Can You Deduct Credit Card Interest on Your Taxes? Here’s What to Know
Can You Deduct Credit Card Interest on Your Taxes? Here’s What to Know
Credit card interest and taxes: what you can (and can't) write off.
Written by
John Egan
John Egan is a freelance writer, editor and content marketing strategist in Austin, Texas. His work has been published by outlets such as CreditCards.com, Bankrate, Credit Karma, LendingTree, PolicyGenius, HuffPost, National Real Estate Investor, and Urban Land.
Americans paid more than $254 billion in credit card interest and fees in 2024 — yet almost none of it was tax-deductible. Whether you can write off credit card interest depends entirely on what the purchase was for, not which card you used. Here's what the IRS actually allows.
In 2024, consumers were assessed $160 billion in credit card interest and paid $31.3 billion in fees. That's according to theCFPB's 2025 credit card market report, and under IRS rules, interest on personal spending isn't deductible.
So, is credit card interest tax deductible? Whether you can write off credit card interest depends entirely on what the purchase was for, not which card you used. Here's what the IRS actually allows.
If you're wondering "can I deduct credit card interest on taxes," the deciding factor is what the purchase was for, not the name on the card. In other words, a tax deduction for credit card interest usually isn't available for personal spending.
One big change: starting with the 2025 tax year, a new deduction covers some car loan interest, but it doesn't cover credit card interest. If interest costs are what's really hurting, comparing credit cards with lower rates may save you more than any write-off. Start bycomparing credit cards.
Note: This is general information, not financial or tax advice. A tax professional can help apply these credit card interest tax rules to your situation.
Key Insights
Interest on personal credit card purchases isn't tax-deductible under IRS rules.
Business card interest may be deductible when the charges are documented business expenses.
Mixed-use cards: only the business share of interest can be deducted.
Mortgage, student loan (up to $2,500) and investment interest can still be deductible.
New for 2025–2028: some new-car loan interest is deductible, but credit card interest isn't.
Is Credit Card Interest Tax Deductible for Personal Purchases?
Interest deductions apply only in narrow categories of the tax code, such as home mortgage interest, some student loan interest and business-related interest.
Why there's so much credit card interest tax misinformation:
People confuse credit card interest with deductible interest, like mortgage interest, student loan interest, or investment interest expense.
People assume "I used a business card" automatically means "deductible," but IRS rules focus on the purpose of the purchase.
People think interest works like itemized deductions for everyone, even when the interest is personal and therefore non-deductible.
Credit card charges for your family's groceries, clothing and vacations, for example, aren't deductible. Even interest paid on personal purchases made on a business credit card isn't eligible for a tax deduction.
Example: If total credit card interest for the tax year is $2,400 on personal spending, that $2,400 typically does not reduce taxable income because personal credit card interest tax treatment is generally non-deductible.
Does the New Car Loan Interest Deduction Apply to Credit Card Debt?
Why it matters: putting a new car on a credit card won't qualify. A credit card isn't a loan secured by a first lien on the vehicle.
Can I Deduct Business Credit Card Interest on My Taxes?
Yes — business credit card interest may be deductible, but only when it is tied to documented business expenses. UnderIRS Publication 334, interest relates to your business if you used the loan proceeds for a business expense.
Annual fees on a card used only for business may also be treated as a business expense, but confirm with a tax pro. Late fees are less clear. The IRS hasn't specifically addressed them in the guidance we reviewed, so confirm with a tax pro.
Business expenses charged to the card usually include rent, internet service, utilities, travel and other "ordinary and necessary" costs tied to business income and operations.
For anyone deducting credit card interest, the key is proving the charges were business expenses — not personal expenses — and keeping records that support the business purpose for tax purposes.
How Do I Claim a Business Credit Card Interest Deduction?
To claim a deduction, every charge must be traceable to a legitimate business purpose with documentation to back it up. Here's a simple checklist:
Confirm the charges are business expenses (ordinary and necessary for business income).
Separate personal expenses from business expenses, or clearly tag transactions in your records.
If a card is mixed-use, allocate the deductible portion instead of guessing.
Report the deduction on the right form for your entity type:
Sole proprietorships / single-member LLCs:Schedule C, usually line 16b
Partnerships: IRS Form 1065
S corporations: IRS Form 1120-S
C corporations: IRS Form 1120
Keep receipts, statements, and notes that explain the business purpose of each charge for tax purposes.
Why line 16b? Per theSchedule C instructions, business interest that isn't reported to you on Form 1098 (which covers mortgage interest) goes on line 16b, "Other."
For step 5,IRS Publication 583 lists supporting documents such as sales slips, paid bills, invoices and receipts.
Does the Business Interest Limit Apply to Small Businesses?
