Now that the time to pay the taxes is just around the corner, all those who have a lot of liabilities are under pressure in order to reduce the burden of their liabilities. For people who use cash or credit card interest, at the end of the year they will find out that they have a lot of expenses to bear. However, what we need to find is that is credit card interest tax deductible? What makes the credit card tax deductible, when is it deductible and when is it not deductible? These are the questions of which you will be getting the answers of in this article.
When is the credit card interest tax deductible and when is it not tax deductible?
If the credit card is used for business activities and any of the work which is related to business, then the interest is tax deductible. However, the interest must qualify itself as a real business activity and expense according to the requirements made by the IRS. The purchases must be deducted in the same year when you have made them and the same goes for the interest which should be deducted in the same year when you pay it.
As for when is the credit card interest not tax deductible, any expense which you have made for your personal use. According to the IRS, these personal expenses come under the heading of personal interest and so there is no kind of tax benefit of these.
If you have a loan to pay on which interest accumulates, interest on furniture items, interest on loans taken among people and interest on medical expenses made by you also are not tax deductible. This means that whatever you pay out of your own pocket for your personal use or personal reasons is not tax deductible.
When it all gets bad
If you have used your credit card for both the personal use as well as for business purposes, then the rule of tax-deductible will only be applied on business expense activity according to the amount that you have used in paying for your business activity.
For instance, if you have taken a loan and you spend 80 percent of the loan for business purposes and 20 percent of the loan for your personal use, then 80 percent of the interest will be tax deductible.
If you use the same credit card for both business as well as personal use, then you can legally deduct the interest which you have paid on any business activity that you have made. However, a tax payer who always uses the same credit for personal and business use will have a really hard time in figuring and calculating out which of the interest is tax deductible. A tax payer may require the services of an accountant or he himself must be so prodigious in math skills that he finds no difficulty in calculating the total amount of tax deductible.
Some more examples of credit card tax deductible
According to the IRS, it has allowed the tax to be deductible on the interest which is paid for the home loans as well as on the money which is taken for investment of the property.
Apart from that, some more examples of credit card interest tax deductible include ATM fees, maintenance fees and other credit card and bank fees. Those employees who are self employed can also deduct the taxes that include traveling on work related trips, audits as well any other expenses that they made with their credit card while they were away for work trips.
Wrapping up
On the whole, it is true that credit card interest is tax deductible. However, if someone needs help and wishes to know is credit card interest tax deductible or not, can do so by taking advice from an accountant or a professional tax advisor.
However, for those people who have huge businesses or large businesses but fail to keep their credit cards separate for business and personal use, can hire the services of a bookkeeper. If they will hire a bookkeeper, they will notice the positives of it. A bookkeeper who will make sure to analyze and let the employer know at the end of the year that which of the expenses of the credit card interest are tax deductible and which are not.
