30 Jun Are Cell Phone Deductions Allowed for Ministers?
If you are a minister, chances are you spend a lot of time on the phone, especially during the Pandemic. Fortunately, ministers can deduct these expenses on their schedule SE, but there are several things you have to keep in mind.
First, you have to be subject to self-employment tax in order to take the deduction. Some ministers have opted out of the Social Security system, so they don’t have self-employment taxes and they don’t have a schedule SE. If you don’t have a schedule SE, you can’t take the deduction.
Next, you have to keep a clear record of your expenses. If the IRS ever audits your return, you will want to be able to prove the deduction or they might disallow it. The IRS generally recommends keeping supporting documents for six years after filing your return.
Lastly, if you use your cell phone for ministry and personal use, you have to prorate the usage. For example, if your cell phone expense for the year is $1,000, and you use the phone for ministry purposes 30% of the time, then your deduction would be $300.
You may be wondering how to determine the percentage to use for prorating. The easiest way is to keep a log for a week of all your cell phone use, then use that percentage for the rest of the year. Another option is to track the minutes you use the phone for ministry calls versus personal minutes. Regardless of what method you decide to use, you need to be able to show the IRS your rationale for why you chose the percentage of use.
One last item- cell phone usage is NOT a deduction that you can use for the housing allowance. The housing allowance can only use expenses for your principal residence, and since a cell phone is not tied to your home, you can’t use the expense. If you want to have phone usage count for the housing allowance, it is limited to land lines only.
Cell phone deductions are just one of the many deductions you need to discuss during a tax return review with your CPA. If you are interested in receiving CPA referrals that specialize in Clergy matters, please reach out to us and we’ll be happy to provide you with referrals.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.