Business expenses are going to be the most common and important deductions for entrepreneurs starting and growing their businesses. You will have a lot of these expenses and it’s important to track them so you can write them off against the income you earn and minimize your taxes. The IRS says the bottom line is that business expense deductions have to be ordinary, necessary, and reasonable. Here are my top five technological business expenses that fall into the category of permissible deductions:
1. Cell Phone
You can absolutely deduct the business use of your cell phone. There are two ways to figure out this deduction and it will depend on whether you have a separate business cell phone or use the same phone for both.
If you have a separate business cell phone: The entire cell phone bill is deductible as a business expense. For a bill of $50 per month, that’s a deduction of $600 per year!
If you use the same cell phone for business and personal use: You have to allocate the percentage you use the phone for business versus personal use and then multiply the bill times the business use percentage to get your deduction. For example is your phone bill is $50 and you use your phone 50% for business and 50% for personal use, your monthly deduction would be $25 ($50 x .25). This would be a deduction of $300 per year.
Keep track of the apps that you buy on your phone or tablet if you’re using them for business! For example, you might invest in MileIQ to track your business miles. The cost of this app would be deductible. The same goes for photo editing apps, bookkeeping apps, and any others that you use for your business. If you use the app for business and personal use, allocate using the instructions above.
3. Internet Service
Just the same as your cell phone can be deducted as a business expense, so can the cost of your internet. You still have to allocate between business and personal use, just like your phone bill, but the resulting percentage will be deductible.
If your internet bill is bundled with your cable, you’ll need to determine how much of the bill represents your internet service. Then you allocate that portion between personal and business use.
4. Software and Web Services
There are a million tools out there on the internet to help you run your business and chances are you are using some of them. Software and online services like MailChimp, LeadPages, Adobe Creative Cloud, and Microsoft365 just to name a few, are deductible business expenses.
5. Marketing Expenses
Marketing is how you grow your business and you bet those costs are deductible. From the cost of that Facebook ad you ran to those stock photos for your new promo, you can deduct the amounts you spend advertising your business as business expenses.
Disclaimer: While the author is an attorney, she's not your attorney, and this is simply some helpful legal information, not legal advice. Be sure to check with an attorney licensed to practice in your jurisdiction if you have questions specific to your business.