Can credit card fees be deducted?

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1. Is it possible to deduct credit card fees?
2. Why can't personal expenses be deducted from a TOC?
3. Deductible commissions for businesses
4. Other interests that may be deductible

When the season of Paying taxesWe all want to include as much spending as possible so that the government will reward us for our contributions.

The taxes They are not a simple subject and you have to know well the rules that apply or be an accountant dedicated to this trade. For now, we'll try to find out if credit card fees are deductible.

Is it possible to deduct credit card fees?

Although tocs are great at giving you different benefits like rewards, bonuses, insurance, protections, and more, they also include some pretty undesirable commissions.

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To the question that concerns us, the simple answer is no. Later we will explain the legal reasons why individual expenses are not considered deductible.

However, those who have their own business, are self-employed or contractors, can deduct certain commissions from expenses related to the commercial activity they do.

While this is possible using any credit card, our main suggestion is that you do not mix personal expenses with those related to a startup.

Why can't personal expenses be deducted from a TOC?

To answer this, we have to go back a bit and review the Tax Reform Act of 1986. In this text, the government eliminated the possibility of deducting interest from toc and other types of installment financing at the time of filing with the IRS.

This also means that You also cannot deduct the charges for personal loans, medical expenses and more.

Similarly, the TCJA or the Tax Cuts and Labor Law, which came into force in 2018, establishes a regulation that complements the previous text.

Individuals no longer have the possibility of itemizing certain deductions as in previous years. Among the changes to this statute, it is also not possible to eliminate individual expenses for businesses, such as vehicle costs.

Deductible commissions for businesses

Since individual credit card expenses are not deductible, we have to pay attention to those that are.

If you are a business owner, the IRS indicates that business expenses rated as "necessary" or "ordinary" can be deducted from taxes. Within this category, businesses have a series of disbursements that fit this description.

For example, if you plan to enable points of sale to start receiving cards, processing these types of payments implies having an agreement with a bank or plastics issuer.

Every time you swipe a credit card, enter it into the system, or someone makes a purchase online, they charge you a percentage. According to the IRS, these charges can be deducted from tax income.

Small merchants have the greatest opportunities to lower their taxes. In case you are self-employed, contractor or run a business, you can receive discounts based on annual commissions, late charges or others fees
imposed by issuers of TDCs. As these are routine expenses to run as a business, they are eligible for deductions.

Discounts for businesses are listed in detail in Internal Revenue Service (IRS) publication 535. According to this text, large or small companies can deduct almost any expense related to their operations throughout the year. This applies when you are calculating the total bill for your annual taxes.

When it comes to using a credit card, companies can deduct: annual or monthly commissions, financing charges and late charges, among others.

The important thing is that the charges are related to the business. In addition, companies can deduct any payment with tdc or debit at the time of filing taxes.

Other interests that may be deductible

While the interest earned on individual purchases on a credit card cannot be deductible, there are other charges that can:

• Mortgages. Homeowners can deduct interest on up to $ 750,000 on mortgage loans on their main home.
• Commercial credit. Business owners can also deduct interest on any small financing that is considered a business expense.
• Student loans. In case you have paid interest on this type of financing, you can deduct up to $ 2,500 from the amount paid as an adjustment to your gross income.
• Investment property. Homeowners can deduct taxes for ordinary or necessary expenses of a rental property, including mortgage interest.

The subject of taxes is complex, extensive and requires specialized advice. For now, you can be certain about what you can or cannot deduct when you use a credit card for personal consumption or for business expenses.

If you want more about the provisions of the IRS, you can consult our specialists. And if you are looking for the best banking products, you also have the Business Blog comparator.