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Is credit card interest tax-deductible?

Get a tax deduction on interest accrued on some purchases.

Let’s face it: Tax season isn’t fun. But there are certain things you can do to make it a bit more bearable — like learning how to save some money through deductions.

For example, deducting tax interest accrued on credit card purchases can help reduce the taxes you owe. However, this only works for some purchases.

Can I deduct credit card interest?

If you accrued credit card interest on personal expenses, your interest isn’t tax-deductible. But interest accrued on business expenses is tax-deductible. This often includes expenses for businesses, contractors and other self-employed individuals.

Can I use a personal credit card for business purchases and get a tax deduction?

Yes, but you’ll need to calculate the amount of interest accrued to your business purchases. Since you’ll likely have both personal and business purchases on your credit card, calculating interest could be a hassle.

Are credit card fees tax-deductible?

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

Separating your business and personal expenses is one of the best ways to simplify the accounting process for tax deductions. If you don’t have a business credit card yet, consider applying for one. Check out the list of business credit card options in the list below.

Name Product Purchase Interest Rate Cash Advance Rate Annual Fee Minimum Income Welcome Offer
American Express Business Edge Card
19.99%
21.99%
$99
N/A
Earn up to 57,000 Membership Rewards points in your first year. Earn 45,000 Welcome Bonus points when you charge $5,000 in purchases to your Card in your first three months, and earn 1,000 Membership Rewards points each month (a total of 12,000 annually) when you spend a minimum of $3,000 on eligible purchases.
American Express Aeroplan Business Reserve Card
16.99%
21.99%
$599
N/A
Earn up to 90,000 Aeroplan points and a bonus Buddy Pass. Plus, apply for an American Express Aeroplan Business Reserve Card by October 1, 2021 and spend at least $10,000 in qualifying net purchases by November 30, 2021 and you’ll earn, step up, or jump start your Aeroplan Elite Status.
BMO Rewards Business Mastercard
14.99%
22.99%
$0 annual fee for the first year ($120 thereafter)
N/A
Get 50,000 points and the $120 annual fee waived in the first year.
BMO Air Miles Business Mastercard
19.99%
22.99%
$120
N/A
Get up to 3,000 AIR MILES Bonus Miles ($310 towards your purchases with AIR MILES Cash).
BMO Cashback Business Mastercard
19.99%
22.99%
$0
N/A
Get 10% cash back on gas, office supplies, cell phone bills and internet bills for 3 months.
BMO Air Miles No-Fee Business Mastercard
19.99%
22.99%
$0
N/A
Get 1,000 AIR MILES Bonus Miles (over $100 towards your purchases with AIR MILES Cash).
American Express AIR MILES for Business Card
N/A
N/A
$180
N/A
Earn a Welcome Bonus of 2,000 AIR MILES when you spend at least $5,000 on eligible purchases within the first three months
Business Platinum Card from American Express
N/A
N/A
$499
N/A
Earn a Welcome Bonus of 75,000 Membership Rewards points when you charge $7,000 in purchases to your Card in your first three months of Cardmembership.
Marriott Bonvoy Business American Express Card
19.99%
21.99%
$150
N/A
Earn a Welcome Bonus of up to 105,000 Marriott Bonvoy points. Plus, get 5X the points on eligible gas, dining & travel for the first 6 months. Apply by September 20, 2021.
American Express Business Gold Rewards Card
N/A
N/A
$250
N/A
Earn a Welcome Bonus of 50,000 Membership Rewards points when you spend at least $5,000 on eligible purchases within the first three months.
American Express AIR MILES Gold Business Card
19.99%
21.99%
$0
N/A
Earn a Welcome Bonus of 150 AIR MILES when you spend at least $1,000 in eligible purchases within the first three months
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Compare up to 4 providers

Bottom line

Interest accrued on your business purchases — whether it be on a personal or a business credit card — is tax-deductible. If you use a personal credit card for your business expenses, you’ll need to calculate the interest on your business purchases yourself.

To simplify the process, consider applying for a business credit card and to help separate your personal and business expenses.

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