Can the interest you pay on a credit card, if you are a small business owner be used as a tax deduction?

Question

I am a small business owner and was told buy another that the interest that I have paid from a credit card, used only for that business can be used as a tax deduction. My tax person has told me know that you never can use the interest from a credit card to be used as a tax deduction. Does anyone know the correct answer?

Answer 1

the instructions for schedule c clearly ALLOW the deduction of any interest paid such as in your example as a business expense on schedule c.(to be deducted against business income) the IRS calls credit card financing "revolving credit" (just like the credit reporting agencies) and specifically addresses this issue in the instructions for schedule c (as well as in the general pub 17) i would be real cautious of a tax preparer that tried to dissuade you from deducting this as a bona fide interest expense.the issue of used exclusively for business expense does not apply in this particular case. i can say that the other answerer's misconception on this issue stems from their confusion with the rules for credit card interest expense deduction for student loans and not a self employed person's use of a credit card in the normal course of their business (think entrepreneurship and the fact that most business start ups are begun on none or very little resources) cash

the next answer if i read it correctly, it states that either way it is an expense..... and if that is correct? then i must ask where is the distinction or relevance to the question at hand,

Answer 2

If your facts are the whole story--the credit card is only used for purchases of items used in the business, most or all of the interest should be deducitble on Schedule C. If you buy any depreciable assets with the credit card, you will have to allocate part of that interest to the cost of such asset(s) that is (are) capitalized. The interest allocation rules put interest into four buckets: trade or business, investment, passive activity, and consumer. Trade or business interest expense is fully deductible, as long as you are at risk with respect to any loss that the business sustains.

Answer 3

It depends on your accounting method.

If you use cash, when you use the credit card to purchase an item for your business, you can claim the purchase price as an expense, and claim the interest paid as an expense.

If you use accrual, then you have to only claim actual payments to the credit card as an expense.

Answer 4

I concur on the above answer.

As long as there was no commingling of the business expenses with personal expenses, the interest should be allowed as a deduction.

Answer 5

yes, as long as you are only talking about a specific credit card that has ONLY been used for business purchases.

Answer 6

I'd be real cautious here - reading the instructions for the interest deduction on schedule C, it doesn't look like you could deduct this.

Answer 7

I was wondering the same question myself yesterday