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Is are credit card fees tax deductible a valid tax write-off?

TL;DR

Credit card fees are generally deductible as a business expense if they are incurred for business-related purchases. However, personal credit card fees are not deductible.

Detailed Answer

Credit card fees, such as annual fees, late fees, or transaction fees, can be deducted if they are directly related to business expenses. For example, if a small business owner uses a credit card to purchase supplies or pay for services necessary for their business, the associated fees are deductible. However, if the credit card is used for personal expenses, those fees are not deductible. It's important to maintain clear records that distinguish between business and personal use. Additionally, if a credit card is used for both personal and business expenses, only the portion of fees attributable to the business use is deductible.

Where to Put It on the Tax Form

Schedule C, Line 27a for sole proprietors or relevant business expense lines on other business tax forms.

Real World Example

A freelance graphic designer uses a credit card to purchase design software and pay for online advertising. The credit card incurs a $100 annual fee and $20 in transaction fees for these purchases. The designer can deduct the $120 in fees as a business expense on their Schedule C.

Audit Risk & Documentation Tips

The audit risk for this deduction is moderate. Taxpayers should keep detailed records, including credit card statements and receipts, to substantiate the business nature of the expenses. It's advisable to annotate statements to clearly indicate which charges are business-related. Keeping a separate credit card for business expenses can also simplify record-keeping and reduce audit risk.

IRS Reference

IRS Publication 535, Business Expenses.

Relevant Industries

FreelancersConsultantsSmall Business OwnersRetailers

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 15, 2025

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