Deduction for a Small Business

• To take a deduction for using a cell phone, a business owner must use the phone for business 30 percent of the time, reports the website TurboTax. At one time, business owners had to itemize their phone bills as a way to prove to the IRS they used the cell phone entirely for business. The Small Business Jobs Act of 2010 now allows a person who owns a business to use a cell phone without the need to create mandatory, detailed logs.
  
  

Employee Deduction and Depreciation

• Employees can deduct employer-provided cell phones as an unreimbursed business expense if phone expenses exceed 2 percent of the employee's adjusted gross income. An employee also figures depreciation (wear and tear) on the cell phone over a seven-year schedule. This was changed from rules prior to 2010 when depreciation was based on less than 50 percent of cell phone use and had a depreciation schedule of 10 years.
  
  

Fringe Benefit Taxes

• Use of a cell phone by an employee for both business and personal use makes the phone a fringe benefit. Under that circumstance, an employee figures it as part of his gross income. If an employee proves through itemization that he uses the phone strictly for business, he may write off the phone as a deduction.
  
  

Debate Over Personal and Business Use

• In 2009, the IRS and the U.S. Treasury requested public comments on the substantiation between personal and business use of employer-provided cell phones. One proposal was a minimal personal use method that calculates a cell phone entirely for business and disregards a small percentage of personal use. A second proposal was for a flat percentage that automatically calculates a certain amount of business and personal use. Another proposal called for the use of statistical sampling methods to determine personal and business calls. As of 2011, this study is not yet resolved.