Your computer, cell phone, Internet service, software and even some cool tech gadgetry are possible tax deductions if you must use them to run your business. Michael Carney, owner and president of MWC Accounting in Chicago, said expensive tech hardware can qualify if it is an asset that retains its value over several years. The taxpayer has a choice on how to deduct the costs of those items.
“You can depreciate them, spreading the deduction over the number of years the IRS considers to be the shelf-life for this item, or you can write the entire cost off for the year of purchase," Carney said.
"Your choice between the two depends on your projected income and other expenses going forward. If you had a big year and want to reduce your profits to minimize the tax bite, it’s best to write the entire cost off."
Carney said this strategy means you will have less to deduct in the coming years.
Also, with most tech gadgets, you can claim a percentage of time that you used that device for business purposes. Most pros caution against claiming 100 percent.
“People will buy a computer and will use it exclusively for business,” said Illinois-based certified public accountant Neil Johnson — also known as "The Tax Dude" — “but, it might be a bit of red flag to the IRS to claim that. Most people will, at the very least, periodically check the news or their personal email account on their work laptop or desktop.”
Internet use and cell phone costs qualify too. “As far as Wi-Fi goes, when I am on a plane, I always buy the Internet package, because I am always working, and this is an expense that is easy to forget about come tax time," Johnson said. "As far as cable or satellite TV goes, it truly depends upon your profession. … If you’re in an ad agency, you can write that off for sure. If you work in construction, not so much. In the past, you would have to tally up the minutes you used (on cell phones) for personal versus business expenses. Now you can just write off a percentage of business use. Just do not say 100: That won’t fly.”
You may have some explaining to do if you claim a newer-generation tech-toy, such as an iPad, as a business expense. The experts say such devices tend to be viewed as perks rather than necessary business tools.
“The IRS’s standard for a legitimate deduction requires the item to be a usual, necessary, customary and reasonable expense for your type of work,” Carney said. “So, an iPad will most likely be viewed more as a legitimate deduction for a computer consultant than for someone who works on an assembly line.”