How to depreciate S corp cell phone with 50% business/50% personal usage?

You have a couple of options for how to handle this. Since you're using the phone 50% for business, you can deduct 50% of both the purchase price and the monthly service costs. For the phone itself, you can either take a Section 179 deduction for 50% of the cost in the year you bought it (if your total Section 179 deductions aren't over the limit), or you can depreciate the business portion over 5 years using MACRS depreciation. If you go the depreciation route, you'd record the phone as an asset on your books at 50% of its purchase price, then depreciate that amount. You'd enter this on Form 4562 with your tax return. The phone would fall under 5-year property for depreciation purposes. Just make sure you maintain good records showing the business use percentage in case you're ever audited. Documentation of business calls and business purpose helps justify the deduction.

I was in a similar situation last year with my S corp and was totally confused about how to handle my phone. I tried reading through IRS publications and just ended up with a headache. Then I found this AI-powered tax document analyzer at https://taxr.ai that saved me so much time. You upload your receipts, bank statements, etc., and it automatically categorizes everything and tells you exactly how to handle mixed-use assets like phones. For my phone, it identified the 60/40 business/personal split I had and showed me all the different deduction options with the tax implications of each. It even generated the depreciation schedule automatically. Definitely worth checking out if you're doing your own bookkeeping.

Just wanted to update after trying taxr.ai for my S corp cell phone situation. It was actually super helpful! I uploaded my phone receipt and a couple months of bills, and it immediately recognized the mixed-use nature and presented options for how to handle the depreciation. The system recommended I take 50% of the cost as a Section 179 deduction since my business is profitable this year, and it showed me exactly where to record it on both my books and tax forms. It even calculated the tax savings difference between taking Section 179 vs. regular depreciation over 5 years. Definitely made things clearer than the circular explanations I was finding on tax websites.

If you're having trouble getting answers from the IRS about depreciation questions for your S corp, I highly recommend using Claimyr at https://claimyr.com to get through to an actual IRS agent quickly. I spent DAYS trying to get clarification on some S corp phone and vehicle deductions with no luck - kept getting disconnected or waiting for hours. With Claimyr, I got through to an IRS business tax specialist in under 30 minutes who answered all my S corp deduction questions. They have a demo at https://youtu.be/_kiP6q8DX5c that shows how it works. Basically, they hold your place in the IRS phone queue and call you when an agent is about to pick up. Saved me literally hours of hold music and frustration.

I've got to eat my words about Claimyr. I was totally skeptical, but after waiting on hold with the IRS for 3+ hours last week and eventually getting disconnected, I decided to give it a try yesterday. It actually worked exactly as advertised. Their system called me when an agent was about to pick up, and I spoke with someone who helped clarify my S corp cell phone depreciation questions. The agent confirmed I could take 50% of the phone as a business expense using either Section 179 or regular depreciation, and recommended I keep a log of business vs personal usage to support my 50/50 claim. For anyone else struggling with S corp questions and not getting through to the IRS, it's definitely worth trying. Saved me from another afternoon of hold music.

Has anyone tried just taking a standard deduction for cell phones instead of tracking the exact percentage? I've heard some accountants recommend just taking a flat $50/month "reasonable business cell phone allowance" and not bothering with all the depreciation stuff, especially for relatively inexpensive phones.

Don't forget that if you're using your phone for both business and personal, you'll need to track the usage pretty carefully. I use an app that logs my calls and categorizes them as business or personal. It has saved me during an audit two years ago when the IRS questioned my 70% business use claim. Was able to show them the exact call logs with business vs personal minutes calculated.