

Deducting Technology Purchases

There are a variety of technology products that you may use for your business that can potentially be deducted, either in part or in full.

Computers and Peripherals

If you purchased a computer, laptop, monitor, mouse, keyboard, printer or other peripheral device specifically for your business, you can typically claim what is called “Section 179 Depreciation” to write-off a deduction for that purchase in the year of the expense. The Section 179 deduction currently has a total cap at $1,160,000 that can be written off (for 2023 tax year). So if you bought a $2,000 laptop for your business, you can claim a $2,000 deduction for it that tax year. Any equipment still being depreciated over 5 years can also have a partial deduction each year.

Software and Online Services

Purchased software programs and subscriptions for online services used for your business are also eligible business expenses. This includes things like:

- Accounting software

- Graphic design programs

- Website hosting fees

- Subscription services (e.g. MailChimp, SurveyMonkey, Calendly)

- Scheduling and payment apps

- Online storage fees

- Collaboration software

Electronics and Office Equipment

Small electronics and office equipment such as routers, external drives, monitors, cameras, printers, label makers and other gadgets can also be deducted so long as they serve a legitimate business purpose. The same Section 179 rules above allowing 100% deduction in the first year apply to these types of technology purchases.

The key qualifications are that any tech device or service claimed as a deduction must be:

1. Used primarily (over 50% of the time) for your business

2. Purchased or renewed during the current tax year

3. Ordinary and necessary for operating your small business

If any technology purchase also has personal use, you'll need to allocate and only deduct the portion attributed to your business activity.

Deducting Cell Phone Use

As a small business owner, your cell phone likely serves double duty for both professional and personal purposes. Fortunately the IRS allows you to claim deductions on cell phone expenses for the percentage of time used for work.

You have two options in terms how to capture and claim cell phone deductions:

1. Claim Based on Percentage of Use

Keep a record of your monthly cell phone bill. Then estimate what percentage is used for business vs. personal. This percentage of your cell phone expenses can be claimed as a business deduction. So if you use your cell phone 75% of the time for work calls, emails, apps and other business use throughout the month, you can claim 75% of each cell phone bill. Be sure to document your usage breakdown in case asked by IRS auditors.

2. Claim Standard Monthly Allowance

Instead of calculating your cell usage percentage each month, the IRS provides monthly standard allowances that you can use. The standard monthly deduction amounts are:

$50 allowance for cell phone line

$25 allowance for tablet

Claiming this standard monthly amount is easier than tracking usage percentages. But make sure your actual business-related cell usage exceeds these threshold allowances.

Capturing Eligible Cell Phone Expenses:

For either deduction method, the types of cell phone expenses that can be claimed include:

- Monthly service charges

- Data plan fees

- Phone lease or purchase fees (via depreciation)

- Apps purchased for business

- Long distance business calls

- Travel roaming fees incurred for work

By capturing technology purchases and cell phone use, small business owners and self-employed individuals stand to reclaim hundreds if not thousands in eligible tax deductions every year. Be sure to keep diligent records so you can maximize these technology expense deductions. Consult with a tax professional to discuss your specific situation. Taking advantage of these deductions will lower your tax liability and help recoup costs associated with using essential technology and cell phone tools for your business.

I aimed to provide comprehensive information on the key rules, deductions available, and methods for capturing technology and cell phone expenses that can be claimed by small business owners and self-employed filers. Please let me know if you need any part of the article expanded or have additional questions!

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