Is credit card interest tax deductible?

CreditCardGuru @ CreditCardForum.com writes: Is credit card interest tax deductible?     Answer: Let’s be honest – the U.S. tax code is a messy nightmare and it’s not always obvious what’s deductible and what’s not. We all know mortgage interest can be deductible, but is credit card interest tax deductible too? Well unfortunately, the answer is usually no, but sometimes yes (I’ll discuss in a moment). However what’s shocking is that credit card interest payments were tax deductible in the past… then on Oct. 22, 1986 Reagan signed a bill that eliminated interest deductions for consumer loans, which included cars, credit cards, etc.

However here’s a possible exception for claiming credit card interest on taxes but check with a tax professional to find out for sure:

Qualified business expenses?

Do you work for yourself? Do you own a small company? If you have made interest payments on qualified business purchases made with a credit card, then you might be able to deduct the interest for those – check with a tax professional or your small business tax software for the answer.

However when credit card interest is tax deductible, one of the pickles that many small business owners find themselves in is that they commingled their finances by using a single credit card for both personal and business purchases. If that is done, how on earth are you going to be able to calculate the interest that corresponded to your business expenses? Remember, if you don’t pay your balance in full each month the credit card interest begins accruing from the date of each purchase, which would make finding the answer even more perplexing. Then of course, minimum payments would have to be factored in somehow (and I don’t even know how you that would be done).

In short, if you are mixing personal and business expenses on a single credit card, unfortunately I think it might be next to impossible to write off the interest from the business expenses (unless your accountant knows how to do it). I personally would never try to deduct the interest if I commingled, because how on earth would I defend my calculations in an audit? I wouldn’t be able to! And, in my opinion, it’s better to be safe than sorry when it comes to taxes!

9 comments... read them below or add your own   (To comment Visit CreditCardForum.com, click here!)

1. 
   

   Di November 6, 2013 at 6:34PM

   Is the interest I pay on my Care Credit Card tax deductible? It is only used for health/dental/pet issues. They do offer interest free if payed off within so many months, but if you don’t you start paying interest and have to pay all the interest from the past months too. I have used this for my pets surgery two years ago and am still paying.

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2. 
   

   timothy April 3, 2013 at 10:11AM

   We are actually being double taxed. We pay income tax on money to pay CC interest. Then the banks pay tax again on the same CC interest. The tax code is supposed to be set up to tax only one time. Somehow everyone has forgotten this premise. Int = Prin X rate X time. The government doesn’t have a dog in the CC interest business so they don’t really care if it is usury. Really 18%. They do care about T bills @ 4%.

   I say make CC interest tax deductible and the economy will take off. Lower CC interest = more money to spend / invest.

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3. 
   

   Joe December 4, 2012 at 5:38PM

   I’m glad they got rid of this deduction. Up until 1986, the IRS was actually encouraging people to spend irresponsibly on credit cards instead of paying off debts in a timely manner. No wonder why we have $16T in national debt.

   On a side note, the mortgage interest deduction has at least partially caused all of the crazy booms and crashes in the housing market. How many people were willing to borrow an extra $100K knowing that they could get a significant amount of that money back as a tax credit?

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4. 
   

   Oryx March 27, 2012 at 12:22PM

   Reagan was such a freaking liberal. So why aren’t the tea party people advocating reversals of these tax rules? If they were, I’d be on the front lines waving the tea party flag. They just advocate for lowering taxes for the rich.

   People that pay interest on CC’s are usually people who have been laid off jobs and use credit cards to buy food and necessities. If the IRS allowed for an interest deduction, think of what would go back into the economy! Better yet, how about giving banks incentive NOT to charge 30% interest rates by taxing the profits gained from interest rates above 10%.

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     esfritzi March 17, 2013 at 6:34PM

     And the 1% “rich” pay 40% of the taxes! Sounds like a balanced approach to me.

