Cell Phone Tax Rules Relaxed

The Small Business Jobs Act of 2010, signed into law in September, removes employer-provided cell phones from the category of “listed property.”  This means employers can take a deduction for the cost of the cell phones without having to collect burdensome documentation of business vs. personal use from employees. 

In the past, employees would be taxed on the value of the personal calls made from employer-provided cell phones.  This change would appear to eliminate this, although the IRS has not released further guidance on the issue.

Removing cell phones from the “listed property” category means that employees can deduct the cost of cell phones used by the employee as an unreimbursed employee expense without the employee having to meet the “condition of employment” and “for the convenience of the employer” tests.  However, the employee will still have to track the amount of time spent on personal vs. business calls, to calculate the deduction.

For self-employed taxpayers, the change means a relaxation in the strict documentation requirements for cell phones.  However, I would recommend that a self-employed person who uses a cell phone for both business and personal purposes still keep a log of their calls.