This article contains links to products or services from one or more of our advertisers or partners. We may receive a commission when you click or make a purchase using our site. Learn more about how we make money.

Is credit card interest tax-deductible?

Get a tax deduction on interest accrued on some purchases.

Updated

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
Ink Business Unlimited℠ Credit Card
1.5% cash back on all purchases
0% intro for the first 12 months (then 13.24% to 19.24% variable)
$0
$750 bonus cash back after you spend $7,500 on purchases in the first 3 months after account opening.
Ink Business Preferred® Credit Card
3x points on the first $150,000 on travel and select business categories annually, then 1x after and on all other purchases
15.99% to 20.99% variable
$95
100,000 bonus points after you spend $15,000 on purchases in the first 3 months after account opening. That's $1,250 toward travel rewards when you redeem through Chase Ultimate Rewards&reg
Universal Premium Mastercard®
3 cents off per gallon when you buy 30,000 or more gallons in a month plus 3 cents off at the Retail Savings Network
27.24% variable
Up to $120
Earn 3 cents off per gallon when you buy 30,000 or more gallons in a month plus 3 cents off at the Retail Savings Network.
Ink Business Cash℠ Credit Card
5% at office supply stores, on Internet, cable and phone up to $25,000 combined annually (then 1%), 2% on gas and dining up to $25,000 combined annually then 1% after that and on all other purchases
0% intro for the first 12 months (then 13.24% to 19.24% variable)
$0
$750 bonus cash back after you spend $7,500 in the first 3 months.
United℠ Business Card
Earn 2 miles per $1 spent on United purchases, at gas stations, office supply stores, restaurants (including eligible delivery services), and on local transit and commuting. Earn 1 mile per $1 spent on all other purchases.
16.49% to 23.49% variable
$0 intro annual fee for the first year ($99 thereafter)
Earn 60,000 bonus miles after $3,000 in purchases within the first 3 months of account opening. Plus, get a $0 intro annual fee for the first year, then $99.
loading

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 separate your personal and business expenses.

Frequently asked questions

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site