Is Credit Card Interest Tax-Deductible?

Credit card interest on personal spending is not tax-deductible. The tax code allows for deducting mortgage interest, student loan interest, and business interest. It doesn’t cover the groceries, car repairs, or other bills you put on a card.

Can you deduct credit card interest from your taxes?

Generally, you cannot deduct interest paid on personal expenses. The IRS specifically lists credit card and installment interest for personal expenses among nondeductible personal interest. That rule does not mean every dollar of interest is automatically not deductible. The IRS looks at what the debt is for.

Imagine you use your personal credit card to buy groceries or cover repairs for your personal vehicle. The interest you accrue for these purchases is not tax-deductible. However, if you use the same card to pay a legitimate business expense, those interest charges may receive different tax treatment.

Eligibility is based largely on the type of purchases you made. Interest on personal purchases isn’t tax-deductible, but business or investment-related purchases and the interest that comes with them may be eligible for certain deductions.

Read more >> Does Paying Taxes Late Affect Your Credit Score?

When credit card interest is tax-deductible

Business expenses paid with your credit card may be deductible depending on what you’re buying.

Business expenses on a personal credit card

You don’t need a business credit card for interest charges to qualify as a business expense. If you use your personal credit card for business expenses, you may be able to deduct the interest you accrue on those purchases when filing your taxes.

If it's all on one card, tag business charges as they post using your bank's app or accounting software, and keep the receipts. You'll need to work out what share of the balance was business spending to know how much of the interest qualifies, and that's much easier monthly than in April.

Business credit card interest

Business expenses paid with your credit card may be deductible depending on what you're buying. Personal expenses don’t meet the standard simply because you paid with a business credit card. There may also be limitations to the types and amounts of purchases that qualify. Talk with a CPA or other tax professional to make sure your filing aligns with IRS rules.

Investment-related interest expenses

If you borrow money to purchase property that you hold for investment, the resulting interest may qualify as investment interest. You must itemize deductions on Schedule A, and it’s capped at your net investment income.

The reason behind your borrowing decisions matters, too. Make sure you consult with a tax professional, especially if your personal and business expenses are intermingled.

Read more >> What Are the Fees and Costs of Using a Credit Card?

‍You don't have to pay for tax help. The IRS runs Free File for most filers and VITA, which offers free in-person help for people under certain income thresholds, people with disabilities, and limited-English speakers. Call 800-906-9887 to find a site near you.

If your situation is more complicated, talk with a CPA or financial advisor for guidance specific to your situation.

When credit card interest is not tax-deductible

The IRS doesn’t allow you to deduct credit card interest on personal spending. This includes interest on:

• Household goods
• Personal travel
• Entertainment

The IRS specifically identifies card interest incurred for personal expenses as non-deductible personal interest. Keep in mind that a personal purchase doesn’t become tax-deductible by putting it on a business credit card. If you mix personal and business purchases, you must separate the two when filing taxes to claim eligible interest deductions.

How to track deductible credit card interest

For any type of tax deduction, keep detailed records. Mark business or investment purchases clearly so you can track how much interest you pay on each transaction. You should also keep documentation that shows why an expense qualifies as a business- or investment-related purchase.

Ways to reduce the credit card interest you pay

Even when you can’t deduct personal card interest, you can look for ways to reduce how much you pay in interest. Here are a few tips:

• Pay more than the minimum. Every dollar above the minimum goes toward the principal, and the principal is what you’re charged on.
• Compare what a credit union might charge you. Federal credit unions generally are capped at 18% by the NCUA for loans and credit cards, a temporary increase extended through September 10, 2027. Find a credit union near you.
• If late payments pushed your rate up, get it back. If your card’s APR increased because you were more than 60 days late, the issuer must reinstate your old rate after six consecutive on-time payments of at least the minimum.

Read more >> How to Avoid Credit Card Interest

‍If the balance isn't payable on your income, get free help before it becomes collections. The National Foundation for Credit Counseling (NFCC) can connect you to free or low-cost counseling at 800-388-2227.

Bottom line

Credit card interest on personal spending isn't deductible, and no filing strategy changes that. If the purchase was a business expense or an investment, trace it, document it, and take the deduction it qualifies for. If it wasn't, the tax return isn't where this gets cheaper.

What does make it cheaper is a lower rate, and the rate is set by your credit, which is the one part you can still move before the next balance. A Kikoff Credit Account reports to Equifax, Experian, and TransUnion, plans start at $5 a month, and there's no credit check to sign up.