Many businesses use business credit cards to buy equipment, supplies and other things. Hopefully, you’re separating business and personal expenses. This does raise questions like “Are business credit card payments tax-deductible? and “Is credit card interest tax deductible?”
Can You Write Off Your Whole Business Credit Card Payment?
No, you can’t. The IRS considers business credit card payments as loan or debt repayments. You cannot simply deduct these payment amounts. But you can and should deduct the itemized costs these bills comprise. To recap: you can deduct the costs of each item, not the cost of your credit card payments.
You should keep track of the tax-deductible business expenses placed on your business credit card. Document your business expenses so you can write off expenses at tax time without drawing the ire of Uncle Sam.
Is Credit Card Interest Tax Deductible?
Yes. You can also write off the interest payments you make for business-related purposes on your business credit card. Business interest is tax deductible, including if it were for a loan. Deductible interest debt must be for business activity. Your business credit card interest for non-business costs isn’t deductible.
Also, credit card swipe fees, annual and late fees, and other fees are deductible. Again, this is only if it’s related to your business activities. The interest on the part of your credit cards that are personal cannot be deducted.
This wasn’t always the case. Before the Tax Reform Act of 1986, all credit card interest was tax deductible. Now, it’s only for the interest on business-related credit cards. That’s why we recommend having a personal credit card and business credit card. Only use the business credit card for business costs. That way, it will be easy to keep your business expenses separate.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.