How Much of My Cell Phone Can I Deduct for Uber?

The short answer is: you can deduct the percentage of your cell phone expenses that directly relate to your Uber driving business. This means you can’t simply deduct your entire cell phone bill; you need to determine the business use percentage. If you use your phone for both personal and business purposes, you must allocate your expenses accordingly. Let’s dive into the details of how to calculate your deduction and what expenses qualify.

Determining Your Business Use Percentage

The key to maximizing your cell phone deduction is accurately determining the proportion of time you use your phone for Uber-related activities. This is not about just the time spent actively on a trip, but also includes time spent:

• Accepting Ride Requests: Time spent waiting for and accepting ride or delivery requests through the app.
• Navigating: Time using your phone’s GPS for navigation to pick-up and drop-off locations.
• Communicating with Riders: Time spent communicating with riders or customers about pick-ups, drop-offs, or any issues.
• Managing Your Uber Account: Time spent reviewing earnings, scheduling shifts, or updating your profile within the app.
• Other Uber-Related Tasks: Any other phone use directly associated with your Uber driving.

You must keep records for all these activities to justify your business use percentage. You cannot claim 100% of your phone bill unless you only use it strictly for business, which is highly unlikely for most Uber drivers.

Methods for Calculating Business Use

• Time-Based Tracking: This is the most common method. Track how much time each day or week is spent on business-related phone use compared to total phone usage. You can use a timer or a phone app to help monitor this. For instance, if you calculate you use your phone for Uber activities for 20 hours per week, and your total weekly usage is 40 hours, your business use percentage is 50%.
• Transaction-Based Tracking: If you tend to use your phone primarily for Uber during specific times, you might track the number of business-related calls, texts, or data use versus personal use. However, time-based tracking is often more accurate for Uber drivers.

It’s important to maintain accurate records to support your deductions if you ever face an audit by the IRS. Using the method that is most accurate for your usage pattern is the key to a successful deduction.

What Cell Phone Expenses Can You Deduct?

Once you’ve determined your business use percentage, you can apply it to several qualifying cell phone expenses. These include:

• Monthly Service Charges: The regular cost of your phone plan.
• Cost of a New Phone: If you purchased a new phone primarily for business purposes. This can be depreciated over a period, if it is used more than a year. Otherwise it’s treated as a regular expense.
• Phone Accessories: Accessories like a car charger, phone mount, or any item deemed necessary and ordinary for your business, in the same percentage you are deducting the rest of your cell phone bill.
• Data Usage: If you pay for extra data, you can also deduct a portion of it based on business use.

Note that you cannot deduct costs for features you use primarily for personal use, such as entertainment or social media. If these were included in your overall data or service plan, you will have to remove them when calculating your business deduction.

The Importance of Record-Keeping

The IRS emphasizes the importance of maintaining accurate and detailed records for tax purposes. For cell phone deductions, this includes:

• Phone Bills: Keep all monthly bills for your phone service.
• Purchase Receipts: If you bought a new phone or accessories, keep the receipts.
• Usage Logs: Maintain a log of your time spent using your phone for business.
• Method Documentation: Document how you calculated your business use percentage.

15 Frequently Asked Questions (FAQs) About Cell Phone Deductions for Uber Drivers

1. Can I deduct the full cost of my cell phone if I only use it for Uber?

If you exclusively use your cell phone for Uber-related activities and not at all for personal use, then you could deduct 100% of the costs. However, this is rare for most drivers.

2. What if I upgrade my phone; can I deduct that?

Yes, if you upgrade your phone, you can deduct the business-use percentage of the cost. If your phone’s expected useful life is over one year, the cost will likely need to be depreciated over its useful life rather than deducting the whole amount in one year.

3. Can I deduct the cost of cell phone accessories?

Yes, you can deduct the business-use percentage of accessories deemed necessary and ordinary for your Uber business, such as phone mounts and car chargers.

4. What records do I need to prove my cell phone business use?

You need detailed phone bills, purchase receipts, usage logs, and a clear explanation of how you calculated your business use percentage.

5. Can I use the Uber app data to determine my business use?

While the Uber app may provide mileage and online time, it does not track all business-related phone use. You still need to keep your own log of activities to document your usage.

6. Is it better to take the standard mileage deduction or actual expenses for my car and phone?

This depends on your situation. If you drive a lot, the standard mileage deduction might be better. If your actual car and phone expenses exceed the mileage deduction, tracking actual expenses could save you more. It’s important to calculate both ways and see which method gives the greater deduction. Note that you must use the same method for both your car and your cell phone.

7. Can I deduct the cost of my internet bill if I use it for Uber?

If you use your home or personal internet for business-related tasks (e.g., reviewing earnings reports, scheduling), you can deduct the business-use percentage of your internet bill, similar to how you’d deduct cell phone expenses.

8. What if my personal use percentage is higher than my business use percentage?

You can only deduct the business-use percentage. The higher your personal usage, the smaller your deductible portion.

9. Do I have to itemize my deductions to claim cell phone expenses?

Yes, you will need to itemize your deductions as a self-employed business owner on a Schedule C to deduct cell phone and other related expenses. If you choose to take the standard deduction on your personal return, you will still have to itemize your business deductions on Schedule C.

10. Can I claim my phone expenses if I drive for both Uber and DoorDash?

Yes, you can combine your business-use percentage from all your rideshare/delivery activities and apply this percentage to your cell phone expenses. Make sure to track each company’s business use separately to determine the overall total.

11. What if I get a new phone in the middle of the year? How does that impact my deduction?

You can start deducting the business-use percentage of the new phone’s cost (either the full cost or depreciated, depending on its life) from the date it was put into service for your business.

12. Can I write off a phone used for my entire small business not just Uber?

Yes, the same principle applies. You can deduct a portion of your cell phone expenses as a business expense for your entire small business. You just need to determine the business use percentage for that business, including time spent working for Uber.

13. Should I claim depreciation or take the entire phone cost as an expense?

If the phone has a useful life of more than one year, then you will claim depreciation over a number of years, depending on the type of property. If your phone has a short life, then you can claim it as a normal expense. You will want to speak to a tax professional to make that determination.

14. What should I do if I’m unsure how to calculate my business use percentage?

If you find it difficult to track your usage or are unsure how to calculate your business percentage, consider consulting with a tax professional to help you accurately track your deductions.

15. Are there any other common tax deductions Uber drivers should consider?

Yes, you can deduct business expenses for vehicle use including mileage, gas, car maintenance, insurance and repairs. You may also be able to deduct a portion of business travel, some meals, and other expenses directly related to your Uber business, provided you have adequate documentation.

By accurately tracking your cell phone use and other deductible expenses, you can potentially reduce your tax liability and increase your overall income as an Uber driver. Be sure to consult with a qualified tax advisor for the most up-to-date tax guidance and advice specific to your situation.