Deducting Your iPad for Business Use
iPads, Surface, and Other Tablets
Is an iPad or other tablet computer deductible as a business expense? The answer, as always, is "it depends." This article describes how taxes work for a business, for the purchase and use of tablet computing devices.
Deidre Morhet, founder of BASC Expertise, a tax, payroll, and accounting firm in Arizona, answers some commonly asked questions about tax implications of tablets in a business (with my comments in italics):
I want to buy a tablet (iPAD or Surface or other) to use in my business and partly for personal expenses. Can I deduct the purchase price as a business expense? The IRS considers a tablet a fixed asset subject to depreciation. However, as long as you have business net income that exceeds the cost of the tablet, and you use it more than 50% in your business, you can expense it under IRS Code Section 179.
Update: Beginning in 2016, you can deduct the full cost of smaller business assets like iPads instead of having to depreciate them over time. Office products that cost $2500 or less can be deducted as an expense in the year you buy and begin to use them.
Can I deduct the monthly costs for use of this tablet as a business expense? Do I have to separate out the personal time? You can only deduct the costs associated with the business use, so yes you would have to keep track of the personal use. (Read more about keeping business and personal expenses separate.)
I've heard that tablets are considered "listed property." How does listed property differ from other business property and equipment? Listed property is generally any asset that lends itself to personal use. If the asset does not qualify for the Section 179 deduction and instead is subject to regular depreciation, then you must limit the depreciation claimed by the percentage of business use.
Tablets as Listed Property
The IRS has a special category of equipment that businesses purchase and use, but which can also be used personally. It's a little difficult, for example, to use a milling machine at home, but a car or a computer can be used personally. The IRS doesn't want businesses buying and using these things to read books, play games, or watch videos and then attempting to claim a business deduction for this use.
Deducting Your iPad
The requirements for deducting listed property are more stringent than for other property. In order to deduct the cost of the iPad or tablet as a business expense, you must be able to show that it is used more than 50% for business purposes. So if you're using it for business, don't put games on it, and you be able to show how you used it for business. For example, if you can show that you only use it when you travel for business and that it's the only computer you take on business trips, you might be able to get the deduction. Keeping careful and detailed records is the key.
Deducting Your iPad Usage as a Business Expense
Don't forget the expense of Wi-Fi or 4G for your IPad; if you can prove it's being used predominantly for business, you can also deduct a portion of the monthly cost of your network as a business expense.
How do I separate business and personal usage so I don't get into trouble with the IRS? The best method is to keep a log of the time you use the asset for business versus the time you spend using it personally and allocate your monthly joint expenses by this percentage. It is important to keep written records.
If the business use percentage falls below 50% you may be subject to recapture of the Section 179 deduction and depreciation expense (that is, you may not be able to get any accelerated depreciation tax breaks). Any direct business costs related to the tablet (like purchasing and downloading business applications) can be expensed when purchased.
What if I'm an employee and want to buy the tablet for business use? Is there a way to deduct this purchase on my personal tax return? Only as an unreimbursed employee business expense subject to the 2% of Adjusted Gross Income limitation on your personal tax return.
If I (the employer) provide a tablet for an employee, can I still deduct the cost (initial and on-going) as a business expense? Is this tablet considered a taxable benefit to my employee? You can deduct the full cost of the tablet provided to the employee as long as the personal use is reported as a fringe benefit on the employee’s W-2 or the employee reimburses you for the personal use. In this case, as described above, you must be able to document what portion of the employee's use is for business.
Document, Document, Document!
As usual, my mantra is "DOCUMENT!" As soon as you open your iPad and start using it, begin by keeping a log of business activity. Use a simple spreadsheet (they are available for iPad and mobile use) and record hours spent and the business activity. Don't make it complicated; consider it like recording time spent on any activity. Getting in the habit of doing this will pay big dividends if you are ever audited.
Disclaimer: Nothing in this article, on this site, should be considered as tax or legal advice. The comments and information provided here are for general information purposes only. Every business situation is unique, state and federal laws and regulations, including IRS regulations, change constantly. Before making any business decision which has tax or legal implications, discuss with your tax and legal advisor.