How to properly deduct cell phone business expenses for my new iPhone?

You're dealing with a common question for new business owners! For a financed phone, you generally deduct the business portion of what you've actually paid during the tax year - both for the phone itself and the service plan. So your calculation of $129 x 6 months x 0.8 for the phone payments is correct. Similarly, you'd calculate your service plan at $95 x however many months you've had it x 0.8. The key is tracking your actual expenses paid during the tax year - since you're financing, you don't get to deduct the full price upfront. Instead, you'll continue deducting the business portion of your payments each year until it's paid off. Make sure you keep good records showing your business use percentage. Phone logs, business contacts, and a general log of business vs. personal usage will help support your 80% claim if you're ever questioned.

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Don't forget about depreciation as an alternative! While you can expense the business portion of payments as you described, you might also consider depreciating the full business portion of the phone's value (80% of total cost) over its useful life. For phones, that's typically 5 years under MACRS. This might give you larger deductions initially, especially if you can take advantage of Section 179 expensing. Definitely worth running the numbers both ways to see which is more advantageous for your tax situation.

Just wanted to point out something about the service plan - if you started your business in January but didn't get the phone until July, were you using a different phone for business from Jan-July? If so, don't forget to include the business portion of those expenses too! Many people miss out on legitimate deductions by forgetting about partial year expenses on old devices.

Great question! I went through this exact same situation last year with my consulting business. You're on the right track with your calculation - since you're financing the phone, you can only deduct the business portion of what you've actually paid during the tax year. So yes, $129 x 6 months x 0.8 = $619.20 for the phone payments is correct. Don't forget to also calculate your service plan deductions: $95 x 6 months x 0.8 = $456 (assuming you got the service plan when you got the phone in July). One tip that helped me a lot - keep a simple log for a couple weeks showing your business vs personal usage to justify that 80% figure. Screenshot your recent calls, texts, and app usage if possible. The IRS likes to see documentation backing up your business use percentage claims. Also, make sure you're consistent with how you categorize this expense each year on your Schedule C. Most people put it under "Utilities" but "Other expenses" works too - just pick one and stick with it.