Can You Deduct the Cost of Your iPad for Business Use?
iPads and other tablets are considered "listed property"
Is an iPad or other tablet computer deductible as a business expense? As with many tax issues, it depends.
You can only deduct the costs associated with business use. If you never use the tablet for personal reasons, you're fine. Otherwise, you'll have some record-keeping and calculations to deal with.
New Rules for Deducting iPads
It used to be that the Internal Revenue Service considered a tablet to be a fixed asset subject to depreciation. You couldn't deduct the entire cost in the first year, and you had to have a business net income that exceeded the cost of the tablet. You must have used the tablet for business purposes more than 50 percent of the time. You would expense the tablet under IRS Code Section 179, effectively breaking the cost deduction out over several years.
That changed in 2016. You can now deduct the full cost of smaller business assets like iPads in the year of purchase. You're no longer required to depreciate them over time. Office products that cost $2,500 or less can be deducted as an expense in the year you buy them and begin to use them.
It's your choice. If you're having a banner year and generating a lot of income, you might want to take the deduction all at once. If things are slow this year, you might want to depreciate the iPad over time to get some benefit from the expense in later years when you're earning more income.
Tablets No Longer Listed Property
The IRS has a special category for equipment that businesses purchase and use but which can also be used personally. It might be a little difficult to use a milling machine at home, but a car or a computer can easily do double duty as a personal expense. This category of items is called listed property—an asset that lends itself to personal use.
The new 2017 tax law (the Trump Tax Cuts) has taken computer devices and peripherals (like printers) off the category of listed property. That change only means that the recordkeeping requirements are a little less difficult. But you still can't take a deduction for personal use of tablets and other computing devices. (Cell phones were taken off the listed property category several years ago.)
Deducting Your iPad
The requirements for deducting listed property as a business expense are more stringent than for other property. You must be able to show that your iPad is used more than 50 percent of the time for business purposes.
You would then claim a deduction based on the percentage of time you use the tablet for business. For example, your deduction would be $250 if you paid $500 for it and you use it for business 50 percent of the time—50 percent of $500.
Don't overlook expenses for of Wi-Fi or internet access for your IPad. You can also deduct a portion of the monthly cost of your network as a business expense if you can prove it's being used predominantly for business. Any direct business costs related to the tablet can be expensed or deducted.
According to the IRS, a deductible business expense must also be both "ordinary and necessary." An ordinary expense is "common and expected in your trade or business." An expense is considered necessary when it's "helpful and appropriate for your trade or business."
So, the question becomes whether most people in your business need the use of an iPad and if your iPad helps you run your business. You can claim a deduction for the portion of the time you use it for business if your answer is yes. Otherwise, you're out of luck...even if you do use it for business purposes.
So How Do You Separate You Usage?
Deidre Morhet, the founder of BASC Expertise, a tax, payroll, and accounting firm in Arizona, says that 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. Allocate your overall monthly expenses by this percentage.
You might be subject to recapture rules if you opted to claim the Section 179 deduction and depreciation expense and your business use percentage falls below 50 percent.
What If You're an Employee?
It used to be that you could deduct business usage of your tablet as an employee if you claimed it as an unreimbursed employee business expense. This involved itemizing on your personal return rather than claiming the standard deduction for your filing status, and you could only claim a deduction for the value and expenses that exceeded 2 percent of your adjusted gross income (AGI).
Unfortunately, this changed in 2018 with the passage of the Tax Cuts and Jobs Act. This itemized deduction is no longer available to taxpayers. You can only claim work-related costs as a tax deduction if you're self-employed.
What If You Provide a Tablet to Your Employee?
Morhet says that you can deduct the full cost of a tablet that you provide to an employee as long as any personal use is reported as a fringe benefit on the employee’s W-2 or the employee reimburses you for the personal use. You must be able to document what portion of the employee's use is for business.
Document, Document, Document!
Begin keeping a log of business activity as soon as you open your iPad and start using it. Use a simple spreadsheet—they're available for both iPad and mobile use—and regularly record your hours spent on it for business use and the business activity you were conducting
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're ever audited.
You can take a few other precautions as well. Don't put games on your iPad if you're using it for business. Make sure you're able to show just how you used it for business. For example, you might be able to get the deduction if you can show that you only use the iPad when you travel for business and that it's the only computer you take on business trips.
Keeping careful and detailed records is the key.
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 IRS laws and regulations can change frequently. Discuss business decision with tax or legal implications with a tax advisor.