When preparing tax returns, we all try to find as many legal deductions as possible. But, figuring out just what you can deduct can be tricky. One question we get here all the time is, "Can I deduct credit card interest?"
The answer is not just a simple yes or now, but it is SOMETIMES. Let me elaborate.
According to the Internal Revenue Service (IRS), personal interest, such as interest paid to a credit card company, is NOT deductible. However, it the credit card in question is uses for business or self-employment expenses, you can deduct some or sometimes even all of the interest paid to that credit card company using a Schedule C or Schedule C-EZ.
Here is what you need to do in order to Deduct Credit Card Interest on your taxes:
Step 1: Use your credit card for business, or self-employment expenses. (You may use the card for both business and personal expenses, but you can only deduct interest on charges made for business or self-employment expenses.)
Step 2: Figure out what percentage of of your credit card balance is from business spending. (If your total balance is $4000 and only $3000 is from business expenditures, devide $3000 byt the total balance of $4000 and you will find that your business expenses make up 75% or 0.75 of your total balance)
Step 3: Figure out how much interest you can deduct. Multiply your total interest payments by the percentage of your expenditures that were for business or self-employment. (in this case, 75%) This is the total interest you can deduct.
Step 4: When filling out your Schedule C, enter your deductible interest (figured out in step 3) in line 16b. Complete the rest of the form and file your taxes as normal.
This is a pretty simple proccess, but if you have questions or are not sure if you are figuring correctly, always consult a licensed tax preparer.
If you find that you have paid more that you thought in credit card interest, there are Debt Consolidation and Debt Settlement programs available that can help you reduce or even eliminate the amount of interest you are paying. Our Debt Solutions Specilists can help you find the right program for your unique situation.
Please give us a call for a FREE DEBT CONSULTATION at 1-877-492-4109
Or simply click on the link below
photo by: DonkeyHotey