For many small businesses, no. The Section 163(j) limit caps how much business interest larger companies can deduct each year.
Businesses with average annual gross receipts of $31 million or less for 2025 ($32 million for 2026) are exempt. That's according to theIRS business interest limit Q&A. Larger businesses generally figure the limit on Form 8990.
Why Do I Need to Separate Business and Personal Credit Card Expenses?
Separating business and personal expenses is essential because the IRS evaluates every transaction based on its purpose — not the payment method used.
So, if a startup founder charges $10,000 worth of personal travel expenses on a business credit card, they would be unable to deduct credit card interest associated with those expenses. But if the founder uses the same card to pay $10,000 for business travel expenses, they should be able to deduct the credit card interest.
How Do I Correctly Allocate Business Credit Card Interest?
You need to track which portion of your revolving balance relates to business expenses, then apply the deduction only to that share. IRS rules require you to divide interest on a part-business loan between the personal and business parts.
Think of it like splitting a shared restaurant bill. Each person pays for what they ordered, not an even split of the total.
Some business owners mix business and personal expenses on a credit card without tracking or allocating charges. That can cause them to miss the deduction entirely.
Without adequate records, a business professional with a 25% share of a credit card balance tied to business expenses might fail to claim the deduction tied to that 25% share.
Example: If total interest for the tax year is $1,200 and tracking shows 25% of the revolving balance relates to business expenses, the potentially deductible interest is $300, assuming the allocation matches how the balance was carried and the business purpose is supportable.
Clean allocation helps determine the deductible portion instead of relying on estimates. It can also save time at filing and reduce the odds of delays.
Which Credit Cards Can Help You Track Business Expenses?
A business credit card you use only for business spending can help you keep records clean. To avoid commingling business and personal expenses, consider dedicating at least one credit card exclusively to business spending.
The table below provides a rundown of two business card options that could be right for you.
Wells Fargo's Signify Business Cash is another option to consider; check ourSignify Business Cash review and the issuer's site for current terms.
Important clarity: A business card can make tracking easier, but a business card alone doesn't make interest deductible. The deduction depends on whether the underlying charges were business expenses for tax purposes.
Is It Worth Focusing on Business Credit Card Interest and Deductions?
For many small businesses, controlling the cost of credit card debt matters more than optimizing the deduction itself. Many card issuerscalculate interest daily based on your average daily balance, so a carried balance can grow faster than many people expect.
A tax deduction reduces taxable income — not the interest bill itself. So even when a business credit card interest deduction applies, the business still pays the interest in cash.
Think of a deduction as a coupon on your taxable income, not a refund of the interest. A $300 deduction doesn't put $300 back in your pocket. It lowers the income you're taxed on by $300.
That's why it can make sense to focus first on clean tracking and second on cost control.
How Can I Reduce My Credit Card Interest Costs?
You can reduce credit card interest costs by contacting your issuer, exploring consolidation options and paying more than the minimum each month.
If your business is going through a rough time, consider contacting your credit card issuers to seek a temporary break on interest rates. You can also ask for a payment program with a longer timeline or lower monthly payments.
One option is a0% intro APR offer, which temporarily eliminates interest on new purchases or transferred balances. But it's vital to understand what 0% APR means before accepting.
APR, or annual percentage rate, is the yearly cost of borrowing on your card, shown as a percentage. Consumer card accounts charged interest averaged a 22.15% APR in the second quarter of 2026. That figure comes from theFederal Reserve's G.19 consumer credit release.
As a rough illustration, a $1,000 balance carried for a full year at that rate would cost about $220 in interest, before any compounding.
Businesses lean on cards, too. In the Federal Reserve's2026 Report on Employer Firms, 86% of firms said they use financing regularly, most commonly credit cards and loans.
To ease the impact of interest charges, look into consolidating balances at a lower APR and paying more than the minimum each month. Here'swhy minimum payments can hurt your finances.
Mortgage, student loan, investment, home equity and some new car loan interest can still be deductible, though personal credit card interest isn't. Sources for each row appear in the sections above and below.
Interest type
Deductible?
Conditions
IRS form
Personal credit card interest
No
Personal interest isn't deductible
N/A
Business credit card interest
Yes, business share only
Must be tied to documented business expenses
Schedule C / Form 1065 / 1120-S / 1120
Home mortgage interest
Yes, partial
Up to $750,000 of debt ($375,000 married filing separately); $1 million ($500,000) for debt before Dec. 16, 2017
Schedule A (Form 1040)
Student loan interest
Yes, up to $2,500/year
Lesser of $2,500 or interest paid; phases out based on MAGI; no itemizing required
Schedule 1 (Form 1040)
Investment interest expense
Yes, limited
Capped at net investment income for the year
Schedule A + Form 4952
Home equity loan interest
Conditional
Only deductible if used to buy, build or substantially improve a home
Schedule A (Form 1040)
Car loan interest (new)
Yes, up to $10,000/year for tax years 2025–2028
New, U.S.-assembled vehicle; first-lien loan taken after Dec. 31, 2024; personal use; phases out above $100,000 MAGI ($200,000 joint)
Yes — but the deductible amount depends on when your mortgage was taken out and the total loan balance.IRS Publication 936 breaks the limits into two bands:
Debt incurred before Dec. 16, 2017: Interest is deductible on up to $1 million of debt ($500,000 if married filing separately).
