Cell Phone Costs: What’s Deductible?
Almost everyone has a cell phone these days, and it’s an essential communications tool for actors who need to stay in touch. It certainly passes the IRS test of an “ordinary and necessary” business expense in our profession.
There may be some confusion if your cell phone is your only telephone service. IRS rules say that you can’t deduct the base costs of your first phone line. But the rules are pretty specific that this refers to a LAND line, so your cell service should be deductible even if you’ve ditched your land line and use your cell phone exclusively.
So how do you deduct your cell use? We all use our cell phones and their associated data plans for personal as well as business matters. Here’s the method I use. It’s a little tedious, but it gives you an accurate deduction for the business use of your cell phone, and differentiates between those calls made for W-2 work and those for 1099 work.
Your cell phone bill should detail every call you make. Every month, go through your cell phone bill and highlight your business calls, using different colors for W-2 and 1099. (Doing it monthly makes it easier to remember the specific calls.) At tax time, first add up the W-2 business minutes each month and divide that by the total minutes used that month. Second, multiply that month’s bill by the resulting percentage. Include the added charges for text and data in the total bill, but if you have a family plan, be careful to use the charges for your cell number only. Then do the same for the minutes related to 1099 work. Finally, add up all the costs for each month for W-2 and 1099, and voilà! -- you have dollar figures for W-2 and for 1099 that reflect your actual cellular business use for voice, which also gives reasonable prorated amounts for text and data.
In a tax seminar I gave last year, there was a CPA in attendance who said this was a rock-solid way to calculate your cell phone costs.
Learn about all your business deductions in The Actor’s Tax Guide. The 2015 edition is available at www.ActorsTaxGuide.com.