Are you wondering if you can deduct your credit card interest this tax season to move to a lower tax bracket?The answer is most likely no.
The Tax Cuts and Jobs Act, signed by President Trump in 2017 was the biggest overhaul of the tax rules in 30 years.1 For individuals, it wiped out many of the miscellaneous itemized deductions taxpayers had used in previous years. With a substantial increase in standard deductions, the need for itemized deductions became obsolete for most taxpayers.
In general, pretty much anything pertaining to a credit card isn’t tax-deductible as a personal itemized deduction but is tax-deductible for a business. The provisions and deduction procedures for individuals and companies are different, so it’s essential to understand which ones apply.
According to the IRS, only a few categories of interest payments are tax-deductible:
- Interest on home loans (including mortgages and home equity loans)
- Interest on outstanding student loans
- Interest on money borrowed to purchase an investment property
- Interest as a business expense
All other interest is considered personal, including interest charged on credit cards, auto loans, unpaid utility bills, and late payment or underpayment of federal, state, and local income taxes. These aren’t tax-deductible.
Tax deductions for businesses are another story. Nearly any business credit card fee or credit card company charge incurred by a business using a credit card remains eligible to be deducted as a business expense. When it comes to credit card usage, companies can deduct finance charges, annual fees, monthly fees, late fees, as well as the expenses they pay to accept credit cards.
While no one enjoys paying taxes, diligence is required to ensure you’re keeping yourself in the lowest tax bracket possible. Call us today and together, we can review your tax status and maybe find ways for you to save some hard-earned money.
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