Is Credit Card Interest Tax Deductible? | Let's Find Out

February, 17 2025 by Steve Banner, EA, MBA

Yes, interest you pay on both business and personal credit cards may indeed be deductible – but the dollar amount you can deduct depends on the type of purchases you have made on each card.

 

When is credit card interest deductible?

Interest expenses for purchases on a credit card are deductible only if those interest expenses are related to purchases for a business-related purpose. This applies to all types of credit cards, regardless of whether the cards are in the name of a business or in the name of an individual.

 

When is credit card interest NOT deductible?

As you may have gathered from the statement above, your credit card interest expenses are not deductible if they relate to purchases you have made for personal use. Once again, this applies to all types of credit cards, whether the cards are in your name or the name of a business.

 

But what if I have used my personal card for both business and personal purchases in the same month?

As we have just seen, you can claim a deduction for the portion of your interest that relates to business use. This means that even though you have mixed different types of purchases on your card, you are still eligible to claim a deduction – however, you will need to perform a calculation to divide the total interest charges between your personal purchases and your business purchases. The part of the interest that relates to your business is deductible, but the personal part is not. The same thing applies if you have used your business card to make mixed purchases during the month.

 

How can I avoid having to figure out how separate my business and personal expenses on the same credit card bill each month?

I’m glad you asked because there is a very simple way to avoid having to do such convoluted calculations each month. Most individuals, as well as business owners, have more than one credit card in their name. You can take advantage of this fact of 21st century life and avoid month-end headaches by simply dedicating one of your personal cards to business purchases only. This will allow you to deduct 100% of the interest charges that appear on that card.

If you follow this practice, your headaches will be a thing of the past – unless you accidentally get your cards mixed up and make a personal purchase on your business-only card, or a business purchase on your non-business use card. You could avoid this trap by getting a completely new card in the name of your business.

Many banks and other companies that offer business credit cards also provide itemized statements and year-end account reports. These reports can break your business expenses into different categories and make it easier to see how much you have been billed in interest.

 

Great idea! So, all I’ll need to keep are the monthly statements for my business credit card bill, right?

Actually, no. It’s true that your credit card bills and statements will be a great help when it comes to completing your tax return. But you also need to keep the receipts for your business-related purchases, regardless of whether they were charged to a personal or business credit card. The tax code requires supporting evidence for all business expenses, and credit card statements on their own do not contain enough information to provide the necessary proof to identify the items purchased. At first glance, it may seem rather tedious to keep your receipts and other evidence of your business purchases – but, trust me, you’ll be glad you did if the IRS ever decides to audit or question your claims for deduction.