Key takeways
- Fees related to personal credit cards are generally not tax deductible.
- If you use a card for business purposes, you can deduct fees on those cards that the IRS deems “ordinary” and “necessary” for tax purposes.
- It’s better to use different cards for your personal spending and business spending so that you don’t mistakenly take or miss a deduction.
Credit cards can give you access to substantial rewards, sign-up bonuses and a convenient way to pay, but they may also charge some unwanted fees.
If you want to deduct your credit card fees to boost your tax refund, you won’t have much luck — personal credit card use is rarely eligible for a deduction come tax season.
Most credit card fees are deductible for businesses, however, so if you run a small business using a business credit card, you can likely deduct those fees on your tax return return.
Are credit card fees tax deductible for personal cards?
Credit cards come with various fees for their typical use, some to penalize you and some simply as a membership fee to hold the card. People can experience credit card annual fees, foreign transaction fees, late fees, over-limit fees, balance transfer fees and other costs. Unfortunately, for even the best rewards cards, travel card or cash back card, these popular fees aren’t tax deductible when using a personal, non-business card.
On the bright side, many common credit card fees can be avoided altogether with the right steps.
Which credit card fees are tax deductible for businesses?
The IRS has deemed that business expenses that are both “ordinary” and “necessary” qualify as being deductible, and small businesses have several “ordinary’ and “necessary” fees. This can possibly include:
If you’re just starting up sales and are considering whether to welcome credit cards as a form of payment, you probably know that a processing company will hit you with a fee for every credit card swipe, insertion or online purchase you accept.
According to the IRS’s Publication 535, any business that faces fees from a credit card company for the service of processing charges is eligible to deduct these fees from their taxable income. Although the percentage taken may be small, the charges will accumulate over time and are well worth looking into when doing your bookkeeping.
Small-business owners are capable of deducting the most charges come tax time. If you fit into this category, it’s likely you’ll qualify for a write-off depending on the fees imposed by your card provider. These charges are determined “ordinary” and “necessary” to routinely run your business, making them eligible for deductions.
Are personal expenses on a business card tax deductible?
You don’t need a dedicated business credit card to deduct business-related credit card fees. However, it certainly saves you time sorting through your books trying to determine the percentage of expenses on the card for business purposes, and therefore, the percentage of the fee that is tax deductible. These calculations are essential when deducting fees from a joint personal and business credit card, as it’s illegal to deduct personal expenses from your business income, whether accidentally or otherwise.
As a general rule, you should keep personal expenses separate from your business expenses. You wouldn’t want business transactions crossing over into your personal finances, so it’s best practice to keep the two apart.
The bottom line
Credit card fees are only tax deductible for business owners as these charges are deemed “ordinary” and necessary” for your business’s operation. Fees on personal credit cards are not eligible but they can mostly be avoided by paying your balance on time and choosing a card that doesn’t carry extra fees, such as an annual fee or foreign transaction fees.
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