While you can't claim the interest you pay on a credit card you use for personal purchases, you can deduct the interest you pay on charges for business expenses. Other credit card expenses for your business or work may qualify as tax write-offs as well. If you use credit cards for business, you can keep your accounting straight by using a separate business credit card.
If you use a credit card to charge business-related expenses, you can get yourself a tax break by deducting the credit card interest you pay as a business expense on Schedule C. However, it complicates things if you charge both personal and business expenses on one personal credit card. Only the portion of the interest related to the total business expenses you charge is deductible. For example, although you paid a total of $400 credit card interest for the year, only 30 percent of the total purchases you made on the card were for business expenses, therefore, you can only claim 30 percent of the interest you paid as business interest expense. Keep all your credit card receipts in case the IRS has questions.
Unreimbursed Employee Expenses
If you use a credit card to pay for work-related expenses that qualify as unreimbursed employee expenses, you can deduct the expenses on Form 1040 Schedule A, according to Bankrate.com. While you must itemize deductions to claim the expenses, unreimbursed employee expenses are among the miscellaneous deductions subject to the 2 percent limit. When filing your tax return, you can only deduct the amount of total miscellaneous expenses that exceed 2 percent of your adjusted gross income. You must incur qualifying expenses during the tax year and the expenses must be necessary for your trade or business.
Credit Card Fees
If you own a business, you can deduct as a business expense those painful fees that credit card companies charge you to process credit card sales, according to Kiplinger. The fees are deductible for the year you pay or incur them. Depending on how many credit card transactions you make in a year, the processing fees can add up quickly. Those same fees can give you a hefty tax write-off when you prepare your return. Other bank charges that you pay for your business accounts, including ATM fees, are also tax-deductible business expenses.
Business Credit Card
Having a separate business credit card makes it easier for you to track deductible business expenses. Using the card only for business makes your record keeping simpler. You’ll know that every transaction listed on the billing statement is for a business-related expense or purchase. That means that come tax time you can deduct the full amount of interest.
- SmartMoney: 5 Little-Known Tax Deductions
- IRS: Other Expenses
- TurboTax: Employees Can Deduct Workplace Expenses
- TurboTax: Can I Write Off Credit Card Interest on My Taxes?
- Kiplinger: Business Expense Tax Deductions
- Bankrate.com: Business Expenses That Benefit You
- Bloomberg Businessweek: 25 Unsung Tax Deductions
- TurboTax: Is Interest on Credit Cards Tax Deductible?
- Jupiterimages/Polka Dot/Getty Images