These Business Credit Card Fees Are Fully Tax Deductible

As a business owner, you want to capitalize on every aspect of your business, with a major focus on your bottom line. You may already understand the importance of maximizing your business expenses by getting cash back on office supplies, or earning free travel with a business travel credit card.

But did you know you can also deduct some of the fees and interest that’s billed to that credit card? As a business owner, there are three main credit card fees that can be deducted as business expenses on your tax return.

1. Credit Card Swipe Fees

If your business sells products or services and accepts credit cards as payment, you’re probably paying a processing fee for every swipe. This is included in the cost of doing business, so you can deduct these fees from your business taxes.

To calculate how much money you’ve spent on credit card swipe fees each year, simply log into your credit card merchant account and add up the fees taken out of each transaction. This can also be printed out with your regular financial statements.

Other examples of credit card processing fees include payments made via PayPal as well as online credit card swipes from customers and clients. Basically, if you had to pay a processing fee in order to receive money for goods and services rendered from your business, then you’re entitled to a tax deduction.

2. Annual Membership Charges

Some of the best business credit cards not only come with some amazing perks but usually have an annual fee attached to them. It’s all part of receiving superior credit card benefits, so paying an annual fee seems like a good investment.

And the good news is that if you do end up paying an annual membership on your business credit card, this charge is considered a business expense and is tax deductible.

Just make sure you use the card for business-related purchases, since personal credit cards that have an annual fee attached to them do not qualify for tax deductions. You can only deduct the membership charges for credit cards used for business purchases that have an annual fee.

3. Credit Card Interest

Another business credit card fee that can be deducted on your taxes is credit card interest. The Tax Reform Act of 1986 made it possible for business owners to claim credit card interest paid that year as a tax deduction. This amount can be quite high and even eat into your business profits, so it’s nice to know you can deduct the cost.

As long as the interest was calculated on purchases made for the business, you can add up all the credit card interest paid throughout that tax year and take it as a tax deduction. This can include interest from cash advances and regular purchase swipes.

How to Qualify for These Tax Deductions

As mentioned, you must use a business credit card for business-related purchases in order to qualify for these tax deductions. The expenses must also be reported on your Schedule C (Form 1040) to file alongside your personal 1040 tax form.

This will help reduce your gross income so you can pay less taxes. Just be sure to check with a tax professional to make sure you qualify and can claim the deductions correctly.

To make it even easier on yourself, it’s a good idea to separate your business and personal finances with different credit cards. That way, you can easily qualify for these three credit card fees as business tax deductions without having to worry about any clarifying questions or supporting documents.

First published November 8, 2016, last updated March 2, 2022

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