a question from a reader…
Q: Is credit card interest tax deductible?
A: Let’s be honest – the U.S. tax code is a messy nightmare and it’s not always obvious what’s deductible and what’s not. We all know mortgage interest can be deductible, but is credit card interest tax deductible too? Well unfortunately, the answer is usually no, but sometimes yes (I’ll discuss in a moment). However what’s shocking is that credit card interest payments were tax deductible in the past… then on Oct. 22, 1986 Reagan signed a bill that eliminated interest deductions for consumer loans, which included cars, credit cards, etc.
However here’s a possible exception for claiming credit card interest on taxes:
Qualified business expenses?
Do you work for yourself? Do you own a small company? If you have made interest payments on qualified business purchases, then you might be able to deduct the interest for those – check with a tax professional or your small business tax software for the answer.
When credit card interest is tax deductible, one of the problems is that some people are known to mingle both business and personal expenses on the same card. So how do you figure out which percentage of the interest payments correspond to solely your business expenses? Unfortunately that might be impossible to and then you won’t be able to write off any of the interest. That’s why it’s so important to have a credit card solely dedicated to business. Need one? Then
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