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Is credit card interest tax-deductible?

Get a tax deduction on interest accrued on some purchases.

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Let’s face it: Tax season isn’t the best. 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.

Criteria for deducting credit card interest

To deduct credit card interest on business purchases, you must fit this criteria:

  • You are legally liable for the credit card debt
  • You and the lender have a creditor-debtor relationship
  • You intend for the debt to be repaid

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.

Why can’t I deduct credit card interest on a personal card?

In 1986, US President Ronald Reagan signed the Tax Reform Act of 1986, which was designed to simplify the federal income tax code by removing tax deductions and tax shelters. Credit card interest on personal expenses was made ineligible for tax deductions.

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. The following fees are tax-deductible:

  • 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.

Paying your taxes electronically can come with a 2% or 3% processing fee. This fee is tax-deductible for both personal and business credit cards.

Criteria for deducting credit card fees

To deduct your credit card fees, you need to:

  • Have a business. A sole proprietorship, a corporation or a limited liability company (LLC) are all eligible to get tax deduction 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 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.

Name Product Filter values Rewards Purchase APR Annual fee
CitiBusiness® / AAdvantage® Platinum Select® World Mastercard®
2x miles on American Airlines, gas stations and select business categories and 1x miles on all other purchases
15.99% to 24.99% variable
$0 intro annual fee for the first year ($99 thereafter)
70,000 AAdvantage® miles after making $4,000 in purchases in first 4 months of account opening.
Comdata Universal Fuel Plus Mastercard
Up to 6 cents off per gallon on fuel depending on number of gallons purchases per month, plus save 5% on maintenance at Firestone and Tires Plus retail locations, 1.5% cash back at eligible retailers and 1% on all other purchases
28.99% variable
Up to $120
Save up to 6 cents off per gallon on fuel depending on number of gallons purchases per month, plus save 5% on maintenance at Firestone and Tires Plus retail locations, 1.5% cash back at eligible retailers and 1% on all other purchases.
BP Business Solutions Mastercard®
Up to 6 cents per gallon on fuel and 3.5 cents per gallon on diesel depending on number of gallons purchased per month
28.99% variable
Up to $120
Up to 6 cents per gallon on fuel and 3.5 cents per gallon on diesel depending on number of gallons purchased per month.
Brex for Startups
7x points on rideshares, 4x on Brex Travel, 3x at restaurants, 2x on software subscriptions and 1x points on all other purchases
N/A
$0
The first corporate card for startups. No personal liability or security deposit needed, meaning your personal credit score won't be affected.
Brex for Ecommerce
N/A
N/A
$0
60-day interest-free financing for e-commerce businesses.
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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 separate your personal and business expenses.

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