When an Idaho business provides an employee or a partner with a smartphone or similar equipment primarily for non-compensatory Idaho business reasons, the following things happen:

  • The Idaho employee’s or Idaho partner’s business use is a working condition fringe benefit that is excludable from income.
  • The Idaho employee’s or Idaho partner’s personal use is excludable from income as a “De Minimis” fringe benefit.
  • The Idaho employee or Idaho partner does not have to keep records of Idaho business use.
  • The tax code nondiscrimination requirements do not apply. This means the Idaho business can pick and choose who gets the smartphone benefits.

 

Here’s how you are going to benefit this year:

  1. Your Idaho S corporation will reimburse you X amount (total annual phone cost) for the smartphone use. The reimbursement puts X amount in your pocket that was not there previously.
  2. The Idaho S corporation deducts the X amount and passes that tax deduction to you via the K-1, so effectively you realize a tax deduction for the entire business and personal use of the smartphone.
  3. And you do not have to keep any tax records to obtain this tax deduction for your Idaho business.