Credit card interest is not tax deductible unless the balance was from business expenses. You won’t be able to deduct interest on any personal purchases you make. That’s been the law since 1986. But it still may come as a surprise to some people because interest on other types of debt, such as student loans and mortgages, is eligible for deduction.
Here’s when credit card interest is tax deductible:
Credit card interest is tax deductible if the interest is on purchases that were used for business purposes. You can’t just buy yourself a new TV for entertainment and deduct the interest on it.
You can claim expenses are for business if you’re a business owner, self-employed or an independent contractor.
Your credit card doesn’t have to be a “business credit card.” It can be a personal credit card that you use for business.
If your balance includes both business and personal expenses, you can only deduct the interest from the business expenses.
Using separate credit cards for business and personal spending makes figuring out how much interest you can deduct much easier.
You may want to think twice about carrying a balance from month to month with a business credit card. The issuer can apply a higher interest rate to your balance at any time.
Make sure you’re being truthful when you write down the amount you’re deducting. It may be tempting to try to write off interest on personal purchases, but it’s not worth the risk of being fined by the IRS if you get audited and can’t prove all your deducted expenses were business related.
A tax deduction is an item recognized by the Internal Revenue Code as fully deductible against your taxable income if paid in the form of cash or cleared check or credit card. Items such as home mortgage interest, charitable contributions, sales tax, state income tax, medical deductions in excess of a certain threshold and miscellaneous itemized deductions in excess of 2% of your adjusted gross income cover most of the allowable deductions on the federal form 1040. In addition, capital gain losses can be taken with certain limitations as can losses from real estate and other business transactions. Hope this helps and good luck… read full answer
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