How to Deduct Your Home Office Phone on Your Taxes

There are a wide range of ways to deduct the charges for your home office phone from your income tax. Learn more below about how to deduct applicable charges for a single telephone line, a dedicated business line or a dedicated business cell or mobile phone.

Single Telephone Line for Personal and Business Calls

If you have just one telephone line into your home, you will not be able to deduct the costs of local calls and all the charges for basic service, as your business does not use the line exclusively. However, you can deduct the fees for long-distance business calls you make, and possibly other fees as well, such as remote message retrieval. Keep precise records of your long distance calls made for business and of the exact dates and times you used the remote message retrieval feature to demonstrate when the phone line is used for business purposes. Highlight your phone bill each month to show the business calls.

Separate Business and Personal Phone Lines

If you have paid to install a second telephone line into your home for business purposes, you can deduct all the costs of this line, including local and long distance call charges. You can also add features to this business line that you do not have on your main phone line, such as caller ID, call forwarding and call waiting, and deduct these as business expenses against your small business income. If you use this phone line to send faxes, you can also deduct the cost of the fax service and supplies for the fax machine as business expenses. Arrange to depreciate the cost of the fax machine over its anticipated lifetime of 3 to 5 years. Avoid using this business line to make personal calls.

Dedicated Cell or Mobile Phone for Business

You can deduct all the costs for a dedicated cell or mobile phone for your business as though it were a land line. Keep a call log and ensure that all the business calls you have logged are billed correctly each month. If you have a smart phone with a billing plan that allows you to use your phone for Internet access, email and texting services, you will be able to deduct these fees as well.

Telephone Equipment

If you purchase a desktop telephone set, with an expected service life of 5 years, for your home office, you can depreciate the cost of the equipment over that time. You should not deduct the entire cost of the purchased equipment in the first year you install it.

Who Can Deduct Home Office Phone Expenses

Small businesses that are sole proprietorships, limited partnerships or S-type corporations can deduct these types of business expenses. "S-type" refers to single-level tax corporations. This incorporation protects your personal assets from claims in the event that your business fails. Businesses incorporated as C-type corporations, with shareholders who pay tax on dividends, cannot deduct home office phone expenses.

Refer to Your Accountant

If you have any additional questions about the kinds of home office phone expenses you can deduct on your income tax return, be sure to address them to your accountant or tax consultant.





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