The answer to this tax question is no if the credit card was for personal use but yes if the card was for business use.
I have outlined three different scenarios that you likely fall under if you have made credit card interest payments.
Credit Card For Personal Use The interest payments are not deductible.
For Business Use You can deduct the entire interest payment as a business expense.
For both Business & Personal Use This can get tricky.
If a credit card is for both business and personal use then you must allocate the interest payment by following a process similar to the one detailed below.
How to Allocate the Interest Payment 1) Add up your credit card business & personal expenses separately 2) Divide your business expenses by your total expenses (business plus personal expenses) 3) If 60% of your total expenses were business expenses then you can deduct 60% of your total interest payments.
Does it Make Sense to Figure out Your Deduction If you used a credit card for both business & personal purposes, it may not be worth your time to claim the interest tax deduction related to the business and go through all of the necessary calculations.
For instance, if your total interest expense for the year was $100, then you probably would only be saving $20 to 30 in taxes.
If your interest expenses were a couple thousand dollars, it may be worthwhile to go through the calculations.
What Fees Are Considered Interest Expenses? A lot of credit card companies have several labels for interest: Late Fee, Finance Charge, Late Penalty.
All of these labels fall under the category of interest expense.
You Need to Pay the Interest to Claim It Please keep in mind that you cannot deduct the interest expense unless the business paid it.
If it was not paid or someone else paid it, you cannot claim it as a tax deduction.