The interest you receive from using a credit card goes a long way in curtailing your expenses if you pay lots of money on interest over the year.
No Deduction for Personal Credit Card Interest
Regardless of what you intend to purchase with your credit card, the interest you paid could be deducted on your tax return.
Due to changes to the tax code of The Tax Reform Act of 1986 that led to the elimination of personal credit card interest as a deductible expense, one could no longer deduct interest paid to the credit card companies for everyday credit card purchases.
Your personal interest goes beyond the interest you paid on credit cards, It includes interest paid on loans and unpaid bills.
Exception for Businesses and Self-Employed Individuals
It is best to use a separate credit card for business expenses, you can Calculate the business interest you’ve paid by using your monthly credit card billing statements. Probably you’ve used a credit card that you’ve used for personal and business purchases, you’ll have to separate out your business expenses, then calculate the amount of interest you paid for the business.
file away your receipts and credit card statements detailing interest, so you have them when it’s time to file your tax return.
Types of Interest That Are Tax-Deductible
There are some types of interest that are deductible, according to William Perez, U.S. Tax Planning Expert:
student loan interest
margin interest on investments.
Is Credit Card Interest Tax Deductible?
This type of interest can be deducted when you pay the interest on a mortgage loan or student loan and not a credit card used for those expenses. You can pay off your credit cards by using a home equity loan then deduct the interest paid on your home equity loan.
You can make a consultation with a tax professional about your tax situation to get specific advice about whether the interest you paid is tax-deductible.