Technology and gadgets to help us succeed in business are an ever-increasing expense. Moreover, as small business owners utilize technology to do business nationwide, if not worldwide, these expenses (sometimes used personally), should be a deduction in their business. In fact, think about the following items and how you may use them in your business operations:
- Laptops, computers and printers;
- iPads, reading devices and tablets;
- Cameras, video cameras, lighting and studio equipment;
- Microphones, speakers and audio equipment;
- T.V.s, monitors, projectors and screens;
- Bluetooth devices, smart watches, and Google glasses;
- Coffee makers and appliances;
- Internet service, fiber or related data needs…etc..etc…
If you use any of these items to make money in your business, there’s a good chance they are a 100% deductible! Track all of these items, keep receipts and discuss them with your tax professional at the end of the year.
I always want to think of a business purposes for a technology item before I would ever purchase it. However, in the same breath I don’t want to throw good money at bad and buy something useless simply for the tax write-off.
“My wife would argue that my Phantom II Drone purchase was simply for personal use, but I assured her it was critical for footage from the sky of our office and enhanced our website with video and photos of our office building and company employees”
The Strategy for Your Cell Phone
In the Small Business Jobs Act of 2011, Congress removed the cell phone from the ‘listed property’ list. What this means is that you can write off 100% of your cell phone, correlated devices and service, as long as you meet certain criteria. Moreover, the IRS issued guidance with Notice 2011-72 clarifying the rules and Congress’s intent.
Essentially, this move by Congress and IRS was motivated by the fact that it was a constant fight in Court with taxpayers trying to prove what ‘percentage’ of their phone was business use versus personal use. In the end, the cell phone and service boiled down to a 100% deduction if you comply with the following criteria:
- It can be shown that the cell phone is critical to the operation of your business;
- The service expense and device isn’t extravagant and is proportionally reasonable for your type of business and sales;
- You have a home phone line or separate cell phone dedicated to personal use.
DON’T FORGET– If you have your family members legitimately working in the business and they need to use the cell phone for the operations of the business, as well as need to be accessible for business duties, there cell phone will be deductible as well!!
Is my Smart Watch Tax Deductible?
Under IRS Code, any expense that’s ordinary and necessary for that business is deductible, and would typically include related telecommunications equipment like a Bluetooth or headphones and mic for those important business calls. (IRC Section 162).
Many of a Smart Watch’s features (thing Apple Watch) are similar to a smartphone or Bluetooth device and can enhance your business sales and work productivity. Some of these features include calendar alerts for business appointments, business related texts, business calls, work email, social media for your business, Apple Pay for quick business purchases and immediate access to Apple’s business-friendly apps. Not to mention the added benefit of a built-in speaker and microphone that gives you hands-free ability to take that conference call while on the road (as well as look like Sean Connery from a 1970s James Bond movie).
Currently the IRS hasn’t taken a position on the new devices and with their current understaffed work load, it probably won’t be any time soon. Bottom line, at least some portion of your Apple Watch should be tax deductible, and it will depend on your business use of the functions. For more information specifically on the Apple Watch, see my other article here on how to deduct it.
Bottom line: When it comes to these ever increasing expenses and strategies to make us more successful in our business, we should be looking for ways to deduct them.
In fact, I argue that you should FIND reasons to use the technology you are already purchasing personal and convert them to a business use and asset in your business!! Make these items a deduction as you blow up your Social Media outlets and marketing plan. Don’t forget the little things my friends.
Mark J. Kohler is a CPA, Attorney, Radio Show host and author of the new book “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions” and “What Your CPA Isn’t Telling You- Life Changing Tax Strategies”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP. For more information visit him at www.markjkohler.com.