Is Credit Card Interest Deductible When You're Self-Employed?

Yes, credit card interest is deductible if the underlying charges were for business expenses. This has been true since the Tax Reform Act of 1986 drew the line between personal interest (not deductible) and business interest (deductible). If you're self-employed and you carry a balance on a card you use for business purchases, you're paying interest you can write off.

The tricky part is figuring out how much of that interest qualifies when business and personal charges are mixed on the same card. Let's walk through it.

Dedicated Business Card: 100% Deductible

If you have a credit card you use only for business purchases, every dollar of interest you pay on that card is deductible. No allocation, no percentage calculations, no headaches.

This applies to any business credit card: Chase Ink, American Express Business Gold, Capital One Spark, or any card where 100% of charges are for your business. The full interest amount goes on Schedule C Line 16b (“Other” interest, as opposed to Line 16a which is for mortgage interest on business property).

Personal Card Used for Business: Only the Business Percentage

This is where most self-employed people get confused. If your personal Visa or Mastercard has both business charges (software subscriptions, supplies, advertising) and personal charges (groceries, streaming services, dining out), you can only deduct the portion of interest that corresponds to the business charges.

The IRS doesn't let you deduct all the interest just because some of the balance was business-related. You need to calculate the business-use percentage.

You need to do this calculation for each billing cycle where you carried a balance and had mixed spending. Yes, it's more work. This is the biggest reason tax professionals recommend keeping a separate card for business purchases.

Annual Fees, Late Fees, and Other Charges

Interest isn't the only credit card cost you can deduct. The same business-use rule applies to most other card fees:

What These Charges Look Like on Your Statement

Here's the thing about credit card interest and fees: they show up as line items on your statement, but they don't appear in your bank transaction export the same way purchases do. Here are the common labels:

Some card issuers break interest into categories (purchases vs. cash advances vs. balance transfers). Others lump it together. Check your year-end statement summary, which usually totals all interest and fees paid for the year in one place.

How to Calculate Your Annual Deduction

For a dedicated business card, it's simple: add up the total interest from your year-end summary and put it on Line 16b. For a mixed-use card, here's the process:

In this example, $847.60 in total interest produced a $508.56 deduction. The remaining $339.04 was personal interest (not deductible).

Where Everything Goes on Schedule C

Different credit card costs land on different lines:

For a full breakdown of every Schedule C line, see our line-by-line guide.

Documentation You Need to Keep

If you're deducting credit card interest, the IRS wants to see that the underlying charges were legitimate business expenses. Here's what to keep:

• •Monthly statements. These show each charge, the interest amount, and any fees. Download the PDFs from your card issuer's website.
• •Year-end summary. Most card issuers provide an annual summary showing total interest and fees paid. This is your starting point.
• •Business-use calculation. If you have a mixed-use card, keep a simple spreadsheet showing each month's total charges, business charges, percentage, and the resulting deductible interest.
• •Receipts for business purchases. The interest deduction is only valid if the underlying charges are legitimate business expenses. Keep receipts or records showing the business purpose of each charge.

Mistakes People Make With Credit Card Interest Deductions

The Easiest Fix: Use a Separate Card for Business

If calculating monthly business percentages sounds tedious (because it is), the simplest solution is to put all business purchases on one card. It doesn't have to be a “business” credit card. Any personal card works, as long as you use it exclusively for business charges.

When every charge on the card is business-related, 100% of the interest is deductible. No percentage calculations. No spreadsheets. Just the total interest from your year-end summary copied onto Line 16b.

Already have everything mixed on one card? That's fine for this year. Just start using a separate card for business going forward, and do the month-by-month calculation for the year that's already mixed.