- Home/
- Credit Cards/
- 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
December 31, 2025
Credit card interest and taxes: what you can (and can’t) write off
December 31, 2025
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.
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.
No — personal credit card interest is not tax-deductible under IRS rules. The Tax Reform Act of 1986, which overhauled the U.S. tax system, wiped out the credit card interest tax deduction for personal (non-business) purchases.
"Interest deductions are valid only in certain narrowly defined categories of the Tax Code, such as home mortgage interest, some student loan interest, and business-related interest," said attorney and CPA Mario Serralta, founder of law firm Mario Serralta & Associates.
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.
Mitchell Nelson CPA and Vice President at NorthCoast Mezzanine, explains that credit card charges for your family’s groceries, clothing, and vacations, for example, are not deductible. Even interest paid on personal purchases made on business credit cards is not eligible for a tax deduction.
"There are no exceptions to these regulations. Therefore, documentation of all business use of credit cards, including interest, is essential."
Bottom line: Americans can't take advantage of perhaps millions of dollars in potential tax write-offs for personal credit card interest.
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.
Looking for the right card for you? Unsure where to start? Explore our top credit cards
Yes — business credit card interest may be deductible, but only when it is tied to documented business expenses. Although personal credit card interest is not tax-deductible, business credit card interest might be, along with late fees, annual fees, and other charges. These expenses 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.
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
Partnerships: IRS Form 1065
S Corporations: IRS Form 1120S
C Corporations: IRS Form 1120
Keep receipts, statements, and notes that explain the business purpose of each charge for tax purposes.
Separating business and personal expenses is essential because the IRS evaluates every transaction based on its purpose — not the payment method used. J.R. Faris, president and CEO of Accountalent, a provider of tax and accounting services for startups, explained that the IRS views every transaction based on its purpose, not on the payment method.
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.
The IRS lens is 'what was bought,' not 'how it was paid' — so a business card does not transform personal expenses into deductible interest.
You need to track which portion of your revolving balance relates to business expenses, then apply the deduction only to that share. Faris said some business professionals mix business and personal expenses on a credit card without tracking or allocating charges — and 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, Faris said. It can also save time at filing, reduce the odds of delays, and lower avoidable audit risk.
To avoid commingling business and personal expenses, experts suggest dedicating at least one credit card exclusively to business spending. The table below provides a rundown of three business card options that could be right for you.
Card | Annual fee | Pros | Cons | Apply Now |
|---|---|---|---|---|
Chase Ink Business Cash® Card | $0 | No annual fee; multiple redemption options may be available | Fees and plan terms may apply; see issuer disclosures | |
Wells Fargo Signify Business Cash® | $0 | No annual fee; simple rewards structure | Fees may apply; see issuer disclosures | Read our full review here. |
Bank of America Business Advantage Customized Cash Rewards | $0 | Useful for keeping business expenses separate for record-keeping | Rewards and eligibility vary by product; terms apply |
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.
For most small businesses, controlling the cost of credit card debt matters more than optimizing the deduction itself. Serralta, the CPA and attorney, recommends that small businesses concern themselves less with tax deductions for business credit card interest and more with the costs of carrying credit card debt.
Be aware of how the interest compounds, because daily compounding interest on revolving credit can make it balloon faster than many anticipate.
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. That's why many tax professionals focus first on clean tracking and second on cost control.
The most direct way to reduce credit card interest costs is to contact your issuer, explore consolidation options, and pay 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, or to arrange a payment program with a longer timeline or lower monthly payments. One option is a 0% 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.
A 2024 survey by market research company J.D. Power found that among the 51% of small businesses classified as financially unhealthy, 61% were carrying debt on business credit cards and 63% were using those cards to cover operating expenses. Annual percentage rates (APRs) for business credit cards often range from 18% to 36%.
Given the potential burden of credit card debt, attorney David Dozier said small businesses should look into consolidating balances at lower APRs and paying more than the minimum payment each month to ease the impact of interest charges.
Explore our best low-interest cards
While the Tax Reform Act of 1986 eliminated deductions for personal credit card interest, several other interest deductions remain available under the tax code.
Interest Type | Deductible? | Conditions | IRS Form |
Personal credit card interest | No | Non-deductible since Tax Reform Act of 1986 | N/A |
Business credit card interest | Yes — partial | Must be tied to documented business expenses | Schedule C / Form 1065 / 1120S / 1120 |
Home mortgage interest | Yes — partial | Subject to loan limits based on origination date | Schedule A (Form 1040) |
Student loan interest | Yes — up to $2,500/year | Based on MAGI; no itemizing required | Schedule 1 (Form 1040) |
Investment interest expense | Yes — limited | Capped at taxable investment income for the year | Schedule A + Form 4952 |
Home equity loan interest | Conditional | Only deductible if used to buy, build, or improve a home | Schedule A (Form 1040) |
Yes — if your business borrows money to invest in assets that generate taxable investment income or that gain in value, you can normally deduct investment interest expenses. However, the deduction is limited to the amount of taxable investment income earned in the same tax year.
The investment interest deduction can be claimed by completing IRS Schedule A and filing IRS Form 4952.
Yes — but the deductible amount depends on when your mortgage was taken out and the total loan balance. IRS rules break down the home mortgage interest deduction into three categories:
Grandfathered debt: A mortgage taken out on or before October 13, 1987.
Mortgages from October 13, 1987 through December 15, 2017: Deductible if the mortgage plus any grandfathered debt didn't exceed $1 million ($500,000 if married filing separately). Applies to mortgages for buying, building, or substantially improving a home.
Mortgages taken out after December 15, 2017: Deductible if the mortgage plus any grandfathered debt didn't exceed $750,000 ($375,000 if married filing separately).
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.
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, or the actual amount paid during the tax year, whichever is lower.
You don't need to itemize deductions to take advantage of this deduction. Instead, you can claim it as an adjustment to your modified adjusted gross income (MAGI). To claim it, obtain Form 1098-E from your lender and transfer that information to Schedule 1 (Form 1040, 1040-SR, or 1040-NR).
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.
Using a business card alone doesn’t make interest deductible. The purchase must be for business purposes, and the business use must be documented.
A sole proprietorship typically reports deductible business interest with other business expenses on Schedule C. Good record-keeping helps support the business purpose.
You'll need receipts, credit card statements, and notes explaining the business purpose of each charge. For mixed-use cards, you'll also need documentation showing how you calculated the business-use percentage.
Yes — late fees on a business credit card are generally deductible as a business expense, provided the underlying charges were for business purposes and the fees are properly documented.
Disclosures:
This content is based on the independent analysis of the publisher and/or its authors and has not been provided by or endorsed by any card issuer.
The credit card offers and information presented on this page are current as of the published date. However, credit card terms, including APRs, fees, and promotional offers, are subject to change without notice. Some offers listed may no longer be available or may have expired. Please refer to the issuer's website for the most up-to-date terms and conditions.
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.
