Is credit card interest a business deduction?

Hi June,

Thank you for sending the Expense List. I am so glad I found your website.

One of my questions has already been answered from your blog but I have another question that I cannot find the answer to. Can I deduct all of the credit card interest charged to my business credit cards each month, even though most of the interest is for balances from two previous years?

I am sending a check for your book and CD. Thanks for being there for all of us Indie's!

Best regards,
Bonnie


Hello Bonnie,

I, too, am glad you found me. Please tell your indie friends and colleagues. They need all the help they can get in these rough times.


You may deduct credit card interest as a business expense whether you have a business card or personal credit card if and this is a really big if you used the card for a business expense and the finance charge is for that expense. If you use a card for both business and personal expenses then you must allocate the interest expense.

A card used 100% for business since you got the card is easy. All interest is a business deduction.

If you had mixed use then you need to do some arithmetic. Tally the business vs the personal. If 40% were personal then you may deduct 60% of the interest as a business expense. Even if for past business purchases.

Because if you have to go back a couple of years this can take some time then you will need to decide if it is worth the time. A $300 interest charge may not be worth your time to figure out. $15,000 is worth the time for the calculation.

Remember that every $100 business deduction can save you $30 -- more or less -- in taxes.

Also be aware that credit card companies have a lot of names for interest: Late fee; finance charge; late penalty. Interest by any other name is still interest expense.

Best,
June