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Are credit card fees tax-deductible?
Get tax deduction on some credit card fees.
CRA tax rules allow you to get a tax deduction for credit card fees, including the annual fee, cash advance fees, foreign transaction fees and balance transfer fees. Unfortunately, this doesn’t apply to all credit cards.
Can I tax deduct credit card fees?
If you use your credit card for personal expenses, your card fees aren’t tax-deductible. But if you use your credit card for business expenses — you can get tax deductions on most of your credit card fees. That’s because you can generally deduct any necessary expense used for earning income.
The following are credit card fees that may be tax-deductible, but check with a certified tax consultant to verify what is deductible for your business:
- Annual fee
- Foreign transaction fee
- Late payment fee
- Overdraft fees
- Cash advance fees
- Balance transfer fees
- Most other credit card fees
Note: If your business accepts credit card payments, you can get a tax deduction for fees charged by your payment processor.
Criteria for deducting credit card fees
To deduct your credit card fees, you need to:
- Have a business. A sole proprietorship or a corporation are both eligible to get tax deductions on your business-related credit card purchases.
- Separate your business expenses. If you use your personal credit card for business purchases, you can’t deduct your entire card’s annual fee because you’ll need to calculate how much money you spend on business purchases as opposed to your personal purchases. To simplify bookkeeping, use a business credit card exclusively for your business purchases.
- Keep clear records. This is important, especially if you mix personal and business purchases. With good record-keeping, you can easily find which fees were incurred on your business-related purchases.
Compare business credit cards
The best way to separate your business from personal expenses is to use a business credit card. You can deduct the card’s annual fee — and apply for a card with a higher annual fee that yields greater rewards.
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Bottom line
Most credit card fees incurred on your business-related purchases are tax-deductible. This includes the annual fee, cash advance fees, foreign transaction fees, balance transfer fees and most other credit card fees.
But to simplify accounting and to easily calculate your tax deduction, consider applying for a business credit card.
Frequently asked questions
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