Is credit card interest tax deductible?
Yes — the business-use portion. Interest on credit card charges for business expenses is deductible. A dedicated business card is 100% deductible. A mixed personal/business card is deductible based on the share of charges that were for business. Report on Schedule C, Line 16b.
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On this page: Short answer · Tracing rule for credit cards · Dedicated business card · Mixed-use card allocation · Annual fees · When interest is not deductible · Schedule C · Example · Records · Related lookups · FAQ
Short answer
Yes — for business charges. Credit card interest is deductible to the extent the underlying charges were business expenses. Dedicated business-only card: 100% deductible. Mixed card: deductible at the business-use percentage. Report on Schedule C, Line 16b.
Personal credit card interest — interest on personal purchases — is not deductible even for self-employed individuals.
FreshBooks — Track business credit card charges and interest automatically
Link your business card, categorize charges as business expenses throughout the year, and keep your Schedule C Line 16b deductions organized at tax time.
Tracing rule: Interest follows the underlying purchase
Credit card interest deductibility follows the same IRS tracing rule that applies to business loan interest. The deductibility of interest on a given statement balance is determined by the nature of the charges that created the balance.
Three scenarios
- Card used only for business: All interest is business interest → 100% deductible
- Card used only for personal: All interest is personal interest → 0% deductible (personal interest is not deductible)
- Card used for both: Interest is allocated → business-use % deductible
Dedicated business credit card: The cleanest approach
Using a credit card exclusively for business expenses eliminates the need for monthly allocation calculations. Every charge is a business expense, every dollar of interest is fully deductible, and the statement itself serves as documentation.
- 100% of interest is deductible — no allocation needed
- The monthly statement shows both the business charges and the interest, in one place
- Year-end interest summary from the card issuer can be used directly for your deduction
- Annual fee on a dedicated business card is also fully deductible
Even a personal credit card can be designated as a "business-only" card by committing to use it exclusively for business purchases. The card issuer doesn't need to label it a "business card" — the use is what determines deductibility.
Mixed-use card: How to calculate deductible interest
When you use one card for both business and personal purchases, you must allocate the interest each month.
Mixed-use allocation method
- Step 1: For each billing period, total all charges
- Step 2: Identify which charges were business expenses
- Step 3: Business-use % = business charges ÷ total charges
- Step 4: Deductible interest = total interest charged × business-use %
- Step 5: Repeat each month — the percentage will vary
This calculation needs to be done monthly because the mix of business vs personal charges changes from billing period to billing period. A single annual average is not accurate enough if the card use varies significantly month to month.
Annual fees: Deductible separately from interest
Credit card annual fees are not interest — they are service charges. They are deductible as a separate business expense and do not require you to carry a balance.
- Dedicated business card annual fee: 100% deductible — report on Schedule C, Line 27a (Other Expenses)
- Mixed-use card annual fee: Deductible at your business-use percentage for the year
- Personal card annual fee: Not deductible, even if you use the card for some business purchases
If you pay full each month and never carry a balance, you can still deduct the annual fee as a business expense. The fee is deductible in the year it is charged.
When credit card interest is not deductible
- Interest on a card used exclusively for personal purchases — personal interest is not deductible
- Interest you cannot allocate because you have no record of which charges were business vs personal
- Interest on a business card where the underlying charges were personal expenses
Where credit card interest goes on Schedule C
Business credit card interest goes on Schedule C, Line 16b (Interest — Other). Enter the total deductible interest for the year — the business-use portion across all billing periods. Annual fees go on Line 27a (Other Expenses).
Example: Mixed-use card annual interest deduction
Example: Freelancer with a mixed-use personal credit card
- Annual charges: $18,000 total ($12,600 business, $5,400 personal)
- Business-use %: $12,600 ÷ $18,000 = 70%
- Total interest paid during the year: $840
- Deductible interest: $840 × 70% = $588 → Schedule C, Line 16b ✓
- Non-deductible personal interest: $252 ✗
A dedicated business-only card at the same spending level ($12,600 business charges) with a comparable balance and interest rate would yield the full $588 in interest as deductible — and eliminate the need for monthly allocation calculations.
What records to keep
- Monthly credit card statements showing charges and interest charged
- A list or tagging of which charges were business expenses (receipts or notation in accounting software)
- For mixed-use cards: a monthly allocation worksheet showing business charges ÷ total charges
- Year-end interest summary from the card issuer (if available)
- For annual fees: the statement or notice showing the fee charged
TurboTax Self-Employed — Claim credit card interest on Schedule C Line 16b
TurboTax Self-Employed guides you through Schedule C Line 16b for business interest, handles the mixed-use allocation, and separately reports annual fees on Line 27a.
FAQ
Is credit card interest tax deductible?
Yes — the business-use portion. Interest on credit card charges for business expenses is deductible. A dedicated business-only card generates 100% deductible interest. A mixed card generates interest deductible at the business-use percentage. Report on Schedule C, Line 16b.
What if I use the same credit card for business and personal expenses?
Only the business portion of interest is deductible. Calculate the business-use percentage (business charges ÷ total charges for each billing period) and multiply by the interest charged. Keep statements showing which charges were business purchases.
Is interest on a personal credit card deductible if I use it for business?
Yes — for the business-use portion. The IRS tracing rule applies: deductibility follows the use of the spending, not whether the card is labeled personal or business. If 80% of a month's charges are business expenses, 80% of that month's interest is deductible.
Is a business credit card annual fee tax deductible?
Yes. Annual fees on a dedicated business card are fully deductible on Schedule C, Line 27a. For mixed-use cards, deduct the business-use percentage of the fee. Annual fees are service charges, not interest — they are deductible in the year charged even if you pay your balance in full every month.
What records should I keep for credit card interest deductions?
Keep monthly statements showing charges and interest, a tagged list of business charges, and for mixed-use cards, a monthly allocation worksheet. A dedicated business card eliminates the need for monthly allocation — every charge and every dollar of interest is fully deductible with clean statement documentation.
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Last reviewed: April 14, 2026