Debt incurred after Dec. 15, 2017: Interest is deductible on up to $750,000 of debt ($375,000 if married filing separately).
Tax-law summaries such asThomson Reuters report that, starting with the 2026 tax year, mortgage insurance premiums on acquisition debt are again treated as deductible mortgage interest.
For 2025 returns, Pub 936 says the mortgage insurance premium deduction has expired. Check with a tax pro before claiming premiums on a 2026 return.
Use IRS Schedule A (Form 1040 or 1040-SR) to claim a mortgage interest deduction.
If you take out a home equity loan, the interest cannot be deducted — regardless of when it was charged — if the loan did not go toward buying, building, or substantially improving a home.
Is Student Loan Interest Tax Deductible?
Yes — borrowers with federal or private student loans might qualify to deduct as much as $2,500 of student loan interest per tax return and per tax year. If you paid less, you deduct the actual amount paid, according toIRS Topic 456.
You don't need to itemize deductions to take advantage of this deduction. Instead, you can claim it as an adjustment to income. To claim it, obtainForm 1098-E from your lender and transfer that information to Schedule 1 (Form 1040, 1040-SR, or 1040-NR).
For 2025, the deduction phases out if your MAGI is between $85,000 and $100,000 ($170,000 and $200,000 if you file jointly), perIRS Publication 970. These limits can change each year.
Who Is This Guide For?
This guide is for anyone who carries a credit card balance and wants to know whether that interest can lower their tax bill. Find your situation below:
If you carry a personal balance, there's no deduction, so focus on cutting the interest itself.
If you're a sole proprietor or freelancer, track the business share and report it on Schedule C.
If you mix business and personal charges on one card, allocate interest by tracing how the money was used.
If you bought a new car in 2025 or later, check whether your car loan qualifies for the separate deduction.
If you run a larger business, check whether the Section 163(j) interest limit applies to you.
Your Questions, Answered (FAQs)
Is credit card interest tax-deductible?
For personal purchases, credit card interest is generally non-deductible under IRS rules. Business-related interest may be deductible when tied to documented business expenses.
Can I deduct credit card interest on taxes if I used a business card?
Using a business card alone doesn't make interest deductible. The purchase must be for business purposes, and the business use must be documented.
How do I deduct credit card interest as a sole proprietor?
A sole proprietorship typically reports deductible business interest with other business expenses on Schedule C, usually on line 16b. Good record-keeping helps support the business purpose.
Can I put credit card debt on my taxes?
No, you can't deduct the debt itself or interest on personal purchases. Only interest tied to business-use charges may count as a deduction.
Can I deduct late fees on a business credit card?
It's unclear. The IRS hasn't specifically addressed late fees on business cards in the guidance we reviewed, so ask a tax pro before deducting them.
Why Trust BestMoney on This?
This guide is built on primary IRS, CFPB and Federal Reserve sources and written by an experienced personal finance writer.
John Egan is a freelance writer, editor and content marketing strategist in Austin, Texas. He has bylines in credit and personal finance publications, and his work has also appeared in HuffPost, National Real Estate Investor and Urban Land.
How We Researched This
BestMoney reviewed IRS guidance, including Topics 505 and 456, Publications 334, 583, 936 and 970, and the Schedule C and Form 1040 instructions. We also reviewed the IRS Working Families Tax Cuts fact sheet and the final car loan interest rules in the Federal Register.
For data, we used the CFPB's 2025 credit card market report, the Federal Reserve's G.19 release and Small Business Credit Survey reports. We checked Chase and Bank of America card pages in Oct 2026.
This article relies on secondary research. BestMoney didn't conduct a proprietary survey for it.
The bottom line: personal credit card interest isn't deductible, and the new car loan deduction doesn't change that. Business-use interest may be deductible if you can document it. Even then, a deduction only lowers your taxable income, so cutting the interest itself can save you more.
Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
Written byJohn Egan
John Egan is a freelance writer, editor and content marketing strategist in Austin, Texas. His work has been published by outlets such as CreditCards.com, Bankrate, Credit Karma, LendingTree, PolicyGenius, HuffPost, National Real Estate Investor, and Urban Land.