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5. 
   

   disconap March 6, 2012 at 9:06PM

   @Slim–no, you would just categorize it as Interest (make sure this is a separate “interest” listing than any income interest, you can’t just delete one from the other). In Quickbooks you can set it up as an expense, and even specify different types of interest expenses. I think you can do that in Quicken and software from other (better) companies than Intuit…

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6. 
   

   Slim March 4, 2012 at 5:10PM

   @Ronald (and Guru). Wasn’t that the point of the article? And wasn’t that answered in the article?

   Just curious.

   I actually came here to find out how to categorize credit card interest as a business expense. The credit card was used for repairs, but the interest shouldn’t be classified as ‘Repairs’, should it?

   Thanks!

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7. 
   

   ronald kyle chewning February 22, 2012 at 4:09AM

   can you deduct interest from credit cards ?

   Thanks

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     CreditCardGuru February 22, 2012 at 11:05PM

     Nope, sorry! It used to be deductible but that was changed in the 80′s under President Reagan.

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How Business Owners Can Avoid the New Investment / Tax Take an Active Role in Running the Enterprise, and Prove It to the IRS

Arden Dale for the Wall St. Journal writes: Business owners can avoid paying a new 3.8% investment tax on their profits by taking on an active role in running the enterprise. But they need to document their workload and maintain that work level year after year, experts say.

The tax on net investment income, enacted as part of the Affordable Care Act, took effect in 2013. It is levied on dividends, capital gains and other investment income for most married joint filers who have more than $250,000 in adjusted gross income. (For most singles, the threshold is $200,000.)

The Internal Revenue Service imposes the tax on individuals who are the ultimate owners of entities such as partnerships and S corporations, whose income passes through directly to the owners, when it determines owners have more of a passive "investor" role—based partly on how much time they spend on the job. Active owners don't have to pay the tax on income from the business.

Financial advisers say clients are asking how hard it would be to go from being a passive owner to an active one. "This is not easy to do," says Katherine Dean, managing director of wealth planning at Wells Fargo Private Bank, which has $170 billion under management. "Don't try to convert passive activities if you are not seriously participating in the continuing running of the business." [snip].  The article continues @ the Wall St. Journal.... To continue reading visit the Wall St. Journal, Click Here!

SugarCRM: Should Salesforce.com Be Worried?

Tom Taulli for Forbes writes: When it comes to CRM (customer relationship management) software, Salesforce.com CRM +0.84% seems to be the only option. 

Yet there are a variety of competitors making a dent in the company’s armor. Just look at SugarCRM. Founded about a decade ago, the company now has its software deployed by over 1.5 million individuals across 120 countries.

So to learn more about SugarCRM, I recently met with the company’s CEO, Larry Augustin.  He is a veteran of the tech business, having been the founder and CEO of VA Linux and also the interim CEO of Medsphere. Along the way, he has served as an advisor to various startups. 

Here’s what he had to say:

Tom Taulli: How is SugarCRM different from Salesforce.com? What’s your strategy for winning?

Larry Augustin: SugarCRM provides the most innovative and affordable CRM solution in the market. We are different in three key ways.

First, while most CRM systems focus solely on management tracking and reporting, SugarCRM puts the needs of the individual user first—fusing the seamless simplicity, mobility, and social aspects of a consumer app with the sales optimization of conventional CRM. The latest release of Sugar includes a significantly enhanced user interface called Sugar UX™, which offers an immersive, intuitive interface to CRM designed to help the individual contributor do their job. The SugarUX delivers contextual intelligence about every individual contact, company, lead, case, and opportunity, from internal data and external sources via an advanced Intelligence Panel; as well as enhanced collaboration features, including context-sensitive activity streams all on a single page.

Second, SugarCRM gives our customers complete flexibility in how they deploy the system. We offer a multi-tenant cloud service, a private instance in the cloud, and also allow customers to deploy on their own internal clouds. This gives customers a level of control they can’t achieve in a proprietary SaaS-only model where their data is locked up in one vendor’s data silo. This allows our customers to more easily comply with international data security and privacy laws, lowers the costs of integration and makes it easier for our customers to create a unified view of their customer data across systems. [snip].  The article continues @ Forbes.com, click here to continue reading.